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Commercial

Increased Use of Litigation Funding in Cross-Border M&A Disputes

Litigation funding continues to see wider acceptance and adoption by claimants in a wide variety of disputes, with funders bringing capital and expertise and experience in complex litigation to the table. Recent research by Dentons Canada has supported this and found that in the world of cross-border post-M&A disputes, litigation funding services are increasingly being retained by claimants and law firms. In a new video, Rachel Howie and Matthew Diskin of Dentons Canada discuss the firm’s latest survey which interviewed 150 senior executives involved in cross-border and global M&A transactions. The findings demonstrate that the use of third-party funding is on the rise, with 65% of respondents in the US & Canada stating they have engaged the services of a funder in the last 12 months. Speaking to the reasons for the uptick in the use of litigation funding, Diskin points to the rising costs of disputes and pressure on legal budgets, which allows funders to position themselves as a useful tool to share the risks and the financial burden when pursuing claims which are otherwise prohibitively expensive. Diskin also notes that the use of outside funding is even becoming more prevalent among companies with strong balance sheets and cash flows.  As for the benefits funders can provide outside of the actual financing, Diskin argues that funders are very attuned to spotting the issues that can arise in these claims, and that through their due diligence processes, funders can assess both the merits of the claim and the viability of any future recovery. Being able to assess whether there is a sound theory of the case and a suitable recovery plan allows all parties involved in these high-value disputes to significantly reduce their risk.
Case Developments Commercial

Piper Alderman and Omni Bridgeway File Class Action Against IG Markets Over CFD Products

Recent decades have seen an increase in the scope of retail investing, with advances in technology allowing individuals to trade increasingly complex investment products. However, failures by financial services firms to adequately protect consumers from the risks of this type of investing have prompted lawsuits against these same firms, as a new class action in Australia is once again demonstrating. Reporting in Lawyers Weekly details the launch of official proceedings in a class action brought on behalf of up to 20,000 Australian investors against IG Markets, over allegations that it marketed contracts for difference (CFDs) to investors without properly detailing the risks, and without proper assessment of these investors’ ability to undertake such trades. The class action was first announced in October of last year, and following months of investigations, proceedings have begun in the Victorian Registry of the Federal Court of Australia. The class action is led by Piper Alderman and is being funded by Omni Bridgeway, which revealed in a joint statement that they have already registered hundreds of individuals for the class action. Kate Sambrook, partner at Piper Alderman, stated that these CFDs “should never have been marketed to everyday Australian investors who had little or no experience in trading such complex products.” Justice Jonathan Beach of the Federal Court of Australia, has previously described these CFD products as “financial heroin hits”.
Announcements Commercial People Moves

Burford Capital Expands European Footprint

Burford Capital, the leading global finance and asset management firm focused on law, today announces that it has expanded its European footprint while also continuing to add leading legal talent to its global operation. Expanded client demand for offerings such as corporate monetization and law firm portfolio financing, combined with a greater desire and need for legal finance in Europe due to legislative changes related to collective redress, have resulted in Burford’s continued growth. In Europe, Burford now has an on-the-ground presence in London, Frankfurt, Zug, Paris, Rome and Stockholm.

Changes to Burford’s European operation include:

  • Burford veterans Michael Redman and Daniel Hall now serve as co-heads of EMEA: Mr. Redman leads Burford’s London office, and as previously announced, Mr. Hall leads Burford’s new office in Dubai.
  • Philipp Leibfried has taken on the role of Head of Europe and will continue to implement Burford’s European growth strategy, actively engaging with law firms and companies across continental Europe.
  • Swiss-based Dr. Jörn Eschment has been promoted to Director and will continue to lead Burford’s business in the DACH region of Germany, Austria, Switzerland and Liechtenstein.
  • Dr. Luca Weskott has joined Burford as a Vice President based in Frankfurt, Germany, and will originate and manage investments in the DACH region. He joins Burford from leading German law firm Hengeler Mueller’s Dispute Resolution practice.

Christopher Bogart, CEO of Burford Capital, said: “As the global industry leader, Burford is constantly evolving to meet our clients’ needs. We continue to add the best and brightest talent company-wide, because that’s the basis not only for growth but for developing strong and lasting client relationships. And I’m especially pleased that as we hire new global talent, we’re also promoting our existing talent into leadership positions.”

Philipp Leibfried, Burford Capital’s Head of Europe, said: “While Burford has always had a significant presence in both the UK and in Europe, with 47 staff now in London, we are also dedicating additional resources to Europe to match growing demand on the continent. From the UK to the DACH region, France, Italy, Sweden and more, we are committed to serving our clients. We look forward to meeting demand from European law firms in areas such as collective redress, securities claims and competition-related litigation, in addition to more award and judgment monetization work with our corporate clients.”

The composition of Burford’s global team as of May 11, 2023 of more than 150 employees – and more than 60 of whom are lawyers – reflects its category leadership as well as its commitment to diversity, equity and inclusion, as half of Burford’s team are women, racial minorities or self-identify as LGBTQ+.

Since its last hiring announcement in November 2021, Burford has expanded its industry-leading global team, including the following senior employees:

Experienced leaders join as Treasurer and Chief Compliance Officer

  • Juan Jimenez, CFA, is Treasurer, based in New York, with responsibility for overseeing all activities and risks related to liquidity and cash management, funding, currency and interest rates, as well as managing relationships with rating agencies. Mr. Jimenez most recently worked as Director of Corporate Treasury at Colgate-Palmolive.
  • Monika Singh, IACCP®, is Chief Compliance Officer, based in Chicago, responsible for overseeing and managing Burford’s compliance with all applicable regulatory, internal policy and procedural requirements. Ms. Singh has over a decade of experience in compliance management. Prior to joining Burford, Ms. Singh was Chief Compliance Officer at 50 South Capital Advisors.

Additional growth of Burford’s industry-leading investment team

  • Christopher Dore is a Director in Chicago with responsibility for overseeing Burford’s underwriting of and investment activity in nationwide consolidated litigation and other complex commercial matters. Mr. Dore was previously Partner-in-Charge of case development, investigations and client acquisition at Edelson PC.
  • Charles Griffin is a Vice President in New York responsible for evaluating and executing new investment opportunities and overseeing investments in Burford’s portfolio. Prior to joining Burford, Mr. Griffin was a litigator at Wachtell, Lipton, Rosen & Katz.
  • Victoria Fox is a Vice President in London focused on commercial litigation, asset recovery and enforcement. Prior to joining Burford, Ms. Fox was a litigator at Stephenson Harwood.
  • Charlie Rooke is a Vice President in London with a focus on complex commercial and competition litigation matters in the UK and Europe. Mr. Rooke was previously a Senior Counsel at the Royal Bank of Canada.

Business origination team adds top industry experts

  • Patrick Dempsey is a Director in New York responsible for originating new business with US law firms and companies. Mr. Dempsey was previously the US Chief Investment Officer and a Board Member at Therium Capital Management.
  • Jonathan Owen is a Vice President in California with responsibility for originating new business with US law firms and companies. Prior to joining Burford, Mr. Owen was a Funding Director at Law Finance Group.

Top global legal talent joins the business

  • Shreya Gulati is Corporate Counsel in New York with a focus on Burford’s investments in the U.S. Prior to joining Burford, Ms. Gulati was an Associate at Weil, Gotshal & Manges.
  • Richard Lee is Corporate Counsel in London with responsibility for overseeing Burford’s investments in the UK, EMEA and Asia. Prior to joining Burford, Mr. Lee was a Managing Associate at Linklaters.
  • Anastasiya Lisovskaya is Corporate Counsel in New York responsible for the legal processes around Burford’s reporting obligations and compliance with securities laws. Ms. Lisovskaya was previously a Senior Corporate Associate at Paul, Weiss, Rifkind, Wharton & Garrison.
  • Richard McGarry is Counsel in London with responsibility for leading Burford’s compliance program in the UK, Europe and Asia-Pacific. Mr. McGarry was previously a Managing Associate in Addleshaw Goddard’s Global Investigations team.

About Burford Capital

Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its offices in New York, London, Chicago, Washington, DC, Singapore, Sydney, Hong Kong and Dubai.

For more information, please visit www.burfordcapital.com.

Commercial Legal Innovation

Spear’s Names Top Litigation Funders for High-Net-Worth Individuals

Litigation funders are increasingly offering their services to a wider range of clients, providing capital and expertise to everyone from individuals to startup business and larger corporates. One market niche where funders can prove to be particularly impactful is in the realm of litigation services for high-net-worth (HNW) individuals, especially when it comes to divorce proceedings. A new index published by Spear’s, the wealth management and luxury lifestyle publication, provides a ranking of the top litigation funding professionals that provide services to HNW individuals. The list includes 15 individuals who are ranked as ‘Top Recommended’ by Spear’s, along with one individual who is listed as a ‘Rising Star’ in the field. These individuals are also sorted by their areas of focus, which includes categories such as family law funding, offshore finance, and matrimonial and private client.  The 15 Top Recommended individuals include senior executives from the following industry-leading funders: Burford Capital, Harbour Litigation Funding, Level, Rhea Family Finance, Schneider Financial Solutions, Therium and Woodsford. Max Austin-Little, director at Level, is identified as a Rising Star in litigation funding, having been highlighted for his expertise in ‘financial remedy proceedings as well as contentious private wealth and probate cases.’
Commercial Deals

Italian Funder LexCapital Signs Agreement with Association Representing Local Authorities

There has been a lot of discussion lately around the use of portfolio litigation funding, and the wider partnership between funders and clients to provide capital for a range of litigation activities. A new example of this approach has appeared in Europe, where a startup Italian funder has signed an agreement with a local association to provide funding for litigation on behalf of its partner institutions. The announcement shared on Legalcommunity.it provides the details on LexCapital’s new agreement with Asmel (Associazione per la Sussidiarietà e la Modernizzazione degli Enti Locali), an association focused on the modernization of local authorities in Italy. The agreement will allow Asmel’s 4,100 partnered institutions to cut costs by giving LexCapital the litigation rights for active disputes, with any financial awards being shared between the local municipality and the funder. Speaking to the benefits of this new partnership, LexCapital’s chief operating officer, Giuseppe Farchione, stated that by taking on the litigation costs, this agreement will allow the local authorities to focus their own resources more efficiently, and also benefit from LexCapital’s technical expertise in litigation. Francesco Pinto, general secretary of Asmel, said that this agreement represents an innovative formula and will provide financial assistance to its partners, whilst also hopefully increasing their rate of success in these lawsuits.
Commercial Legal Innovation

NuGenesis Seeks Litigation Funding for Claim Against FTX

NuGenesis (the purveyor of NuCoin), is reported to be exploring AI and litigation finance as investment tools in claims against  FTX and Alameda Research’s alleged fraud.  Cointelegraph characterizes NuGenesis as a well respected source for quality innovation in the digital asset ecosystem. After NuCoin was attacked by FTX, executives at NuGenesis began to employ AI technology to digest what could be happening behind the scenes at Alameda and the Japanese arm of FTX.  Touted as 'groundbreaking' by Cointelegraph, NuGenesis' crypto fraud detection software has been instrumental in uncovering alleged inconsistencies of fiduciary duty across FTX's global enterprise. NuCoin is said to have tallied almost $55B in potential damages associated with potential FTX scams against the token.  The FTX saga could yield new opportunities for litigation financiers in the crypto litigation space. As an added bonus, we have included 185 highlights to the Office of Legal Education's "Prosecuting Computer Crimes" handbook for reference. 
Commercial Deals

Spain Offers Opportunities for Litigation Funders as ‘Gateway to the Latin American Market’

Whilst the UK, US and Australia remain the most established markets for litigation funding, jurisdictions across Europe are shaping up to be increasingly valuable prospects for funders to pursue. In a new feature, one funder suggests that Spain has a bright future, not only through its domestic market, but also through its ties to the wider Latin American region. In an interview with Leaders League, Paloma Castro, senior legal counsel at Deminor, discusses the current state of litigation finance and the potential for Spain to become an increasingly active market for third-party funding. Castro points to the ongoing economic instability, rising inflation and low growth as key drivers for a global increase in the demand for litigation funding, as companies will be in need of outside capital to fund meritorious litigation. Looking at the Spanish market, Castro argues that the country has great potential to evolve into an attractive market for litigation funders, standing out as the fourth largest economy in the European Union. Beyond its economic clout, Castro also suggests that Spain benefits from ‘a robust legal system that guarantees legal certainty’, which could lower risk for interested funders.  Beyond its domestic market, Castro highlights Spain as ‘the gateway to the Latin American market’, which is another region that funders will be keen to explore given its predisposition to resolving disputes through arbitration.
Commercial Regulatory Issues

Former MP Argues for Increased Regulation of Funders Involved in Collective Actions

Whilst the current collective action regime has been viewed as a net positive for law firms and litigation funders in the UK, there are outside observers who argue that the current system benefits these players more than the consumers and organizations represented in the legal actions. In a new article published in Conservative Home, the chief executive of Fair Civil Justice and former Member of Parliament (MP), Seema Kennedy, argues that the current collective actions regime has created an environment in which ‘law firms and litigation funders profit from consumers who have suffered harm.’ Kennedy argues that it is these two groups who have benefited most from the changes to collective actions following the Consumer Rights Act 2015, each seeking to maximize financial returns from these claims. Kennedy highlights the example of the Horizon IT claim, which saw former postmasters awarded a £43 million judgement, only for a significant share of this award to cover the legal fees and funding costs. Kennedy suggests that if the current system is allowed to continue, it will lead to the UK’s businesses suffering from what she describes as: the United States’ ‘aggressive profit-driven litigation culture’. To address the perceived imbalance in incentives, Kennedy recommends that the UK government consider mirroring other jurisdictions, such as the EU, which increases regulation around litigation funding. Kennedy argues that the current system of self-regulation under the Association of Litigation Funders (ALF) is ineffective, and that without stricter regulation, the interests of funders will be placed ahead of those of consumers seeking access to justice in the first place.
Commercial Deals

Rising Legal Costs in India Drive Demand for Litigation Funding

As regulatory structures continue to evolve in jurisdictions around the world, global litigation funders are keeping a watchful eye on markets that could represent fruitful opportunities for new investments. One such market that has been gaining attention recently is India, which is now experiencing a burgeoning market of domestic funders expanding operations, as well as interest from international funders. A new article in Business Today highlights the growth of litigation finance within India, featuring commentary from Ashish Chhawachharia, a partner at Grant Thornton Bharat. Chhawachharia argues that there is ‘tremendous scope for growth [in] litigation funding in India’, fuelled by rising legal costs which are leaving both companies and individuals unable to pursue meritorious litigation without the support of third-party funding. This growing demand is good news for companies such as LegalPay, which has become one of the leading names for litigation funding in India. Chhawachharia also notes that whilst international funders may choose to work with Indian law firms on these opportunities, the growing presence of international law firms in the country will only contribute to the rise in funding activity. As for what kind of investors will be looking to achieve returns from litigation funding in India, Chhawachharia suggests that high-net-worth individuals and family offices ‘are likely to invest in funds which pool in investments with a similar thesis or objective, rather than invest directly in this market’. 
Commercial Legal Innovation

The Intersection of Litigation Funding and Litigation Risk Insurance

Litigation funding represents an important tool for litigants and law firms in providing the capital to pursue meritorious cases, as well as fundamentally rebalancing the levels of financial risk involved in the process. However, the benefits can be more powerfully realized when funding is paired with the smart use of litigation risk insurance. A recent Q&A hosted by Woodsford’s director of litigation finance and legal counsel, Bob Koneck, dives into the world of litigation risk insurance and discusses current market trends with Megan Easley, senior vice president at CAC Speciality. The discussion covers the wide variety of contingent risk insurances available to customers, from stop-loss policies to judgement preservation insurance, and the growing expansion of portfolio solutions. The booming litigation market has also seen a correlated growth for litigation risk insurance products, with CAC having ‘placed approximately $3Bn in limits in the contingent risk markets in just the last three years’. Speaking to the growth of these portfolio offerings, Easley highlights that they can be useful for a variety of clients, including litigation funders, which hold a diverse array of investments, and law firms who have multiple contingency fee interests. More so than insurance products offered for individual legal assets, these portfolio solutions are tailored and constructed to fit the bespoke needs of the client. Discussing the interactions between funders and insurers, Easley points out that funders can secure insurance to protect their own investments, and also can be involved via litigants and law firms by providing the capital needed to cover the premiums for insurance. Easley also addresses the similarities between the due diligence conducted by funders and insurers, adding that beyond internal approval, the insurer’s process also includes ‘a submission to insurance markets that have to engage with the risk, quote it, and ultimately issue policies’.
Announcements Consumer

Pre-Settlement Funding Firm Expects Johnson & Johnson Talcum Based Baby Powder Cases to Settle By Year’s End

Legal-Bay, The Pre Settlement Funding Company, announced today that they expect a global settlement to be reached in the landmark Johnson & Johnson Baby Powder Talc cases. It will be one of the largest mass tort settlements in U.S. history, costing J&J over $10 billion to resolve over 100,000 claims.  Plaintiffs allege that J&J talc-based baby powder is directly responsible for causing their ovarian cancer, and point out that the company has long been aware of the health risks associated with their product. Several studies dating back to the 1970s concluded that talc particles increase a woman's chances of developing serious medical issues, and evidence suggests that J&J has been intentionally concealing the results for decades.  J&J has attempted to settle the cases via bankruptcy filing and a $9BB payout; however, plaintiffs' lawyers believe that this is woefully insufficient compensation for the damage their product has inflicted, leaving the average settlement amount at less than $200k per plaintiff. If you require an immediate cash advance from your anticipated Johnson & Johnson talc baby powder lawsuit settlement, please visit the company's website HERE or call 877.571.0405 Last week, Federal Judge Michael Kaplan put a hold on all trials as he examines Johnson & Johnson's second bankruptcy filing. Claimants are not only challenging J&J's strategy, but asking the U.S. Justice Department to investigate the pharmaceutical giant for improperly using the bankruptcy code. With the legal rhetoric now at a fever pitch, Judge Kaplan has requested the parties head to mediation to work out their differences. Chris Janish, CEO of Legal-Bay, said, "Our sources close to the litigation have indicated that although a settlement is not imminent at this time; they believe decisive action toward a compromise could be taken by the end of this year. Typically, a fair transaction is when all parties walks away a little disappointed. Therefore, while we predict that J&J will come up on their nine-billion-dollar offer, it will still be well short of the settlement values plaintiffs feel they deserve for their devastating injuries." If you're a plaintiff in an active Johnson & Johnson talcum powder lawsuit and need an immediate cash advance from your anticipated settlement, please visit the company's website HERE or call 877.571.0405 where agents are standing by to hear about your specific case.  Legal-Bay reports that the average settlement value for a case at $9B would be less than $100K. If J&J were to raise their offer, these figures could push the awards closer to $200K per average case, which would be a rather large award considering that 100K total claims are expected to be filed. Legal-Bay is one of the best lawsuit loan companies when it comes to mass tort litigations, and is currently the #1 talc funding company in the industry. Legal-Bay is also funding Round Up cases, Essure, Juul e-Cigarettes, Hernia Mesh, IVC Filters, and Exactech hip and knee recall cases. Legal-Bay assists plaintiffs in all other types of lawsuits, including personal injury, slips and falls, car, boat, or construction accidents, medical malpractice, dog bites, police brutality, sexual assault, judgment or verdict on appeal, commercial litigation, contract dispute, Qui-tam or whistleblower cases, False Claims Act, patent litigation, copyright infringement, and more. Their lawsuit funding programs are designed to provide immediate cash in advance of a plaintiff's anticipated monetary award. The non-recourse law suit loans—sometimes referred to as loans for lawsuit or loans on settlement—are risk-free, as the money doesn't need to be repaid should the recipient lose their case. Therefore, the lawsuit loan isn't really a loan, but rather a cash advance. To apply, please visit the company's website HERE or call toll-free at: 877.571.0405 where agents are available to answer your questions.
Commercial Regulatory Issues

Analyzing EU Regulatory Reforms Against the Australian and British Systems

Following last year’s release of the Voss Report and its recommendations for further regulation of litigation funding within the European Union, there has been much discussion over the individual proposals within the report. However, it is also worthwhile to look at the proposed reforms through a comparative lens and see how their impact could mirror or differ from regulatory structures in other key markets for litigation funding. A new piece of analysis from Chris Martin of Augusta Ventures looks at the future of litigation funding regulation in the EU, comparing the potential outcomes against the existing regimes in Australia and the UK.  Martin highlights the recent developments in Australia, where the government has rolled back certain pieces of regulation to ensure that litigation funders are able to facilitate access to justice. However, Martin points out that Australia’s previous regulatory regime created an environment in which certain cases, ‘particularly class actions against large and well capitalized corporate wrongdoers’, were no longer viable investment opportunities for smaller funders.  The analysis contrasts this stricter approach with the more ‘self-regulating’ model that exists in the UK, where the Association of Litigation Funders (ALF) provides an industry body that can set standards that ensure there is a competitive market and level playing field. Martin argues that the ALF’s code of conduct tackles the same issues that the EU is trying to solve through regulation, including issues such as ‘control of case strategy, approval of settlements and withdrawal from cases’. Martin concludes by suggesting that the EU should not ignore the potential for increased regulation to ‘end up limiting funding options for litigants’, by increasing barriers to entry and driving up existing funder prices.
Commercial Regulatory Issues

Trial Attorney Says Litigation Funding as a National Security Risk is a Myth

As LFJ reported earlier this week, the calls for tighter regulation of litigation funding in the US based on the claim that it threatens national security have continued to grow from politicians, corporations and lobbying groups around the country. However, litigation professionals are speaking out to critique these claims and suggesting that these arguments are simply being made to protect those threatened by litigation, rather than out of a genuine fear about foreign entities exploiting the US judicial system. In an op-ed for Bloomberg Law, Adam Mortara, a trial attorney and former clerk to the US Supreme Court, argues that this supposed risk to national security is vastly exaggerated. Mortara emphasises that despite the Chamber of Commerce’s repeated claims that this is a genuine threat, it has failed to ‘address how confidential information is protected in discovery’, nor has it provided any ‘any actual examples of litigation funders (foreign or domestic) gaining access to sensitive corporate secrets.’ Mortara highlights that Federal Rules already protect defendants from ‘unwarranted disclosure through the issuance of a protective order’, which can also be extended to include an “attorney’s eyes only” provision. Mortara goes on to state that he has never seen a situation in which a litigation funder was allowed access to such protected and confidential information, neither intentionally nor through accidental leaks.  Mortara concludes his argument with a harsh rebuttal of the Chamber of Commerce’s attacks: “Corporations might not like litigation funding because they generally don’t need it and get sued by the people who use it. Fine. But litigation funding isn’t a national security risk.”
Commercial Regulatory Issues

SEC Approves Mandatory Disclosure of Litigation Funding by Private Equity Firms

Whilst the involvement of major industry-leading litigation funders is widely publicized, outside of these household names are a wide range of investment firms that are keen to take part in a sector which promises lucrative returns for those willing to accept the high levels of risk. A new ruling from the Securities and Exchange Commission (SEC) means that whilst private equity firms may still not publicly discuss these investments, they will now be required to privately disclose their litigation finance activities. Reporting by Bloomberg Law details the results of a vote by the SEC earlier this week, which approved new rules governing required disclosures by private equity firms. These companies had previously been able to avoid making disclosures about litigation finance investments, but will now be required to privately report to the SEC ‘the percentage of their capital targeted for use by law firms as part of an investment strategy’. The article also covers additional plans to increase reporting of litigation funding activity by private funds, as the SEC is working to finalize rules that would also require hedge funds to confidentially disclose the proportion of litigation finance in the total value of their assets. The current plans would see hedge funds make this disclosure using a net asset value calculation, and would allow them to report using the percentage of the firm’s capital that is allocated to litigation funding.
Consumer

California Litigation Funding Bill Drops Mandatory Disclosure Requirements

Attempts to regulate litigation funding and provide additional oversight into the practice have been gaining momentum, not only on a national level in several countries, but also by individual state legislatures in the United States. As LFJ reported in March, one such attempt has begun in California where State Senator Anna M. Caballero introduced the Predatory Lawsuit Lending Prevention Act, SB 581. However, a new development suggests that the scope of this bill will be significantly reduced if it does become state law. Reporting in Bloomberg Law highlights the news that a new version of SB 581, which was unveiled last week, had removed the requirement for mandatory disclosure of third-party funding in all cases. The latest draft of the bill has softened these requirements, by only requiring disclosure where it is ordered by a judge in situations where they believe the funding violates state law. Additionally, these disclosures will also be permitted to be made in private to the court, rather than disclosed publicly. Senator Caballero also clarified that the types of funding arrangements included in the bill’s oversight has been narrowed ‘to the situations where the plaintiff needs some kind of financial support in order to get them through the litigation process.’ As a result, Caballero stated the new law would provide an exemption for ‘business-to-business kinds of transactions that help attorneys pay for the litigation costs’. Groups who have been lobbying in favour of amendments to the bill included Consumer Attorneys of California, whose legislative director Nancy Peverini, described the changes as ‘a big victory’. Consumer Attorneys of California has been working with industry associations including the International Legal Finance Association (ILFA), the Alliance for Responsible Consumer Legal Funding and the American Legal Finance Association, to lobby for appropriate changes to the bill. ILFA’s executive director, Gary Barnett, stated that a key concern around the bill’s scope was ensuring that it ‘does not conflate the consumer litigation funding industry and the separate and distinct commercial legal finance industry’.
Commercial Regulatory Issues

Former US Senator Calls for Mandatory Funding Disclosure in Patent Lawsuits

Criticisms of third-party litigation funding of patent disputes have focused on the perceived lack of transparency and oversight, with the U.S. Chamber of Commerce going so far as to suggest that this represents a threat to national security. These calls for a crackdown on litigation finance in patent lawsuits have found a warm reception in some corners, with a former US Senator from Vermont being the latest high-profile political figure to come out in support of the proposed reforms. Writing in an op-ed in Bloomberg Law, former US Senator Patrick Leahy echoes the Chamber of Commerce’s warnings that third-party funding is a tool for America’s competitors to undermine economic and national security. Leahy argues that ‘as more than half of US patents are issued to foreign entities’, there is a broader concern about the lack of transparency regarding patent ownership, with litigation funders offering the potential for ‘foreign competitors to advance their strategic interests’. Whilst Leahy acknowledges that ‘third-party litigation funding is not always problematic’ and can provide access to justice for those who cannot afford it, he maintains that there is an issue if ‘funders are able to influence litigation without revealing themselves’. Leahy highlights recent events including the patent lawsuits in Delaware that saw the court order disclosure around funding, and the ongoing dispute between Burford and Sysco, as examples of the dangers litigation funding poses. Leahy argues against creating complex legislation to regulate litigation funding, and instead argues for a straightforward approach that mandates the disclosure of any third-party funding in all patent lawsuits. Leah concludes by stating that such a requirement ‘poses no threat to good-faith actors, but will expose litigation investors that are weaponizing the US legal system’.
Commercial Deals

RBG Holdings Moving Forward with Sale of LionFish

Coverage of the litigation funding industry often focuses on the successes and returns on investment, but those victories do not eliminate the high levels of risk involved in third-party funding. This has been highlighted by the struggles faced by LionFish Litigation Finance, and its parent company, RBG Holdings. Reporting by Legal Futures reveals that RBG Holdings is taking steps to sell LionFish, its litigation funding subsidiary, which had previously reported £4 million in losses. RBG’s group chief executive, Jon Divers, said that the decision was made following a strategic review of the level of investment required to minimize risk, stating that ‘the group did not have the balance sheet to support the growth required and that LionFish’. RBG’s statement confirmed that the selling process was underway and that it had already received four offers to purchase LionFish, with Mr Divers emphasizing that RBG would conduct the necessary due diligence to ensure ‘an offer that will both deliver cash back to the group and a share of the upside in successful cases’. Looking towards the company’s future, RBG’s group chair Keith Hall added that with a new executive team in charge, ‘the group is well placed to deliver its goal of sustained shareholder value’, once the sale is complete.
Case Developments Commercial

LCM Funds Fashion Label Founder in Trademark Dispute with Katy Perry

When litigation funding is involved in patent or trademark litigation, we most commonly see it associated with cases in the technology sector and in disputes between startup companies and established multinational corporations. However, a recent victory in a trademark lawsuit in Australia saw a prominent commercial funder back a fashion label in a dispute with the world-famous pop star, Katy Perry. Reporting in Business News Australia covers the recent judgement in the Federal Court of Australia, which provided fashion label founder, Katie Taylor, with injunctive relief and damages in regard to her trademark dispute with Katy Perry, whose real name is Katheryn Hudson. Taylor had registered the trademark for ‘KATY PERRY’, and had sold clothing through a business with that name, which she founded in April 2007, had alleged that Hudson’s businesses infringed on the trademark by selling merchandise for the artist under that trademarked name. The Federal Court’s Justice Makovic found in favour of Taylor, stating that the respondents were aware that their conduct was infringing, and yet still ‘engaged in what can only be described as a 'calculated disregard of [Ms Taylor’s] rights.’ Taylor had launched formal legal action in October 2019, and only did so when she became aware of the availability of litigation funding. Justice Makovic elaborated on Taylor’s funding arrangements by saying, ‘It took some time for Ms Taylor to secure litigation funding.  Ultimately LCM Operations Pty Ltd was identified as a firm prepared to fund the litigation.’
Commercial Regulatory Issues

Patent Litigation Assignment in Western District of Texas Still Favors Judge Albright

As LFJ covered earlier this month, a new report by RPX found that patent litigation driven by Non-Practicing Entities (NPEs) saw a dramatic decline in volume in the first quarter of 2023. However, one of the most interesting findings in RPX’s research was a 55% reduction in the number of defendants in the Waco Division of the Western District of Texas. This was attributed to a standing order mandating the random assignment of cases in the Western District, rather than automatically assigning them to Judge Alan Albright in the Waco Division. A new piece of analysis by Goodwin dives into the details of patent litigation assignment in the district, assessing the distribution of cases among the 12 district judges. Goodwin’s analysis found that in the first seven months of the new regime, August 2022 to February 2023, the allocation of cases was still largely dominated by Judge Albright, who received 49% of all new Waco patent cases. Goodwin notes that this is a much higher share than under a truly random distribution, which would have allocated roughly 8% of cases to Judge Albright. The analysis suggests that the reason for this initial disparity is partly a result of circumstance, as Judge Albright was repeatedly allocated patent cases where there were already related cases that he was presiding over.  However, Goodwin highlights the important fact that this trend has begun to shift as of March, with Judge Albright only receiving 14% of all patent cases that month. The other conclusion drawn from the data is that the Western District is prioritising allocating cases to other judges with the most experience in presiding over patent litigation, as Judge Robert Pitman and Judge Lee Yeakel have been allocated 13% and 9% of cases, respectively, in the period August 2022 to March 2023. Goodwin concludes by noting that this trend may not follow an exact pattern as Judge Yeakel is retiring on May 1, 2023.
Commercial Deals

Distressed Restructurings Generate Opportunities for Funders in the Middle East

As the litigation finance industry continues to grow and industry leaders find themselves in an increasingly competitive market, opportunities in emerging markets will represent a top priority for funders to establish a dominant position in new regions. The Middle East stands out as one of the most promising markets for funders, with a growing financial infrastructure and governments looking to modernise their legal systems, opportunities for high value litigation funding in the region will proliferate. Reporting by Debtwire examines the current state of litigation finance in the Middle East, with a particular focus on the role of funders in distressed restructurings and their acquisitions of non-performing loans (NPLs).  The article highlights Omni Bridgeway’s partnership with the IFC, which created a $100 million investment vehicle that could provide banks with a solution to NPLs. Marjin Flinterman, senior investment manager at Omni Bridgeway, argues that banks saddled with challenging NPLs are turning to funders who ‘are often better equipped to extract value through developing and implementing international recovery strategies.’ Debtwire notes Arabtec and NMC Health as examples of situations which are prompting funders, such as Burford Capital, Omni Bridgeway and Phoenix Advisers, to acquire bad debt and then capitalise on returns from future litigation. Phoenix Advisers’ CEO, Dilip Massand, suggests that by acquiring some of the debt in these distressed situations, ‘one would be able to ‘take a few more bites at the apple’ by getting the [right of first refusal] on the ultimate litigation claims.’  Daniel Hall, managing director at Burford Capital, does caution that despite the interest in these distressed restructurings, ‘there are a lot more people talking about NPLs than actually doing them.’ Outside of NPL-related litigation, there is still plenty of interest from funders in litigation going through common law courts, where cases can generate significant value. Lexolent’s Jonathan Davidson also argues that litigation in the local courts can offer tangible benefits as ‘the proceedings tend to be less expensive, there are less adverse cost consequences and local lawyers, like barristers, are accustomed to working on the basis of fixed fees or retainers.’
Case Developments Commercial

Pending US Supreme Court Decision is a Coinbase Class Action Cliffhanger

Coinbase's business has been seminal to the legacy of cryptocurrency innovation. As the global digital asset marketplace continues to mature, Coinbase is tiptoeing between a group of class action lawsuits. Now, the United States Supreme Court is deliberating if Coinbase should be protected by mandatory arbitration.   Benzinga reports that in March 2023, the U.S. Supreme Court appeared uncertain regarding whether to allow Coinbase to move to arbitration over class actions which had been launched against the firm. Executives at Coinbase argued that private arbitration is a win for business.  The June decision by the Supreme Court will spell a new dynamic for cryptocurrency sector litigation. Some digital asset scholars predict that a lack of mandatory arbitration may devastate business dynamics at Coinbase. Allowing class action lawsuits to continue is an expensive proposition that would inevitably impact the pace of cross-border crypto innovation. Meanwhile, U.S. and global regulatory uncertainty is stoking new legislation that could fuel litigation well into the future.  The efficient nature of digital asset technology is at a crossroads. The Coinbase decision, commingled with upcoming regulatory requirements worldwide, will shape business dynamics for enterprise crypto software and the entrepreneurs behind future sector innovation. 
Commercial Regulatory Issues

Proposed Reforms to PTAB Include Third-Party Funding Disclosure

As intellectual property and patent litigation remain among the most active areas of interest for litigation funders, industry leaders will be watching carefully to see how the regulatory and oversight system continues to develop. Last week, the US Patent and Trademark Office (USPTO) announced an Advance Notice of Proposed Rulemaking (ANPRM), and is looking for public input across an array of proposed changes to proceedings taking place at the Patent Trial and Appeal Board (PTAB). Outlined in an article by Bloomberg Law, one of the key reforms put forward in the proposals includes changes to the “inter partes” review process, such as specifying who can request such a review and under what circumstances the PTAB will deny those reviews. Importantly for funders, another proposal looks to implement mandatory disclosure of any ownership interest or third-party litigation funding related to a patent, mirroring similar efforts to enhance funding disclosure in patent litigation. The USPTO’s director, Kathi Vidal stated in the April 20 press release: “Our goal is to better ensure our practices align with the USPTO’s mission to promote and protect innovation and investment, and with the congressional intent behind the AIA (America Invents Act) to provide a less expensive alternative to district court litigation to resolve certain patentability issues while also protecting against patentee harassment.”
Commercial Deals

Deminor Announces Global Strategic Partnership with the Grimaldi Alliance

The growth and maturation of the litigation finance industry has seen funders increasingly focused on building strategic partnerships with law firms and clients, rather than simply looking to grow the business through individual case investments. A tangible example of this shift in approach comes from leading funder Deminor, which has announced a strategic partnership with the Grimaldi Alliance. Detailed in an announcement by Deminor, the partnership will position the funder as the ‘partner of choice’ for the Italian law firm and its global network of partners. Deminor’s CEO, Erik Bomans praised the new partnership and stated: “Our complementary international footprint, combined with multi-jurisdictional client requirements, have led to a natural fit with the Grimaldi Alliance, both strategically and culturally.” Speaking for the Grimaldi Alliance, Francesco Sciaudone, managing partner at Grimaldi, also highlighted the synergy between Deminor’s global strategy and his law firm’s multi-jurisdictional reach. Sciaudone highlighted the scope of the Grimaldi Alliance’s presence, which includes “the Italian market (with more than 9 offices throughout the peninsula) and in the European and international markets, where Grimaldi Alliance is present with well-qualified and integrated teams, in addition to offices in Brussels, Paris, London, worldwide with more than 60 jurisdictions.”
Announcements Commercial Deals

Three Quarters of Law Firms Would Consider External Ownership

Three quarters of law firms would consider selling a percentage of their business to an external buyer, new research has revealed.

A survey of 200 law firm partners commissioned by Harbour, the world’s largest independent litigation funder and law firm lender, showed that 149 of the 200 partners surveyed said their firm would consider external ownership.

The most willing to sell a percentage were the firms with a turnover of between £5m and £10m with all those questioned saying their firm would consider it.

The next most willing to consider external ownership were firms with a turnover of between £50m - £100m (89%), £30m - £50m (86%) and £10m - £30m (79%).

Those least likely to sell were those with turnovers of £400m - £500m (22%) and £100m - £400m (48%).

Of those who said they would not consider external ownership, loss of control was most cited (51%) as the key issue that would need to be resolved before they would consider selling. Other factors included future partner compensation (47%), obtaining partner consensus (37%) loss of employees (33%) and loss of culture or ethos (31%).

The survey revealed that the vast majority of law firms are willing to consider using alternative funding in the next year to 18 months, though 83% of firms said they would consider using cash reserves or asking for increased investment from partners.

Popular forms of alternative funding included bank loans (82%), greater use of contingency fee or damages based agreements (DBA) (79%), credit or lending facilities from litigation funders (78%) and stock market listing/non-lawyer shareholders (77%).

Ellora MacPherson, Managing Director and Chief Investment Officer at Harbour, said: “These results show that the legal sector is well and truly open for investment from external sources. With 75% of law firms considering external ownership, it is a fascinating time in the market with the trend for mergers and acquisitions set to continue. Our survey shows this isn’t just the smaller firms, but also those with substantial turnovers.

“In addition, with law firms and their partners having weathered turbulent economic times during the pandemic, it is clear that many are looking at alternative forms of investment. At a time of high interest rates, specialist lenders to the legal sector, who understand lawyers and law firms, are well-placed to provide attractive finance options.”

Survey methodology

200 law firm partners were interviewed online by Censuswide between 05.07.2022 - 20.07.2022.

About Harbour Litigation Funding

Harbour Litigation Funding is the world’s largest independently owned litigation funder. Since launching in 2007, the business has been at the forefront of the growth and development of the global funding market.

Headquartered in London, the business funds cases across the globe ranging from one-off disputes valued from circa. £1m to portfolios of multi-million-pound cases. It also funds the growth of law firms by offering credit facilities and through equity investments.

Harbour is a founder member of the Association of Litigation Funders (ALF), a member of the International Legal Finance Association (ILFA) and the Commercial Litigators’ Forum.

Ellora Macpherson is managing director and chief investment officer.

Announcements Consumer

Gain Brand Launches, Commits to Leveling the Insurance Playing Field

Gain, a comprehensive medical lien servicing and legal funding company with an artificial intelligence-powered platform, launched today. Previously, the company had been doing business as a variety of operating companies, including Cherokee Legal Holdings, Cherokee Funding and Gain Servicing. The rebrand is meant to streamline the companies and build efficiencies in order to serve as a centralized, AI-powered hub to those with medical lien servicing and legal funding needs. “Since 2011, we have provided legal and medical funding services. Over the years, we have added new companies, new divisions and expanded offerings. Our exceptional growth has led us to today. An exciting time has come in the evolution of our organization and that is the need to streamline all of our services and capabilities under one go-to-market brand,” said Gain Founder and CEO Reid Zeising in a recent letter to clients. “Under our new company name, we aspire to provide solutions and services that are undeniably Gain.” With two-year revenue growth of 251%, Gain recently ranked no. 83 on Inc. magazine’s list of the Southeast Region’s Fastest-Growing Private Companies. Between 2005 and 2022, Gain, doing business as Cherokee Legal Holdings, Cherokee Funding and Gain Servicing, has provided $250 million in medical care and serviced $800 million in medical liens. Honored with three Inc. 5000 designations, 15,000 law firm partners, and over 3,000 health care clients, Gain is well-positioned for continued growth. The new brand identity and company consolidation was launched initially on an updated website, www.gainservicing.com. The company headquarters are and will remain in Atlanta, Ga. About Gain Gain is the fastest growing medical lien servicing and legal funding company in the United States. Gain’s innovative artificial intelligence-enabled servicing platform and its collective services and solutions come together to meaningfully serve the personal injury ecosystem and create better outcomes. Gain is the critical hub connecting medical providers, lawyers and personal injury plaintiffs. Gain’s industry-leading platform serves as the source of truth, providing both needed transparency and efficiency for all of those supporting personal injury cases and plaintiffs. Gain is committed to leveling the insurance playing field for those injured through no fault of their own. To learn more, go to gainservicing.com. Contact: Kris Altiere (470) 713-6621 kris@gainservicing.com
Commercial Deals

Singaporean Bondholders Seeking Funding for Class Action over Credit Suisse Rescue

Last month saw the dramatic collapse of a trio of mid-size U.S. banks including Silicon Valley Bank, and in the aftermath, Credit Suisse found itself in dire need of rescue via its sale to UBS. However, the emergency deal to save Credit Suisse did not come without negative consequences, and in the ensuing weeks, it has appeared increasingly likely that bondholders will be pursuing several lawsuits across various jurisdictions. Reporting in Reuters covers the potential scope of the upcoming litigation, which has been prompted by the $3.4 billion rescue plan’s arrangement to write down around 16 billion Swiss francs of Additional Tier 1 (AT1) Credit Suisse debt. Bondholders in the United States, Switzerland, and Singapore are all reportedly exploring claims, with law firms including Quinn Emanuel Urquhart & Sullivan, Pallas Partners and Korein Tillery, all seeking to represent the claimants. Additionally, there are a number of class actions being proposed in the U.S. that would be brought on behalf of Credit Suisse shareholders. Additional reporting by Business Times zooms in on the bondholder litigation in Singapore, with lawyers representing Singaporean Credit Suisse AT1 bondholders looking to bring a class action lawsuit against the Swiss Government. Jonathan Lim, partner at WilmerHale, stated that the class action was seeking outside litigation funding to support a claim which alleges the bond write-down violated rules against ‘unfair state actions’ codified under the 2003 Singapore-European Free Trade Association.
Commercial

Providing Budgetary Certainty to In-House Counsel Through Litigation Funding

It has become increasingly clear that as the commercial litigation funding market continues to grow more competitive, funders are looking to broaden their client base with a focus on offering services to in-house counsel. Among the advantages that outside capital can provide to legal departments, one funder is stressing the value of providing budget certainty amidst the always unpredictable timing of litigation spending. In a feature in Legal Dive, Burford Capital’s co-COO, Aviva Will, highlights the common issue faced by general counsel that whilst they have a set quarterly budget to account for, outside law firms cannot always make those litigation costs reliably fit within quarterly constraints. As a result, Burford is looking to support GCs where possible by covering legal costs that would exceed the department’s litigation budget, allowing clients to have ‘certainty around when they [are] going to spend their capital’. Another solution which Burford Capital provides to CFOs and general counsel is a form of factoring, where a company expects to receive an award, and Burford will pay a portion of that award in advance, in return for being first in line for any payment if the award is granted.  Will also points to the value Burford can offer clients from a strategic perspective, arguing that it’s not simply about providing lump sums of capital in one go, but instead finding out what the pain points are for the legal department, and then Burford can ‘think creatively about how we can support the company.’
Commercial Regulatory Issues

Is Litigation Funding Responsible for Rising Insurance Settlements?

Many insurers claim that litigation funding is a major contributor to so-called ‘nuclear settlements’, which are large settlements and damages awards that are based on intangible factors. However, a new article interviewing industry experts suggests that there is less consensus on the topic than might be expected. An article by PropertyCasualty360, looks at the issue of rising insurance settlements and the associated rising cost of civil litigation, known as social inflation. Examining litigation funding’s ties to these increases, the author found that there were those who do see a link, such as John C.S Pierce who investigated a social inflation task force at the Defense Research Institute. Pierce argues that the presence of third-party funders and the huge amount of capital they bring, naturally increases costs overall, stating that as the funding industry grows ‘we will see more of these big verdicts and […] more big settlements.’ However, there are experts who disagree with this assessment, including Tom Baker, professor of law at the University of Pennsylvania, who argues that even if social inflation is real, ‘there is no solid evidence, and certainly no published, peer reviewed research, showing that litigation funding is the cause.’ Baker also criticized a publication by insurer Swiss Re, which claimed third-party funding had increased costs in commercial trucking litigation, but failed to note that lawyers in this area do not regularly engage litigation funders. Anthony Sebok, professor at Cardozo School of Law, goes even further and suggests that when looking at litigation funding and social inflation, ‘there are so many reasons to think that the two have nothing to do with each other’. Instead, Sebok argues that industry leaders should look to the wider socio-political conditions at play here, namely the rise in populism that will naturally lead to an environment which is increasingly hostile to corporate defendants. 
Case Developments Commercial

Funder Files Lawsuit Against Another Funder, Alleging Fraud in Law Firm Financing Dispute

As LFJ recently covered, there is growing enthusiasm among litigation funders to invest capital in portfolio and law firm financing, in addition to the single case funding that is a staple of the industry. However, such engagements do not come without their own risks, as has been demonstrated by a dispute where one funder is suing both a law firm and another funder over allegations of fraud. An article by Bloomberg Law provides an overview of the lawsuit in the Supreme Court of the State of New York, where Contingency Capital has brought a complaint against ACAP Litigation Fund. Contingency’s lawsuit alleges that ACAP and the Houston-based Dunken Law Firm defrauded the funder, by using an $8.8 million loan provided to pay off Dunken’s entire existing debts to ACAP. Contingency claims that ACAP lied that this loan would cover the debt, only for ACAP to claim that Dunken was ‘in default of a new loan that it had agreed not to extend’. Whilst Dunken is not the target of Contingency’s lawsuit, they are simultaneously facing another lawsuit from ACAP in Texas, and Bloomberg Law’s reporting found that Dunken has been the target of multiple lawsuits, including allegations of ‘fraud and breach of contract over its handling of transvaginal mesh and talcum powder cases.’  Rebecca Berrebi, CEO of Avenue 33 and a litigation funding broker, stated that the case demonstrates that due diligence cannot always prevent these situations, and that in every litigation funding agreement ‘you presume good faith and fair dealing and that people aren’t lying.’
Case Developments Commercial

District Judge Denies Sysco’s Request to Bundle Burford Dispute with Antitrust Claim

Whilst public conflicts between funders and clients are a rare sight, when a major dispute erupts between the two parties it is sure to be a drawn-out affair. The dispute between Burford Capital and Sysco Corporation is proving to be just such a conflict, as Sysco has failed to bundle its motion to vacate Burford’s existing injunction with one of the antitrust lawsuits at the heart of this dispute. Reporting in the Cook County Record gives us another update on this dispute, highlighting the decision by U.S. District Judge Thomas Durkin to deny Sysco’s reassignment motion. Sysco had argued in its request that resolving its primary dispute with Burford would allow it to settle its ‘Broiler Case’ chicken pricing lawsuit, but Judge Durkin refuted this argument and stated that ‘the two cases are as different as night and day.’ He went on to explain that as Sysco’s dispute with Burford was wholly concerned with the financing agreement, whilst the antitrust litigation still contains ‘unresolved questions of law and fact’, there was no relation between the two cases. Judge Durkin also refuted the idea that bundling the disputes together would create no efficiencies, as he was not even familiar with the details of the litigation finance agreement and its related dispute in the first place. Judge Durkin’s decision included a strong rebuke of the assumptions made in Sysco’s request, stating: ‘While district judges sometimes mediate settlement, it is never appropriate to presume settlement. And it is certainly inappropriate to decide whether Case 1451 should be reassigned on the assumption that Sysco’s claim in that case is meritorious.’