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Commercial

The Attorney’s Litigation Finance Lexicon Handbook 

As the global litigation finance industry flourishes, new phrases, old phrases and modified legal vernacular are molding new products and services. This, as litigation investors build legacy franchises. As industry innovation continues exponentially, it is key for attorneys to have a model guide or handbook to familiarize themselves with conversational industry terms.  Lake Whillans has collated 54 of the litigation finance terms that make the industry go ‘round. Litigation Finance Journal has organized the terms below, click the hyperlink to be directed to Lake Whillans’ definition for reference. 
Commercial Regulatory Issues

Council of Bars and Law Societies of Europe on Private Litigation Funding 

Representing bars and law associations of 45 countries and over 1M attorneys, the Council of Bars and Law Societies of Europe (CCBE) has published insights into third party litigation funding best practices. CCBE’s report is in response to the European Parliament’s draft on responsible frameworks for nurturing the future of third party funding. As an added bonus, Litigation Finance Journal has collated 25 highlights to CCBE’s findings.  According to CCBE, funding agreements should be developed around client interest and avoid complications associated with conflicts of interest.  CCBE states that third party funders should be regulated under European law, but also stresses the importance of ancillary legal service providers falling under similar provisions of regulation. CCBE makes comments on the nature of nonprofit organizations and suggests clearer definitions associated with nonprofit client/attorney relationship protections.  CCBE warns of situations where conflicts of interests are generated between a complicated network of counterparties striving to drive returns against ethical provisions of the law.  Click here to read CCBE’s findings, along with our 25 highlights to the report. 
Commercial Deals

Insolvency Funding in France 

French insolvency proceedings have unique opportunities, according to Insolvency and Restructuring International. Third party funders can be engaged to help companies navigate insolvency proceedings. Oftentimes, French third party funders help companies in the form of cash advance proceeds, yet they also purchase the legal claims of insolvent companies, in the hopes of earning a hefty ROI on the legal claim.  Insolvency and Restructuring International Vol.16 features Alexandra Szekely and Chloé Delamourd’s research into third party insolvency vehicle engagement in France.  Their research covers instances where an insolvency agreement is reached and then purchased back from the original seller, among other unique third party funding instances under French law. For example, the research suggests that third party insolvency funders have prime opportunities to capture value from the receivables of a firm under bankruptcy proceedings.  Click here to read more on the latest insights spanning French insolvency law. 
Case Developments Commercial

Law Society of Scotland on Post Office Scandal Litigation 

The Law Society of Scotland shares a new debrief of the Post Office scandal. The story goes: When the Horizon computer system found over 736 sub-postmasters were allegedly grifting from the United Kingdom’s postal budgets, they were summarily punished. However, Horizon’s back office capabilities were later found to contain bugs and other system defects that allegedly found workers at fault by mistake. Enter litigation funding, a utility that many of the former post office workers found necessary to clear their name.  According to the Law Society of Scotland, February of 2022 saw the initiation of a public debate and investigation on the totality of the Post Office scandal’s effects. The whole affair is being dubbed an extreme case of United Kingdom justice malfeasance. Furthermore, the Law Society explains that about 10% of the 736 criminal records have been overturned. A class of 555 claimants have won restitution, totaling £20,000 each.  Click here to read more about the Law Society of Scotland’s take on the Post Office Scandal.
Commercial

The Legal 500 Lists the UKs Top Litigation Financiers 

Editor's note--Legal 500 first published the below rankings in 2021. This ranking has resurfaced in 2022, though to our knowledge Legal 500 has yet to update its rankings, nor has it published its methodology.  The inaugural edition of the Legal 500 list of top litigation finance franchises in the United Kingdom has been published. Legal 500 likens litigation investment to tennis, in that winners are decided by those who hit the ball out of bounds less than their rivals. The Legal 500 says top litigation investors look to make four to ten times the cost of investment when choosing claims for funding.  The Legal 500 alludes to innovation in the litigation finance space, and cites portfolio funding as the crux of a successful legacy franchise. With safety in numbers, the best-performing litigation investors are navigating market ebbs and flows through portfolio risk mitigation. Litigation Finance Journal has collated a list of the Legal 500’s leading UK litigation financiers below: 

Rankings Table

First Tier
  • Burford
  • Harbour
  • Therium
Second Tier
  • Augusta
  • LCM
  • Omni Bridgeway
  • Vannin Capital
Third Tier
  • Bench Walk Advisors
  • Balance Legal Capital
  • Woodsford
Commercial

Video: Mass Tort Finance Innovation 

Max Volsky (co-founder, chief investment officer and general counsel at Lexshares), recently profield how Lexshares approaches funding mass tort claims. According to Mr. Volsky, Lexshares often funds firm portfolios composed of meritorious mass tort claims. Mr. Volsky says that Lexshares’ products and services are designed for individual attorneys and large law firms alike.  In the video interview, Mr. Volsky walks through various scenarios of the Lexshares mass tort review process. Volsky says that the non-recourse nature of litigation finance is an attractive feature for many, as opposed to traditional finance options. Volksy says that if a story is interesting and the case has value, Lexshare is happy to consider these characteristics for mass tort funding review.  Click here to watch the full mass tort interview with Mr. Volsky.
Commercial Regulatory Issues

The Arkin Cap Debate 

The Arkin Cap has traditionally been a guide associated with governerning the costs of litigation finance agreements. However, over a series of recent rulings, justices in the United Kingdom allude to their own autonomy, given individual case nuances. This implies that the concept of the Arkin Cap is not guaranteed in any litigation.  Insights outlined by Stewarts Law profile though surrounding the Arkin Cap as a binding rule. With various organizational matters part of litigation finance agreements, modern interpretation of the Arkin Cap has evolved. For example, the Arkin case included a litigation finance agreement that only covered a portion of case costs.  Since the Arkin case, similar scenarios have occurred, where justices have precluded the Arkin Cap under other contractual arrangements. Click here to learn more about the latest Arkin Cap debates.    
Case Developments Commercial

Global Electricity Cartel Faces Class Action 

Burford Capital is funding litigation exploration of a potential claim that alleges that some of the world’s largest electricity cable makers conspired to inflate cable prices in a fraud paid for by millions of consumers in the United Kingdom. The higher costs of the alleged cable fraud have been passed onto consumers since April, 2001.  According to reports on the matter, a similar cartel operated between 1999 and 2009, in which $319M in fines were awarded. Given that consumers pay for the high voltage cables as part of their utility bills, the new case aims to recover damages and court costs associated with any modern electricity cartel operating at the expense of United Kingdom consumers.  Click here to learn more about the case.
Commercial Deals

MoneyWeek on Bankrolling Global Litigation Finance 

Top-30 law firms in the western world hold $2T in pending arbitration claims, while raking in $860B in yearly fees associated with litigation. MoneyWeek takes a deep dive, profiling the best techniques for bankrolling litigation finance globally.  MoneyWeek says that the value of high stakes litigation is increasing exponentially. Different approaches to litigation investment include non-recourse, insolvency and crowdfunding so retail investors can participate.  MoneyWeek describes litigation finance as an asset class that avoids cyclical market events that impact interest rates and bond markets. However, MoneyWeek raises alarm bells that cross-border accounting of unsavory litigation finance houses will be a cause for the industry’s eventual consolidation.  MoneyWeek profiles Burford Capital’s approach to the funding market, given Burford’s top position as a global legal funder.  
Commercial

Litigation Investment Ethics for the Modern Attorney

With $11B in assets under management in the United States, litigation investors are looking to a global market of attorneys who are engaging modern financial solutions to meet client demands and needs. The ethics behind pure litigation marketplace innovation is something that LexShares says is imperative. A collated collection of whitepapers and scholarly articles concerning global litigation investment ethics are below.  Litigation Funding Ethics acts as an organized primer for the modern attorney. The guide explores large jurisdictions such as New York, Delaware and Texas.  Ten of the 12 chapters from the guide explore top ethical insights impacting United States litigation finance innovation. Click here to read LexShare’s insights on ethical matters impacting the industry. 
Announcements Deals

Litigation Finance Agreement for new representative claim against Google and DeepMind Technologies

Litigation Capital Management Limited (AIM:LIT), an alternative asset manager specializing in dispute financing solutions internationally, announces that it has entered into a litigation finance agreement for a new representative claim.

The finance agreement is to fund a new representative action in the High Court of Justice of England & Wales brought on behalf of up to 1.6 million individuals against Google and DeepMind Technologies for the unlawful use of patients’ confidential medical records.

The claim is for the misuse of private information and arises out of an arrangement formed in 2015 between Google and DeepMind and the Royal Free London NHS Foundation Trust. The tech companies obtained and used a substantial number of confidential and private medical records without patients' knowledge or consent.

This representative claim being brought by Mishcon de Reya, provides access to justice and a means of compensation which would not have been viable on an individual basis due to the cost of the litigation process. Not only does it provide a means of redress to those affected by the misuse of their private and confidential medical records but this is also a significant claim for LCM to support and fund.

Patrick Moloney, CEO of LCM, commented: "LCM has a long and deep experience in funding large scale actions, many of which would not be possible without litigation funding. As pioneers of the industry, we are well-placed to support the claim in this action."

ABOUT LCM

Litigation Capital Management (LCM) is an alternative asset manager specializing in disputes financing solutions internationally, which operates two business models. The first is direct investments made from LCM's permanent balance sheet capital and the second is third party fund management. Under those two business models, LCM currently pursues three investment strategies: Single-case funding, Portfolio funding and Acquisitions of claims. LCM generates its revenue from both its direct investments and also performance fees through asset management.

LCM has an unparalleled track record driven by disciplined project selection and robust risk management.

Currently headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT.

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Consumer

New York’s Clergy Concerned About Consumer Litigation Funding Act 

This week, Litigation Finance Journal reported that the New York State Assembly is debating ‘Bill A.1270-A,’ which is referred to as the Consumer Litigation Funding Act. Meanwhile, New York City and State Clergy leaders have co-signed a letter of objection to the Consumer Litigation Funding Act’s thematic intent(s). However, New York’s clergy leaders signaled support for mindful regulation of litigation investment agreements.  New York’s clergy leaders' damnation of the Consumer Litigation Funding Act is further buttressed by Assemblyman Erik Dilan’s bill A.3315. Mr. Dilan’s approach is to juggle ethics and transparency to pioneer litigation funding regulatory standards.  Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC), had this to say about the proposed bill: "A1270-A is being promoted as a good piece of legislation to help protect consumers, when all it does is harm consumers. It eliminates the product from the state. It makes it cost prohibitive to operate in New York, and the proponents of the bill, the Insurance Industry, know that. They do not want consumers to have this financial lifeline so that they can get the true value of their legal claim." The clergy leaders of New York support Dilan's "fair, ethical and transparent" legislation. They refer to A1270-A (the Consumer Litigation Funding Act) as "a wolf in sheep's clothing," which, as Mr. Schuller noted, is designed to eliminate Consumer Legal Funding from the state entirely. 
Case Developments Commercial

Sberbank CZ Litigation, Insolvency and Liquidation

The Central Bank of Russia founded Sberbank in 1991. Traded on the Moscow Stock Exchange, Sberbank is Russia’s largest universal banking institution with ⅓ of all Russian assets flowing through it. Given Russia’s war in Ukraine, the Czech National Bank revoked Sberbank CZ’s license at the beginning of May. Furthermore, a Czech Municipal Court in Prague ruled in favor of the liquidation of Sberbank CZ.  The litigation investment structure designed to consolidate Sberbank CZ’s creditors comprises a trio of Europe’s notable third party funders. Natland Investment Group has a hallmark collaboration with LitFin Litigation Financier and The Association of Small and Medium-Sized Enterprises and Self-Employed Persons of the Czech Republic.  The group’s promotional materials suggest a sophisticated approach to Sberbank CZ liquidation. Europe has experienced insolvency fire sales liquidating assets at pennies on the euro. Success metrics will gauge how fast the bank’s assets can be monetized … And at what price.  According to Sberbank’s liquidators, liquid assets total 24B CZK. However, liabilities usurp that value with 79B CZK in client levies, and 61B CZK in debt liabilities.  
Commercial Special Features

LegalPay, India, and the Promise of Litigation Finance in Emerging Markets

LegalPay is a Litigation Finance startup founded in India, an emerging market for third-party legal funding. Until recently, investing in legal cases was reserved for high-end investors. The advent of LegalPay allows retail investors—those of average means–to take advantage of the potentially large uncorrelated returns that have attracted savvy investors for years. According to founder Kundan Shahi, LegalPay is the only formal player that offers third-party litigation funding for late-stage cases in India. One can’t help but wonder how this will influence the development of global Litigation Finance? Does LegalPay’s success foretell the rise of litigation funding in emerging markets?  How Does LegalPay Work? According to founder Kundan Shahi, LegalPay is a tech-focused, data-driven litigation funder which leverages a 15-point checklist proprietary algorithm in its underwriting process. The use of AI in diligencing cases is nothing new, however, LegalPay differentiates itself by enabling retail investors to commit modest amounts of capital as a means of participating in this uncorrelated asset class. Interest rates are competitive and offer high returns—plus investor and creditor interests are secured by the IBC. There are other such “crowdfunding for Litigation Finance” platforms on the market, though LegalPay seems to be performing a balancing act between being a tech platform for the masses, and a large-scale commercial funder that invests in mega cap cases (at least, as far as the Indian legal market is concerned). In 2021, for example, LegalPay offered interim financing to Yashomati Hospitals, a private medical entity in insolvency. This is in addition to more than a dozen short-term secured loans to hospitals undergoing insolvency. The funds go toward operating costs and payroll to keep the hospital running from six months up to a year. Ravindra Beleyur explains that the term sheet was finalized in fewer than two weeks from initial contact. LegalPay’s platform has worked out well for insolvent firms, and perhaps even better for the company’s spate of retail investors. A case involving Brain Logistics demonstrates the difference that backing from LegalPay can make. A bevy of delays and appeals by delinquent debtor Hero MotoCorp necessitated increased funding for Brain Logistics to continue fighting. This was provided by LegalPay, and allowed Brain Logistics to proceed with its claim against Hero MotoCorp. While the case has yet not resolved, it demonstrates how legal funding can expedite proceedings and allow for a more timely application of justice. In addition to its funding platform, LegalPay aims to create specialized products in insolvency and interim business financing, as well as carve out a piece of the legal funding market in India for itself. For insolvent companies, LegalPay offers short-term lending products that are asset-backed and secured.  Why is This Especially Important in India? Though the Indian legal system has been refined in recent years, it is still lacking when compared to that of developed nations. The Supreme Court of India is the de facto head of its unified legal system. Its purpose is to interpret laws and defend the constitution, resolve disputes, and affirm basic rights for citizens. Today, certain drawbacks of the Indian legal system make justice more difficult to achieve in a timely way. For example: As far back as 2016, the Chief Justice of India’s Supreme Court implored the Prime Minister to appoint more judges. Government inaction over judicial delays has caused significant hardships in all case types. Bloomberg Businessweek has affirmed that if India’s judges closed 100 cases every hour, 24-hours a day, it would take more than 30 years to clear the current backlog of pending cases. Ironically, there are pending cases from 30 years ago that are still unresolved. Given the dearth of judges and astronomical wait times, many companies–and even wronged individuals or businesses–are reticent to sue in India’s courts. New cases must work their way up from lower courts, which means they often take years to reach completion. Given all of this, it’s clear that in India today, finding innovative solutions to the old adage “justice delayed is justice denied,” is more important than ever. Who is Partnering with LegalPay? The well-documented challenges in India’s legal market may dis-incentivize investors from getting involved in TPLF in India. At the same time, LegalPay is amassing impressive partnerships that will enable it to make offers to companies undergoing insolvency. LegalPay’s Series A funding, a special purpose vehicle, found itself oversubscribed in a short amount of time—demonstrating consumer confidence in the concept and in its implementation. This first SPV was intended to diversify capital with a portfolio of 8-12 cases, and allowed retail investors to commit as little as Rs 25,000 in a single case. A second SPV will emphasize commercial disputes. These SPVs help investors diversify by investing in a basket of commercial cases that typically generate a pre-tax IRR of over 20 per cent. Incidentally, the entire investment process is digital and seamless, including signing investor documents, KYC, tracking of the basket of claims, and portfolio monitoring and analytics. Among those partnering with LegalPay is Jumbo Finance, which provides secured interim financing. Managing director Smriti Ranka explained that there are many benefits to investing in distressed debt assets. US hedge fund Hedonova is another LegalPay partner that, according to Shahi, will enhance LegalPay’s plan to aggressively grow its Indian market. Naples Global is also onboard with LegalPay, launching a $5MM fund that’s expected to protect the interests of founders in the event of disputes among the board. With disputes between founders and investors on the rise, this development may be crucial in attracting new investors and adding a sense of security to the opportunities LegalPay provides. The current $20 billion legal expense market in India has enabled seed funding led by 9Unicorns and Accelerator VC, along with LetsVenture, and angel investor Ambarish Gupta. Much of these funds will be deployed toward late-stage litigation—currently plentiful given that delays are rampant due to COVID. Also among LegalPay’s list of partners are Amity Technology Incubator and Venture Catalysts. What’s the Next Step? How will innovators like LegalPay alter the Litigation Finance landscape?  The complexities of global litigation funding make predictions like this difficult. As noted earlier, the Indian legal market is full of challenges, as are all emerging markets (heck, even most mature legal markets can be labyrinthine at times). But those challenges keep competitors out of the fray, which means funders willing to take the plunge typically have their pick of the litter in terms of cases. Lack of competition can present itself as a blue ocean of opportunity, as early entrants into the US and UK litigation funding markets can attest. And India certainly has a lot of untapped potential. The prospect of getting in on the ground floor of a maturing legal market that is home to over 1 billion people may be too enticing for some funders to pass up.  While LegalPay’s emergence may encourage more partnerships between larger funders and retail investor platforms, it’s unlikely we will see funders dive head-first into emerging markets like India any time soon (for example, opening an office in Bangalore). That type of commitment will take time, as there are less risky jurisdictions out there where the TAM has yet to be saturated (like Japan, South Korea and Israel–where Woodsford maintains an office and Validity Finance recently opened shop).  Yet established funders in Australia, the US and UK would do well to keep an eye on Shahi’s startup, given how its numerous strategic partnerships and technological capabilities enable both large-scale case investment, and promising returns for retail investors. Any company leveraging AI to effectively source and/or diligence cases deserves a second look, and one doing that in an emerging market like India deserves extra consideration. 
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Commercial Deals

Third Point LLC on Shell PLC Restructuring 

Litigation Finance Journal recently reported on Shell PLC’s board of directors who are accused of allegedly manipulating ESG frameworks at the expense of shareholder interest. New York-based Third Point LLC recently announced a significant investment into Shell, underscoring intentions to profit from a corporate restructuring of the multinational energy conglomerate. Third Point says Shell’s relocation to the United Kingdom provides significant leverage for ROI, given the board of directors’ alleged ESG misgivings.    Third Point’s Q1-22 shareholder letter outlines the firm’s pragmatic approach to increasing its investment in Shell, despite the board’s ESG track record. Third Point suggests that conversations with Shell’s board echo shareholder dismay from poor ESG planning. However, Third Point plans to help guide Shell’s shareholders to a bright future under various restructuring scenarios.  Third Point suggests that European energy efficiencies are a valuable long-term investment in a wartime scenario. Third Point’s Q1-22 letter discusses lessons learned by Shell, and how ESG’s future will include copper and nickel stewardship to drive the future of EV innovation.
Consumer

New York Senate Bill A.1270A’s Consumer Litigation Funding Act 

Back in 2017, New York State Assembly members introduced a bill that would mandate certain consumer protections concerning the arrangement and engagement of litigation funding agreements. Each legislative session since has seen a new version of the Consumer Litigation Funding Act debated by New York legislators. On May 3, 2022, a new draft of the Act was amended and recommitted to the Consumer Affairs and Protection committee for debate.  According to New York State Assembly Bill A1270A’s summary, the Act would promote consumer litigation finance protections by regulating contractual mandates as part of New York State law. For example, the proposed Act would stipulate that claimants hold rights to ‘prepay’ the funded amount before their case is settled, without penalty.  The Consumer Litigation Funding Act would be a game changer for the New York State legal scene. Special interest groups are sure to be lobbying both sides of the Act’s debate.  Litigation Finance Journal will continue reporting on the Act’s progress through the New York State legislature.
Commercial Deals

Lexshares’ Q1-22 Litigation Finance Industry Outlook 

Lexshares has published the firm’s outlook for the first quarter of 2022. Notably, Lexshares suggests that the litigation finance industry is thriving. Furthermore, the funder says it disagrees with marketplace competitors who suggest a decline in average litigation investment deal size.  According to Lexshares’ insights, courtroom delays are hindering profits of the largest litigation funders in the United States. Yet Lexshares sees an increase in patent and trademark case funding on the horizon, as potential awards associated with IP violations are on the rise.  Meanwhile, Q1-22 was eventful for Lexshares, as the firm raised $103M for its Marketplace II Fund. Lexshares notes that courtroom delays are a ‘double-edged sword’ in terms of how funders organize their fund’s deal flow.  Click here to read more about Lexshares’ Q1-22 insights.
Commercial

Burford Capital’s Insights for Women in Law

Women in the legal profession face various challenges such as unconscious bias, according to the Women’s Career Progression Factsheet. Recently, a group of litigation finance leaders debated the findings from a Career Progression in the Legal Sector report.  Burford organized key takeaways associated with a woman’s career progression in law. According to the panel, data will continue to play a crucial role in monitoring the effects in supporting women’s careers in law.    Some in the industry suggest that legal franchises should better monitor origination credits across the industry, alluding to the fact that women’s efforts are sometimes overlooked in terms of client origination and retention. Furthermore, unconscious bias seems to be a significant matter for the legal profession when it comes to promoting women.  Click here to learn more about Burford’s findings. 
Commercial

Forecasting Litigation Investment Consolidation 

The global litigation finance landscape is ripe for consolidation according to predictions from the court reporting firm, Steno. According to Steno’s forecasts, with the advancement of litigation investment products and services, the most successful legacy franchises will have balanced macro factors to attract large cases, while pushing out competition by consolidating resources.   Steno’s brief on the future of litigation finance evolution signals that the industry is in some ways protected by the safety of the court system. In that, when marketplace dynamics change (such as in a recession), investors seek to deploy capital in safe places. Steno also predicts a growing trend of regulatory harmony across jurisdictional borders.  With regulation synergies, Steno suggests that the fruits of the legal system will become more ubiquitous – something that previously was only accessible by the wealthy.
Commercial Deals

The Frothy UK IP Litigation Space 

International IP claims are becoming more important for pure play cross border competition. Many large technology firms in the United States have met trouble when violating global IP rights. Most litigation finance firms in the United Kingdom are seeking to boost patent and intellectual property business according to new market insights. Notably, UK litigation investors are leading worldwide IP litigation funding ahead of the opening of Europe’s Unified Patent Court.  London’s Mathys & Squire LLP outlines that litigation funders are sometimes engaged by startup firms who lack funds to pursue dynamic IP claims against technology giants. Oftentimes, IP registrations in the United States are seen as the preeminent safeguard for global IP concerns. Litigation investors in the UK often partner with firms of various sizes to police global IP infringement scenarios.  Furthermore, litigation investors are becoming more useful for those pursuing injunctive relief to secure market dynamics, according to Mathys & Squire.
Commercial Special Features

High Court confirms use of public examination powers to investigate potential class actions

The High Court has ruled in favour of shareholders in Walton & Anor v ACN 004 410 833 Ltd (formerly Arrium Limited) (in liq) & Ors. In a 3:2 decision, the majority permitted former shareholders of Arrium Ltd to examine the insolvent company’s officers under s 596A of the Corporations Act 2001 (‘CA’) for the purpose of potentially bringing a class action against the company’s managers. The Road Ahead The High Court (3:2) decision is positive news for shareholder class actions as it confirms that “eligible applicants” can publicly examine corporate officers about a corporation’s affairs, to test the merits of a potential class action against the company. This is even if a liquidator does not intend to investigate or pursue claims against the officers of the company. The approach adopted by the majority is a welcome step forward for corporate accountability in the midst of many attempts by the legislature to constrict the Australian class action landscape. Procedural history The applicants were shareholders in a former mining company, Arrium Ltd (‘Arrium’). The applicants bought shares in Arrium during a capital raising in 2014. Shortly thereafter, Arrium announced an impairment to the value of its business of over $1billion. Arrium was then placed into administration, and then finally liquidation. Under s 596A CA, the Court is to summon a person for examination about a corporation’s ‘examinable affairs’ if an eligible applicant seeks the order, and the court is satisfied that the person subject to the order was an officer or liquidator of the corporation during the prescribed period. With authorisation from ASIC, the applicants sought an order from the Supreme Court of New South Wales summoning a former director of Arrium for public examination. The applicants sought the order,  as they believed that they may have claims against the former directors and auditors of Arrium arising out of the capital raising and the company’s published financial results for the same period. The goal of the examination was to investigate whether pursuing these claims as a class action with other shareholders was viable. The Supreme Court of New South Wales initially granted the order.  However, the Court of Appeal overturned the decision to allow the examination on the basis that it was an abuse of process, as the examination did not benefit Arrium, its creditors, or its contributories. The issue to be determined by the High Court was whether the applicant’s purpose for seeking the order was an abuse of process. This involved considering whether the purpose of the application was consistent with the purpose of s 596A CA. Was the Proposed Examination an abuse of process? The majority (Justices Edelman, Steward and Gageler) allowed the appeal, finding that the application was not an abuse of process. The purpose for the application was held to be within the scope of s 596A CA. In coming to this conclusion, the court considered section 596A CA to ascertain its purpose, which involved lengthy consideration of the preceding iterations of the statutory scheme for public examinations. The High Court acknowledged that earlier laws insisted on public examinations being for the benefit of the company or its creditors, or for bringing criminal or regulatory proceedings in connection with the company. However, the High Court concluded that these requirements did not apply to bringing an application under s 596A CA because s 596A CA has no direct analogy with any former provision in the earlier companies’ legislation. Instead, the court held that s 596A has much broader requirements than the former laws on this issue. This is because: 1.     section 596A CA is drafted differently, and applications under it require less supporting evidence than earlier companies’ legislation and other sections within the same part of the Corporations Act 2001; 2.      section 596A CA was intentionally drafted to have a broad application; 3.     section 596A was enacted in the public interest to facilitate the administration or enforcement of the law concerning a corporation and its officers in public dealings. Therefore, an application under this section will not be an abuse of process if it promotes compliance with the law. On this basis, the High Court concluded that using a compulsory examination to test the merits of a potential class action for corporate misconduct coincides with the purpose of s 596A CA. The fact that the proposed class action would not benefit all of Arrium’s shareholders did not jeopardise the validity of the application, because s 596A CA is directed to enforcing the law, rather than benefitting the company in administration. The judgment is available here: Walton v ACN 004 410 833 (formerly Arrium Ltd) (in liq) [2022] HCA 3, 16 February 2022. About the Authors Lillian Rizio specialises in managing large scale complex litigation, particularly with claims involving multiple parties. Lillian’s emphasis is on corporate disputes, class actions, professional negligence and insurance, across most Australian jurisdictions. Lillian also has extensive experience advising clients in relation to right to information matters, in both federal and state jurisdictions Julia Hegarty is a law clerk in the Dispute Resolution and Litigation team at Piper Alderman in Brisbane. She is currently studying a Bachelor of Commerce/Laws (Hons) at the University of Queensland. Julia has an interest in externally funded litigation and shareholder class actions. For queries or comments in relation to this article please contact Kat Gieras, Litigation Group Project Coordinator | T: +61 7 3220 7765 | E:  kgieras@piperalderman.com.au
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Case Developments Commercial

New York Court of Appeals Rejects Litigation Agreement Discovery 

In what might be the first time in the history of New York State published law, a New York Appeals Court has rejected relevance associated with discoverability of litigation funding agreements in Worldview Entertainment Holdings v. Woodrow. The five justice panel refused the necessity of probing the plaintiffs financial background on grounds that the assessment has no material association with the nature of pure discovery.  Validity Finance profiles insights into the decision. According to Validity, the court described the defendant's litigation agreement discovery motion as “palpably improper.”  New York’s Court of Appeals requires certain standards to be met to entertain and approve such discovery requests. In this instance, the court's decision of non-approval was brief, according to Validity’s assessment of the concern.  Click here to read more about the historic precedent.
Announcements Commercial Fundraising

Northleaf leads A$250 million senior secured credit facility for Omni Bridgeway

Northleaf Capital Partners (Northleaf) today announced that it acted as the lead arranger of a A$250 million senior secured credit facility for Omni Bridgeway (ASX: OBL), a global leader in financing and managing legal risks, with expertise in civil and common law legal and recovery systems. 

“Omni Bridgeway represents the fourth litigation finance platform with which we have partnered over the past 24 months,” said David Ross, Managing Director and Head of Private Credit at Northleaf. “These types of specialty finance assets provide our investors with portfolio diversification while generating consistent, stable cash flows and enhanced returns that are uncorrelated to the broader economy.” 

“We are delighted to partner with Omni Bridgeway, leveraging our specialty finance expertise to support the firm’s continued global growth,” added CJ Wei, Vice President at Northleaf. “Northleaf’s flexible investment approach allows us to provide senior debt as well as hybrid and equity capital to support leading specialty finance and financial technology businesses across consumer, commercial and other verticals.” 

“The Northleaf team brought the necessary capabilities to meet the evolving capital demands of our business as we transition into the next phase of our growth, making them the right partner for us in this transaction,” said Andrew Saker, Managing Director & CEO and Chief Strategy Officer – US at Omni Bridgeway. “This transaction creates significant benefits for our company and our customers.”

 Northleaf’s private credit program seeks to provide investors with diversified exposure to private credit investments globally, with a focus on floating rate loans to middle market companies and specialty finance platforms in North America, Europe and Australia. Northleaf invests across the capital structure, including first lien, unitranche, second lien, mezzanine and subordinated debt and equity structures. 

About Omni Bridgeway

Omni Bridgeway is the global leader in litigation financing and managing legal risk, with expertise in civil and common law legal and recovery systems. With international operations based in 20 locations, Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery.

Omni Bridgeway is listed on the Australian Securities Exchange (ASX: OBL) and includes dispute funders formerly known as IMF Bentham Limited, Bentham IMF and ROLAND ProzessFinanz, and a joint venture with IFC (Part of the World Bank). For more information visit www.omnibridgeway.com. 

About Northleaf Capital Partners

Northleaf Capital Partners is a global private markets investment firm with more than US$19 billion in private equity, private credit and infrastructure commitments under management on behalf of public, corporate and multi-employer pension plans, endowments, foundations, financial institutions and family offices. Northleaf’s team of more than 175 professionals, located in Toronto, Chicago, London, Los Angeles, Melbourne, Menlo Park, Montreal and New York, is focused exclusively on sourcing, evaluating and managing private markets investments globally. Its portfolio includes over 500 active investments in more than 40 countries, with a focus on mid-market companies and assets. For more information on Northleaf, please visit www.northleafcapital.com.

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Announcements Commercial People Moves

Validity Finance Approaches Fourth Anniversary with New Key Hires and Promotions

Nearing its fourth anniversary in June, leading litigation funder Validity Finance, announced the arrival of three senior members to its team including a new portfolio counsel for investment review, a new corporate counsel and a first-time marketing officer. Validity also reports the promotion of seven professionals in New York, Houston and Tel Aviv. In Houston, Michelle Eber joins as portfolio counsel from Baker Botts, where she represented technology and energy clients in patent litigation matters. In New York, Abe Sutton arrives as corporate counsel from Windels Marx Lane & Mittendorf, where he practiced commercial and real estate law. And joining Validity as its chief marketing officer is John Neidecker, who previously led marketing and business development initiatives at several Am Law 100 firms.
“We’re delighted to add three superb line professionals to further scale up operations as we hit our fourth year in business,” said Validity founder and CEO Ralph Sutton. “Michelle Eber has substantial trial experience and command of the litigation market in Texas, which has become an important hub for our funding platform. Abe Sutton has a strong background in corporate and real estate transactions. And John Neidecker brings deep, sophisticated marketing and branding experience, making him a great fit for CMO as we further advance our national profile.” Since its launch in June 2018, Validity has experienced rapid growth, adding former litigators from Gibson Dunn, Boies Schiller and other leading law firms. The firm has three full-time offices – New York, Houston, and Washington, DC, which launched last month. Validity also added major names to its roster of senior advisors and board of directors, including current and former chairs of Am Law 100 firms. The firm has committed nearly $300 million towards client matters in more than 50 separate dispute investments, and secured additional funding of $70 million this past fall. About the new hires:
  • Michelle Eber – Portfolio Counsel: Ms. Eber is responsible for Validity’s patent matters, including evaluating new cases for investment and managing funded cases. She brings more than 10 years of patent and trade secret litigation experience, including significant courtroom experience. She was formerly special counsel at Baker Botts in Houston, where she represented plaintiffs and defendants in the energy and technology sectors in high-stakes IP cases, including disputes involving oilfield technologies, telecommunications systems, data and video compression systems and computer hardware and software. She has been recognized as “One to Watch” in The Best Lawyers in America in 2022 and a Texas Super Lawyer – Rising Star for IP Litigation in 2020-2022.  She received her J.D. with honors from the University of Texas School of Law, where she was a member of the Texas Law Review. She also holds an M.B.A. from the University of Texas McCombs School of Business. Ms. Eber graduated magna cum laude from the University of Pennsylvania with a B.S. in systems engineering.  The addition of Ms. Eber reflects a growing pool of complex patent disputes that Validity is considering funding.
  • Abe Sutton – Corporate Counsel: Mr. Sutton will work closely with Validity clients and their respective in-house and outside counsel, along with the firm’s investment team, to navigate all aspects of risk mitigation and funding. He was previously a senior associate at Windels Marx, focused on commercial real estate matters. He represented private and public companies, and private equity clients in corporate transactions including mergers and acquisitions, financings, reorganizations, corporate governance and securities law compliance. He received his J.D. from Fordham University School of Law, where he was a member of the Fordham Law Review. Mr. Sutton graduated summa cum laude from Yeshiva University with a B.S. in Finance.
  • John Neidecker – Chief Marketing Officer: Mr. Neidecker has over 20 years of experience in professional services, including top marketing/business development positions at one Big Four accounting firm and four Am Law 100 firms including Steptoe & Johnson, Covington & Burling and Foley Lardner. He also spent seven years as a marketing director for PricewaterhouseCoopers. Mr. Neidecker holds a B.S.B.A. in Marketing from the University of Arkansas.
Meanwhile, Validity has elevated seven of its team members to new positions within the company. “This talented group of professionals has helped us grow in a short time to a formidable presence in the increasingly competitive space for dispute funding, while helping distinguish Validity as a true leader in client service,” Mr. Sutton said. “We’re grateful for the team we have in place and look forward to hitting our next round of growth together, in capital commitments and developing new innovations in litigation finance.” The new promotions include:
 
  • Laina Hammond  – Managing Director, Senior Investment Officer: Formerly an investment manager, Ms. Hammond has been with Validity since launch, directing the firm’s Houston office.  She was previously a litigation principal at Shipley Snell Montgomery.
  • David Kerstein – Managing Director, Senior Investment Officer: Mr. Kerstein likewise joined Validity at its 2018 launch. A former trial attorney at Gibson, Dunn & Crutcher, he was formerly a senior investment manager and counsel at litigation funder Bentham IMF.
  • Julia Gewolb – Chief Risk Officer: Ms. Gewolb has been with Validity since 2018.  A former litigator with Boies Schiller Flexner, Ms. Gewolb was previously legal counsel at Bentham IMF with Messrs. Sutton and Kerstein.
  • Wendie Childress – Investment Advisor: Formerly a portfolio counsel at Validity, Ms. Childress joined the company in 2019; she was previously a trial attorney at litigation and appellate boutique Yetter Coleman.
  • Joshua Libling – Director of Risk Analytics/Portfolio Counsel: Mr. Libling has been with Validity since 2020. He was previously a counsel at Boies Schiller Flexner.
  • Jason Listhaus – General Counsel: Mr. Listhaus, who joined Validity in 2020, was previously was a member of the corporate department at Fried, Frank, Harris, Shriver & Jacobson.
  • Eli Schulman – Senior Advisor: Mr. Schulman joined Validity in 2020, establishing the firm’s presence in Tel Aviv.
 
About Validity
Validity is a commercial litigation finance company that provides non-recourse investments for a wide variety of commercial disputes. Validity’s mission is to make a meaningful difference in our clients’ experience of the legal system. We focus on fairness, innovation, and clarity. For more, visit www.validityfinance.com
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Commercial

Singapore Ministry of Law’s New Conditional Fee Agreement Framework 

Today (May 4, 2022) marks a historic day in Singapore. Attorneys in Singapore can now enter into conditional fee agreements (CFA) under Singapore's new CFA framework. The new CFA provisions are an addition to traditional fee agreements under Singapore’s Legal Profession Act. The new CFA framework in Singapore includes CFAs counter-party contracts such as “win, more fee”, “no win, no fee”, and “no win, less fee.” The new CFA framework will apply to Singapore-based attorneys, and in some instances to foreign law practitioners. Mediation and arbitration will also be covered as part of the CFA framework. This will include partial coverage of Singapore International Criminal Court (SICC) proceedings.  According to the Ministry of Law, the new CFA framework aims to help build out Singapore as a hub for litigation innovation, while enhancing aspects of the country's legal system.  As required by the Ministry of Law, attorneys have strict requirements associated with CFA agreements. Click here to read the details in full. 
Commercial Regulatory Issues

Litigation Finance Regulatory Insights from Sentry Funding

In the United Kingdom, with the unregulated nature of commercial lending, many legal scholars are wondering how the trajectory of litigation investment will unfold. Whatever the case may be, most are certain that given the growing popularity of litigation finance products and services, regulations are not far behind.  According to new insights from Sentry Funding, banishing litigation finance misconduct will require official rules and regulations. Sentry underscores that the United Kingdom is home to more litigation finance houses than any other county in the world. And, over the last two years, the number of United Kingdom litigation finance firms has doubled.  Per cross-jurisdictional developments in litigation finance, Sentry says global counter-parties are still embryonic in development. The same can be said with global industry regulation, according to Sentry.  The details of litigation investment regulation are still a hot topic. Click here to read more about Sentry’s litigation finance discussion.  
Commercial

Podcast: American Bar Association Radio on Litigation Finance for Law Firms 

Litigation Radio (hosted by Dave Scriven-Young) features dialogue between litigation attorneys, judges and other litigation professionals, and is sponsored by the American Bar Association’s Litigation Section. On a recent episode, Litigation Radio featured Jason Levine (Investment Manager and Legal Council at Omni Bridgeway) to discuss various aspects of litigation finance for law firms.  The podcast outlines details pertaining to commercial litigation finance benefits. Additionally, the episode discusses what type of cases are best for commercial litigation investors.  Mr. Scriven-Young and Mr. Levine also touch on trends associated with law firms engaging litigation finance. This includes how law firms can engage litigation investors to maximize a portfolio of claims as collateral.  Check out the full podcast by clicking here. 
Commercial Special Features

Key Takeaways From LFJ’s Special Digital Event on Litigation Funding Advisory Firms

LFJ's latest digital event featured Litigation Finance advisors Rebecca Berrebi (Founder and CEO, Avenue 33, LLC), Peter Petyt (Co-Founder, 4 Rivers Legal), Andrew Langhoff (Founder and Managing Director, Red Bridges Advisors), and moderator Ed Truant (Founder, Slingshot Capital). The panel discussed how they navigate between funders, law firms and claimants, as well as the challenges they face in this market, and the numerous benefits they provide each counter-party. ET: Can you comment on some of the key changes you have seen in the litigation finance market since you got started?  RB: The number one biggest change is that there is so much more money out there than there used to be. In 2016, we rarely had competition on deals. There are so many funds out there that want to allocate capital. If you have a good case, or a portfolio of cases that has merit and a good chance of winning, there would be multiple funders out there looking to fund your case. That is primarily the change I have seen over the arch of my life in litigation finance.  PP: The change that I have seen over the last couple of years is the willingness and appetite for funders to provide capital in addition to what is necessary to run the case. What I have seen is the willingness and appetite for funders to provide working capital. That’s definitely been the development over the last couple of years.  ET: What do you believe is your greatest value add for your clients?  PP: It becomes clear that a very low amount of opportunities that are presented to funders are actually funded. It is in the low single digits. And I am very confident that I will achieve much better success rates than that. And I think it's the approach that is the most important thing and value add here.  ET: Can you talk about your origination efforts and how you find opportunities? AL: I have been lucky over the last five years being a broker and intermediary, cases and opportunities have found me. What I have found is referral and repeat business is really the best part of the origination process for me. The trick is to find lawyers who are entrepreneurial, who are very open to litigation finance.  RB: I am a lawyer by background. I have a pretty strong network from my whole career working at law firms and funds. And I do try to educate the market the best way I can. Frankly, I get a lot of hits that way by being out in the market and talking in the media.  ET: When a client comes to you, what are they looking for?  PP: I think in the vast majority of cases, plaintiffs may have never used litigation finance before.  There is no doubt in my mind that law firms are the right people to go out and seek opportunities. I think we perform a valuable role here and I think plaintiffs know that. I think it is about managing processes, but adding value.  ET: What are some of the legal considerations as you take on a new client?  RB: You have to start thinking about confidentiality from the get-go. Disclosure with respect to privilege we have to be careful about. There are state-specific issues related to litigation finance that you have to be careful about, specific to disclosure.  ET: In terms of the intake, can you provide us an overview?  AL: I think it is far more effective to take all the information, organize it, mitigate any concerns and present it to the funder. Almost in a way that you are doing the funder’s work for them. Ideally, when I give them that memorandum, I know many funders will paste it into their investment committee memorandum. And that is that idea, I am trying to make it drop dead simple for them. Click here to listen to the entire episode. 
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Commercial Regulatory Issues

Bloomberg Law on Legal Investment Work Product

Bloomberg Law recently profiled the professional perspectives of Ken Epstein (Investment Manager and Legal Council at Omni Bridgeway) and Megan Easley (CAC Specialty) analyzing the attorney work product doctrine’s scope related to law firm funding. According to the article, courts traditionally have considered legal investment conversations a product of attorney work product privilege. The Bloomberg Law article explains the differentiation between attorney client privilege and attorney work product doctrine, which contains similar protections of privilege.  For example, attorneys consult with potential legal investors concerning firm finances and client litigation finance concerns, while law firm professionals often consult directly with third party investors concerning case portfolio financing. Mr. Epstein and Ms. Easley argue that care is essential to protect elements of client confidentiality.  Check out complete insights on work product privilege here.   
Case Developments Commercial

Sears Holdings Seeks $35M Litigation Investment Approval 

The iconic Sears department store (which filed Chapter 11 bankruptcy protection in 2018), now known as Sears Holding Corporation, filed a motion to authorize a $35M litigation funding agreement in United States Bankruptcy Court of the Southern District of New York. Bench Walk Advisors LLC was selected by Sears Holding Corporation to coordinate funding the litigation investment agreement.  The litigation funding term sheet filed for the court’s authorization was accompanied by a preliminary statement outlining several litigation funders that were evaluated. Bench Walk Advisors’ new $35M litigation finance agreement for the court's authorization comes upon a $25M litigation budget that is nearly exhausted, according to the filing. According to the litigation funding agreement, Bench Walk has budgeted up to $200,000 in transaction fees associated with facilitating the litigation investment.   Currently under creditor protection, Sears Holding Corporation litigation is part of a claim totaling over $2B in damages.