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Case Developments Commercial

UK Lawyers Anticipate Lawsuits Over Pension Fund Crisis

As LFJ reported last week, the UK financial services sector is bracing itself for a surge in litigation this year, as leading British banks look to be on the receiving end of a wave of class actions. However, this may not be the only driver of litigation activity for financial services entities in 2023, as a new study suggests that last year’s pension funds crisis could catalyze another wave of lawsuits targeting asset managers and advisers. Reporting by the Financial Times covers new research by the London Solicitors Litigation Association (LSLA), which found that UK lawyers are expecting a rise in legal activity relating to the fallout from the government’s ‘mini-budget’ and the impact on liability driven investment (LDI) strategies in September 2022. The LSLA’s president, Nicholas Heaton, suggested that it was likely that LDI-related lawsuits would begin to appear, and that whilst the volume of such claims was less certain, he highlighted that the presence of litigation funders would continue to drive the growth in class action suits. However, Anna Rogers, senior partner at Arc Pension Law, pointed out that the viability of these LDI claims and their ability to successfully receive significant compensation will not be straightforward. Rogers highlights that asset managers facing such litigation may be able to offer a credible defense by putting the burden of understanding on pension trustees, who could in turn place blame on investment consultants.
Commercial Regulatory Issues

An Argument for Greater Transparency in Third-Party Litigation Funding

Disclosure in litigation funding continues to be one of the leading topics of discussion for the industry, particularly driven by recent U.S. patent dispute cases that have led to fiercely contested disclosure orders by federal courts. Whilst funders are largely resistant towards blanket disclosure orders, especially when it comes to the details of litigation funding agreements, one member organization that seeks to deter invalid patent assertions has made the argument for greater transparency. In an op-ed for Delaware Online, Jonathan Stroud, general counsel at Unified Patents, argues that as transparency is a central tenet of the justice system, funders who are involved in financing patent infringement lawsuits should have to meet the same transparency requirements as other participants in court cases. He argues that funders either explicitly or implicitly exert control over the litigation process, therefore it is in the courts’ interest to know both their identity and the degree of influence that these financiers have over the plaintiff’s litigation. Stroud cites familiar arguments that the presence of third-party funders both influence the litigation process, and increase legal costs for all parties. He also echoes recent claims by the Chamber of Commerce and State AG’s that litigation funding by foreign state and non-state actors represents a threat to U.S. security. Stroud concludes by encouraging more courts to follow the recent examples of Judge Connolly in Delaware, and enforce disclosure requirements for funders involved both in patent disputes and other litigation proceedings.
Commercial Deals

Hedonova Reports Strong Growth in 2022, Bolstered by Litigation Finance Investments

With the litigation funding industry experiencing exceptional growth despite the uncertain economic climate and instability across the globe, the practice is not only attracting specialist funders, but also interest from broader investment firms. As an investment opportunity largely insulated from macro-economic events, funds are increasingly seeking to diversify into the asset class.  An article by Hedgeweek spotlights one such example, as Hedonova, a global hedge fund with offices in Los Angeles and Tallinn, has reported impressive financial growth last year due to its portfolio of alternative investments which include litigation finance. Hedonova saw its assets under management grow from $160 million to $400 million in 2022, whilst reporting an annual gain (post fees) of 32.8%. According to Hedonova’s website, litigation finance represents a maximum of 10% of its portfolio allocation and has experienced historical returns of 56.8%. The hedge fund has also partnered with traditional funders such as Burford Capital and LegalPay as part of these investments. In 2022 alone, Hedonova’s litigation finance investments generated a return of 58%.
Announcements Commercial Fundraising

Bryant Park Capital Secures Senior Debt Facility For DLF Management Corp.

Bryant Park Capital (“BPC”), a leading middle market investment bank with a focus in the specialty finance industry, announced today that DLF Management Corp., dba Dynamic Legal Funding, LLC (“DLF” or the “Company”), a leading provider of legal and medical funding, closed on a senior secured debt transaction with a large commercial bank. BPC served as the exclusive financial advisor to DLF in connection with this transaction. “Bryant Park Capital has been an immensely valuable partner to DLF in closing our first institutional credit facility. They helped us through every step of the process, and their expertise in the space allowed us to close an important transaction for DLF that will greatly enhance our growth and profitability. We could not have been happier to work with them,” said Brian Natanov, Founder and CEO of DLF. About Dynamic Legal Funding DLF Management Corp. is a leading provider of pre-settlement legal funding to plaintiffs with pending injury lawsuits. DLF also specializes in pre- and post-surgical funding to medical providers. Founded in 2017, DLF is based in New York, NY and provides funding to clients throughout the United States. For more information, visit www.dynamiclegalfunding.com. For more information about Bryant Park Capital, please visit www.bryantparkcapital.com.
Commercial Deals

Funders See Opportunity in Class Action Suits Targeting UK Banks

As LFJ reported earlier this week, the UK has experienced a surge in class action lawsuits over the last year, and there are no signs that this trend is slowing as we begin 2023. Whilst Big Tech companies were identified as one of the main targets in our previous article, new research suggests that the UK’s largest banks are also a top target for class actions, and litigation funders are playing a key role in driving these claims. An article from Financial Reporter highlights new research by law firm RPC, which has identified 109 class or group actions against some of the UK’s largest financial institutions. Among the industry-leading firms targeted by these claims, Barclays is facing 41 actions, whilst HSBC and NatWest are also on the receiving end of a significant volume of cases, with 31 and 28 apiece.  One of the key drivers of these claims is the aftermath of the LIBOR interest rate manipulation scandal, with 41 cases focusing on this wrongdoing and another 18 are targeted at banks alleged to be in breach of the US Anti-Terrorism Act. However, RPC’s Daniel Hemming argues that the “quantum of these cases” is high enough that it is regularly attracting the interest of litigation funders who are enthusiastically pursuing investments in these class actions. Simon Hart, another partner at RPC, states that whilst many of these claims focus on compliance violations, he expects ESG-related class actions to increasingly dominate the space in the years to come.
Commercial Regulatory Issues

Confidentiality and Litigation Funding Agreements in the U.S.

The use of litigation funding has been seen by many as a method for equalizing the balance between plaintiffs and defendants, providing the needed capital to enable parties to seek legal redress against larger and more well-financed entities. However, some legal analysts are concerned that despite its growing role in the litigation area, third-party funding is not being held to the same levels of transparency and disclosure as other parties involved in litigation. In an article on The National Law Review, Malerie Ma Roddy and Jonathan Judge of ArentFox Schiff LLP, raise the issue of litigation funders being exempt from the disclosure requirements applied to “corporate interests and insurance agreements”, which critics claim is creating an inequality in the system. The authors point out that while corporates with a financial stake in the plaintiff’s company and agreements with insurers face mandatory disclosure, courts have largely been hesitant to apply the same standards to funders. Roddy and Judge highlight the lack of commonality between states in terms of legislation outlining disclosure requirements, citing states such as Wisconsin, West Virginia and New Jersey as jurisdictions that have enacted mandatory disclosure rules for third-party funding of cases, whereas Illinois’s laws on litigation funding do not require automatic disclosure. The lack of federal legislation to unify disclosure requirements for funding agreements is pinpointed as the cause of this inconsistency.
Case Developments Commercial

France Financial Regulator Fines London’s H2O €93 Million for Fund Misrepresentations 

UK-based H2O Asset Management is under regulatory investigation by the French financial crime enforcement auditors. H2O is accused of breaching financial instrument ownership laws.  Pensions and Investments reports that Bruno Crastes (H2O Group CEO) received a €15M penalty, with Vincent Challiey (H2O Group CIO) panelized €3M. Furthermore, regulators assigned €75M in fines for H2O AM totalling €93M or $99MUSD.  French assessors claim H2O's mismanagement yielded significant investor losses. As of June 30, 2022, H2O maintained €12.3B in assets under management. In November, 2020, Natixis Investment Managers elected to cancel a 10 year agreement with H2O, liquidating 50.01% stake ownership in two tranches, immediately capitalizing 26.61%. Natixis plans a six year horizon for complete divestiture.  H2O has claimed innocence of wrongdoings, suggesting French authorities issued the group penalty in the absence of fraud or mismanagement by H2O.  Deminor announced that it is financing litigation for victims of H2O's Natixis managed asset fund. Deminor is representing 1,500 individuals on a non-recourse basis. After meeting with French authorities, H2O announced formalizing a reserve allocation to cover the maximum potential fine as a cash flow precaution. 
Commercial Fundraising

LegalPay Launches New Bond Targeted at Retail Investors

Established litigation funders play an important role in leveling the balance of power in the legal system for those plaintiffs who lack the capital to see their case through to completion. However, India’s leading litigation funder is now looking to rebalance the scales for retail investors, offering a new product to their customers that will allow them to diversify their portfolios in a manner previously only available to high-net-worth individuals. Reporting in Financial Express covers LegalPay’s latest announcement, which sees the launch of Interim Financing Bonds for its retail customers. Available for a minimum investment of Rs 10,000, equivalent to approx. $122, retail investors will be able to take advantage of bonds which are used by LegalPay to provide capital to companies who are in the Corporate Insolvency Resolution Process. LegalPay’s CEO, Kundan Shahi, said that the Interim Financing Bonds are designed to offer retail investors a new avenue of diversification beyond traditional securities, as part of a plan “towards democratizing equity markets investing”. The company also assured prospective retail investors by stating that all the bonds have had thorough risk assessment and due diligence performed.
Commercial Regulatory Issues

Irish Legislature Publishes Draft Amendments Legalizing Third-Party Funding for International Arbitration

With 2023 set to be an important year for regulatory developments in the litigation funding industry, an early sign of progress has emerged in Europe. Whilst the European Union may still be in the process of examining tighter restrictions and oversight of third-party funding, Ireland has moved another step closer to legalize certain types of legal funding. In an article on Lexology, Nicola Dunleavy and April McClements, partners at Matheson LLP, have examined the draft rules concerning third-party funding of international arbitration in the Irish legislature’s Courts and Civil Law Bill. The amendments in the bill would mean that dispute resolution proceedings are exempt from the prohibition on maintenance and champerty. This would include international commercial arbitration matters, and any court, mediation or reconciliation proceedings as a result of such arbitration. Dunleavy and McClements note that the amendments would ensure that funding agreements for these types of proceedings would also be legal, although it is expected that additional criteria for these agreements will be set out by the government. As the draft legislation is currently at the committee stage, it is not known how soon the bill could become law, but the authors suggest that this could happen by the end of Q1.
Case Developments Commercial

Law Firm Continues to Fight $1.8 Million Award to Woodsford

An ongoing dispute between a funder and law firm continues, as Hosie Rice lodges objections to a US Magistrate Judge’s recommendation that Woodsford receive a $1.8 million award. This follows on from LFJ’s reporting last month that the Magistrate Judge Sherry Fallon had recommended the federal district court in Delaware confirm the award to Woodsford. Reporting by Legal Newsline illuminates the latest development in the dispute, as Spencer Hosie and Diane Rice, partners at Hosie Rice, filed their objections to Judge Fallon’s recommendations. Hosie Rice had originally brought the dispute to federal court after an arbitration panel had ruled that the firm owed Woodsford $1.8 million. Hosie Rice maintains that the arbitration panel had erred when it classified the two partners as guarantors rather than co-borrowers, and that the panel had “rewrote the plain meaning of the law firm funding agreement (LFFA).” The ultimate decision as to whether the award will be confirmed will still rest with Judge Colm Connolly of the District Court of Delaware.
Announcements Consumer

Legal-Bay Pre-Settlement Funding Announces Uptick in Wrongful Termination Cases Due to Sexual Harassment and Discrimination Awareness

Legal-Bay LLC, The Pre Settlement Funding Company, reports today that a large portion of their pre-settlement cash advance funding capital will be directed toward victims of wrongful unemployment. Legal-Bay has vast experience with unlawful termination lawsuits related to sexual harassment and retaliation as well as racial, gender, or age-related discrimination. Based on recent court case trends, Legal-Bay anticipates even more wrongful termination lawsuit filings to come. Legal-Bay delivers financial assistance to people who've recently found themselves wrongfully unemployed, providing cash advances to plaintiffs while their cases are tied up in litigation.  The service is a huge help for people dealing with the financial strain of lost pay or benefits, not to mention the emotional stress of being let go due to a situation you had no control over. Chris Janish, CEO, commented on the company's focus of assisting plaintiffs in similar situations, "As the world has changed with the #MeToo movement, we continue to see more wrongful termination lawsuits and settlement values at higher levels than in the past. Many victims are unable to get new jobs, and sometimes a cash advance from Legal-Bay is the only way to pay the bills." If you're an attorney or plaintiff in an ongoing wrongful termination, sexual abuse, sexual harassment, retaliation, racial, age, or gender discrimination lawsuit and require an immediate cash advance from your case, please visit our website HERE or call 877.571.0405. Legal-Bay's settlement loan programs can offer immediate cash in advance of a plaintiff's anticipated monetary award. The non-recourse lawsuit 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 law suit loans aren't really a loan, but rather a cash advance. Legal-Bay has some of the quickest turnaround in the industry, normally getting plaintiffs cash-in-hand within 48-hours of filing an application. If you require money now, please visit the company's website HERE or call 877.571.0405 where skilled agents are standing by.
Commercial Deals

Litigation Funders Driving Anti-Competitive Class Actions in UK

Following on from LFJ’s reporting last week that highlighted new research which demonstrated the growth of class actions in the U.S., similar trends are also taking hold in the UK, according to an upcoming study by Thomson Reuters. At the heart of this rise in the volume and value of class actions in Britain is the presence of a well-capitalized funding industry, combined with high-profile targets in the form of technology multinationals. An article by City A.M. places a spotlight on new research by Thomson Reuters, which examines class action activity in the UK last year and found anti-competition claims against global tech leaders to be a growing feature of the industry. The research found that the number of anti-competitive claims rose from six to eight, between 2021 and 2022, whilst the value of these claims skyrocketed from £4 billion to £26 billion in the same period. These high-value claims included actions brought against the likes of Google and Sony, with the UK’s reformed rules allowing for opt-out claims being identified as another catalyst. Thomson Reuters’ Warsha Kalé also pinpointed the litigation funding industry in the UK as playing a key role in this growth, indicating that funders still have plenty of capital to deploy, and have shown a willingness to take on these high-profile actions to hold these corporate giants to account.
Announcements Commercial

LITFINCON II: The Premier Litigation Finance Conference Announces Judicial Panel

Described by Above the Law as the “showcase for some of the most nuanced, content-packed discussion on litigation finance,” LITFINCON II returns to the Post Oak Hotel in Houston on March 1-2, 2023.

LITFINCON II is thrilled to announce that four distinguished jurists will participate in its featured Judicial Panel:

  • The Honorable Alan Albright of the United States District Court for the Western District of Texas
  • The Honorable Nancy Atlas retired United States District Court for the Southern District Court of Texas
  • The Honorable Mike Engelhart of the 151st Civil District Court in Harris County
  • The Honorable Charles Eskridge of the United States District Court for the Southern District Court of Texas.

“As a litigation funder, we are honored to provide the platform and resources to help trial lawyers and litigants achieve justice. Our ultimate mission is to continue the advancement of an emerging asset class by educating and promoting the best practices in litigation finance at LITFINCON II,” says Mani Walia, Managing Partner & General Counsel at Siltstone Capital.

In addition to the judicial panel, we are excited to announce that there will be a new academic panel featuring the nation’s leading scholars at LITFINCON II this year. We look forward to a wide-ranging discussion about the impact of litigation finance in the U.S. and abroad.

LITFINCON II is grateful for the early support from several high-profile organizations in the litigation finance industry. Confirmed initial sponsors for LITFINCON II include Certum Group, CAC Specialty, Schulte Roth & Zabel, Kerberos Capital Management, Gerchen Capital Partners, Curiam, D.E. Shaw & Co., Arran Capital, Aon, Filevine, Dunning Rievman & MacDonald, Omni Bridgeway, 4 Rivers Legal, Soryn IP Capital Management, Willis Towers Watson, and Calumet Capital.

Siltstone Capital, the host of LITFINCON II, is a premier investment firm that provides capital solutions to litigants, law firms, and legal departments to help resolve their real-world legal issues and create significant value for all stakeholders. For more information about Siltstone Capital, please visit our website http://www.siltstonecapital.com.

For more information about LITFINCON, please visit our website http://www.litfincon.com.

Commercial Deals

The State of Third-Party Funding in Mexico

With litigation funding being more widely recognized across the globe as a useful tool for both prospective plaintiffs and law firms, funders are keen to explore jurisdictions that are able to provide growth markets for new investments. Whilst the U.S. remains the premier market for litigation finance in North America, some industry figures are looking at what opportunities exist in Mexico. In an article for The Law Reviews, Paloma Castro, senior legal counsel at Deminor, provided an overview of the state of third-party litigation funding in Mexico covering everything from the regulatory framework to disclosure requirements. Castro highlights that while the use of third-party funding is generally permitted in Mexico, the country has traditionally been slow to adopt the practice due to the comparatively low costs of litigating, the limited lack of recoverability and the courts’ tendency to provide conservative award values. However, recent developments in the country’s legal system have seen it grow more in line with the U.S., by creating a framework for collective actions and through Mexico’s Supreme Court having established a precedent of awarding punitive damages. Castro points to the rise in alternative dispute resolution practices as another key factor fueling the growth of legal funding in Mexico, with the country having seen an uptick in third-party funding used for arbitration proceedings compared to domestic court litigation. Furthermore, Castro notes that Mexico has undergone a process of innovation and modernization in the legal system, partly fueled by the pandemic, which may improve ease of access to funding in the country moving forward.
Case Developments Commercial

Nanoco Announces ‘No Fault Settlement’ With Samsung in IP Lawsuit

As intellectual property and patent cases continue to dominate the headlines, the discussion around funding disclosure has been a common through-line in this area, especially in U.S. courts. However, an update in a major IP lawsuit demonstrates that this is not universal, as Nanoco’s case against Samsung appears to be approaching a resolution whilst the funder’s identity remains anonymous Reporting by The Business Desk details an announcement by Manchester-based materials developer, Nanoco Technologies, that it has agreed to a “term sheet for a no fault settlement” with Samsung. The dispute, which has been ongoing since February 2020, saw the UK company accuse Samsung of infringing upon multiple patents related to the nano materials it had developed for use in electronics, including OLED screens. The announcement by Nanoco revealed that as a result of the agreement, both parties had requested a stay on the trial which was meant to begin this week, with the details of the settlement agreement being finalised over the next 30 days. Whilst the identity of the litigation funder is not public, Nanoco first engaged in the funding agreement in July of 2020.
Commercial Deals

Duane Morris Report Highlights Record Year for Class Action Settlements

Class action lawsuits have continued to gain interest and investment from litigation funders, with LFJ reporting on two high profile actions in the first week of 2023 alone. This is no doubt driven by the record-setting volume of class actions brought last year, as new research reveals the billions of dollars in class action settlements delivered in 2022. A new article by Forbes examines this year’s Duane Morris Class Action Review, which provided a breakdown of the 635 class action decisions in the U.S. last year. The latest installment of the law firm’s annual review found that the combined value of all class action settlements topped $63 billion, with 15 of these actions reaching a settlement resolution with a value of $1 billion or more. Authored by Gerald Maatman Jr., chair of Duane Morris’ class action practice, the report identified product liability class actions and mass torts as being the most valuable area, with over $50 billion in settlements. However, the area that saw the most growth in the value of settlements was in consumer fraud class actions, which reached nearly $8.6 billion and represented an increase of 640% from 2021. The presence of litigation funders who are willing to fund these actions will continue to play a role in the sector’s growth, whilst also contributing to the rise in the value of settlements.
Commercial Deals

Funder Outlines Key Case Factors that Attract Litigation Funding

As the litigation finance industry enters another year of expected growth in activity and invested capital, the question remains as to what type of cases will attract the most third-party funding. In order to find an answer, one industry leader has used both historical data, and his experience in the legal funding sector, to identify what makes a lawsuit attractive to prospective funders. Writing in a blog post on LinkedIn, Bill Tilley, president and CEO of Amicus Capital Group, examines the important qualities that litigation finance companies look for. Looking at research conducted by Bloomberg Law and by Westfleet Advisors, Tilley notes that commercial litigation is the practice area that receives the most funding, and that patent litigation is continuing its rise in popularity, attracting significantly more commitments from funders in recent years. Turning to the individual case factors that are at the top of a funder’s checklist, Tilley highlights three key markers: a defendant with sound financials, a plaintiff with the will to engage in the challenging fight of the litigation process, and the potential of the case to attract additional plaintiffs or members of the class action.  He also points out that cases where the defendant has a track record of previous misconduct will always increase the proposition’s attractiveness.
Commercial Regulatory Issues

Funder Calls for Change in ABA’s Position Towards Third-Party Financing of Law Firms

The maturation of the litigation funding industry has not only provided a tool to widen access to justice, but has also begun to offer law firms the capital and resources needed to modernise and evolve, in order to better service their clients. However, one prominent funder argues that institutional forces’ long-standing objection to a closer relationship between funders and lawyers is hindering further innovation In an article on Lexology, Ken Epstein, investment manager and legal counsel at Omni Bridgeway, argues that the American Bar Association’s (ABA) unwillingness to reform its policy against non-lawyer ownership of law firms and fee sharing arrangements is a major roadblock. Epstein points out that whilst a number of states have relaxed rules on these practices in recent years, the ABA’s refusal to engage the possibility of changing its own policy is stifling progress towards a more equal justice system. In contrast, Mr Epstein highlights the New York City Bar Association and its Litigation Funding Working Group’s study into such reform, which recommended changes to existing rules in order to permit third-party financing of law firms without breaching ethical guidelines. Whilst Epstein acknowledges that it is not the ABA who writes state legislation, he argues that the organisation can play an important role in paving the way for wider reform.
Commercial Regulatory Issues

Judge Can Request Further Funding Disclosure in Patent Disputes, Says Federal Circuit Panel

The beginning of the new year appears to have continued where 2022 left off, as third-party funding disclosure in patent lawsuits remains a contentious issue in a number of cases. Just as LFJ has reported in the Nimitz lawsuit, the U.S. federal courts are willing to allow a judge’s probing of litigation funding arrangements in another two patent lawsuits. Reported by Bloomberg, a panel of three judges from the U.S. Court of Appeals for the Federal Circuit denied two separate patent owners’ requests to stop Judge Colm F. Connolly’s ongoing efforts to mandate further disclosure of their litigation funding sources. Creekview IP LLC and Waverly Licensing LLC had requested to have their cases dismissed, with the agreement of the defendants in each suit, but the panel ruled that Judge Connolly should be allowed to continue his probe. The Federal Circuit maintained that the Delaware judge was not acting outside the bounds of the court’s authority, and that dismissal of a case does not prohibit the court from “addressing collateral issues.” The panel’s order resembles a ruling in the Nimitz patent dispute, in which the court’s authority to request further disclosure of funding arrangements was similarly upheld.
Case Developments Commercial

Omni Bridgeway Funds Class Action Against Australian Insurer Over Data Breach

Litigation funding of class actions remains a powerful tool for holding large corporates to account, especially within industries such as Healthcare and Insurance, which can see customers outmatched by the financial and legal power of the companies involved. A new proposed class action in Australia looks to bring justice to customers of a major private health insurance provider. Omni Bridgeway recently announced that it is funding a class action against Medibank Private Limited, on behalf of customers affected by the company’s data breach around 12 October 2022. Medibank, which provides insurance policies under the ‘ahm’ brand, suffered the data breach in October of last year, and reportedly compromised millions of customers’ personal data including ‘passport numbers and health claim data’. Omni Bridgeway is inviting both current and former customers to register their interest in the class action, which will be led by the law firm Baker McKenzie.
Case Developments Commercial

LitFin Funds Class Action Against European Truck Manufacturers Over Antitrust Violations

The ongoing rise and potential continued growth in class actions in Europe was a common topic of discussion in 2022, and it appears that this year will continue that trend, as a prominent European funder is backing a significant action against some of Europe’s largest automobile manufacturers. LitFin, a European funding firm based in the Czech Republic, is funding a class action claim in Germany against manufacturers of heavy and medium-duty trucks, who were fined by the European Commission for breaching antitrust laws. LitFin is bringing this claim on behalf of companies who bought or leased this category of vehicles from Daimler, MAN, Volvo/Renault, DAF, Iveco and Scania; all of whom admitted their antitrust violations, with the exception of Scania. These manufacturers were all fined by the Commission for acting as a ‘cartel’, violating antitrust regulations by agreeing to prices on trucks sold in the European Economic Area (EEA) between 1997 and 2011. LitFin had already brought a claim against the cartel in the Netherlands, but due to the statute of limitations rendering these claims ‘time-barred’, the funder is also leading a claim in Germany to offer the manufacturers’’ clients another avenue for seeking compensation. The class action in Germany will be led by the Munich-based law firm, MMG Rechtsanwaltsegesellschaft.
Commercial Deals

Arbitration and Third-Party Funding in Asia

The use of third-party funding in international arbitration is on the rise, and as its use grows more commonplace, parties are increasingly keen to understand the nuances of accessing funding in jurisdictions that do not have the same established practices as countries like Australia, the UK or US.  In a new article for the China Business Law Journal, Yang Xueyu and Mariana Zhong, partners at Hui Zhong Law Firm, examine the different third-party funding practices and relevant legislative frameworks across Asia.  Singapore has one of the most-established legal structures for legal funding, having permitted the use of third-party funding in international arbitration since 2017, and then widened this permission structure to include domestic arbitration matters in the Singapore International Commercial Court. However, the authors highlight that third-party funding is only permissible where the funder meets the required criteria of having at least 5 million SGD in paid-up share capital or managed assets. Whilst Hong Kong does not allow the broader use of litigation funding, it does permit the use of third-party funding in both domestic and international arbitration proceedings, and in 2022, legalised “outcome-related fee structures” in order to offer parties a wider array of permissible fee arrangements. Importantly, Hong Kong has well-defined disclosure regulations, which require the existence of funding agreements to be disclosed, including the identity of the funder. Finally, while mainland China does not have established legislation around third-party funding, there have been no indications that it is prohibited, and contingency fee agreements are also recognised as valid. Xueyu and Zhong do highlight that some of China’s arbitration bodies, such as CIETAC and BAC, have set out guidelines for third-party funding regarding investment arbitration that more closely align with international standards.
Case Developments Commercial

Intel and VLSI Seek Dismissal in Microchip Patent Dispute

Patent dispute cases have dominated industry news in recent months, both due to them being among the most active areas for litigation finance involvement, and also due to the number of high-profile cases that have put the spotlight on funding disclosure. One of these cases appears to have found a resolution just before the end of the year, as VLSI and Intel have both agreed to drop their respective claims and counter-claims in the microchip patent dispute. Bloomberg Law covers this latest update which has been ongoing since June 2018, with a joint filing revealing that both parties are seeking dismissal and moving to drop their claims, with neither side receiving any financial payout. According to the article, the resolution contains no remuneration for either party, and also affirms that VLSI will agree to not take any further legal action regarding these microchip patents. The case had attracted attention as VLSI was caught in the crosshairs of Judge Colm Connolly’s April standing order, which mandated additional disclosure around the plaintiff’s litigation funding arrangements. Whilst VLSI had provided further disclosures, Judge Connolly and Intel both argued they were still failing to comply, and then in October, Connoly requested briefs from all parties as to whether the suit should be dismissed for VLSI’s failure to meet the court’s disclosure requirements. Whilst additional briefs were expected in January, these are unlikely to go ahead, after both Intel and VLSI have requested the case be dismissed. However, observers will now likely be closely watching the Nimitz patent case, which has faced increasing scrutiny from Judge Connolly regarding disclosure of its litigation funding arrangements.
Commercial Legal Innovation

Tokenization of Litigation Funding Could Widen Access to Justice

Litigation finance represents a potent solution to the access-to-justice issues facing America’s legal system. However, third-party funding still faces barriers to entry, both in terms of a lack of general awareness of its availability, and how it can be best accessed and utilized. Writing in Law.com, Ron Lasorsa, managing general partner at Victory Litigation Fund, argues that digital transformation, and in particular, tokenization, is the key to unlocking access to litigation funding by opening pathways for more capital and further democratizing the judicial system. Lasorsa points out that it has been three years since the first lawsuit was tokenized, and has since become a more commonplace practice by funders. By embracing tokenization and thereby allowing for the effective crowdfunding of lawsuits, the litigation funding market can expand beyond the borders of the small group of established litigation funders. By widening the number of sources of capital, the individual risk can be reduced, and in the process, increase the liquidity of the market. Furthermore, Lasorsa highlights that ‘smart contracts’ on the blockchain would avoid the difficulties of ensuring payouts from funded wins are delivered on-time and without difficulty. Finally, he argues that tokenization would increase opportunities for activist investors, rather than commercial funders to finance litigation, especially within the ESG arena.
Consumer

RNC Funding of Trump’s Legal Campaign Undermines GOP State AGs’ Attack on Litigation Funding

Litigation Finance Journal recently reported on a group of 14 state attorneys general that have called for action from the Department of Justice to review potential threats to U.S. national security from foreign adversaries' engagement of litigation investment. Litigation funders and industry advocates have new ammo in response to the AGs’ claims, given recent news of the RNC funding former President Donald Trump’s various legal entanglements.  According to ABC News, RNC leaders earmarked $1.6M in legal funding to support President Donald Trump's defense over lawsuits brought by New York Attorney General Letitia James. Meanwhile, the United States Chamber of Commerce Institute for Legal Reform's research has prompted 14 state attorneys general to ask for the Justice Department to assess national security risks of adversaries 'undermining' the United States by engaging litigation funding and third party investment vehicles.  The group of 14 state attorneys general are concerned about foreign adversaries 'weaponizing' United States legal frameworks via litigation investment, to attack critical national industry and infrastructure, such as energy sectors. The group of 14 seeks the Department of Justice to detail how a network of federal agencies could engage a blueprint for defending United States independence from international litigation investors, hostile groups, agencies or governments such as Russia and China. This latest attack on the industry, prompted by the U.S. Chamber of Commerce, is simply another attempt to undermine the nascent and growing litigation funding sector. It is ironic, given that in the case of Consumer Legal Funding–which the Chamber specifically targets–the funding in question does not go to support legal fees, but rather to finance claimants’ livelihoods while they remain injured and unable to work.  While the RNC’s funding of Trump’s legal battles does not constitute foreign investment, it illustrates the acceptance of third party legal funding across political lines, and should be noted by industry advocates looking to respond to the negative publicity put forth by the U.S. Chamber. 
Consumer

Bloomberg Law Reports Litigation Finance is an Investment in National Integrity

The United States Chamber of Commerce Institute for Legal Reform recently warned that litigation finance is a potential risk to national security. Bloomberg Law has published a rebuttal to such claims, hailing Consumer Legal Funding as a cornerstone of many United States households seeking much needed cash flow during the litigation process.  Bloomberg Law claims that Consumer Legal Funding poses no risk to United States national security. Bloomberg Law's opinion piece does draw a distinction between consumer and commercial litigation investment. With a focus on consumer funding, Bloomberg Law concludes that many Americans can only pursue justice through the facilitation of litigation investment as a cash flow facility.  With the average Consumer Legal Funding contact around $2,000-$3,000, Bloomberg Law concludes that national security is certainly not at stake.  Bloomberg goes so far as to call the Chamber of Commerce's position on consumer litigation investment a 'fallacy' of composition logic.
Commercial People Moves

Former LCM Investment Manager Launches Versaras

As we head into 2023, another new funder has entered the growing litigation funding market. Revealed in a LinkedIn post, Matthew Denney announced the launch of Versaras, a new legal finance and consultancy firm which is seeking to provide “outsourced dispute finance and funding solutions, and non-recourse investments in Real Estate.”  Prior to founding Versaras, Denney has accumulated a wealth of experience across the legal and finance sectors, having most recently served as an investment manager and head of origination in EMEA for Litigation Capital Management.
Commercial Fundraising

Boutique Investment Firm Launches with a Focus on Cross-Border Disputes

As the litigation finance industry continues to grow in both established and nascent jurisdictions around the globe, new funders are launching investment firms dedicating a significant portion of their capital to this industry. As we close out the year, this trend does not appear to be slowing, with the launch of a new boutique investment firm: Inweasta. Interviewed by EU Reporter, Inweasta’s Hong Kong CEO, Annie Chan Wai Kwan, discussed the new company’s focus on special situation investing, with an eye towards international disputes resolution and litigation funding. The company is looking to bridge the gap between East and West, bringing expertise to complex cross-border disputes and litigation finance cases that require tailored solutions. Inweasta was founded and is owned by Andrei Elinson, who brings 20 years of experience in commercial disputes, distress assets management and private equity M&A.
Consumer

State AGs Join Chamber of Commerce’s Call for Action Against Foreign Litigation Funding

Recent discussion around the risks of litigation funding have highlighted the potential threat of foreign actors using third-party funding of lawsuits to harm U.S. national security. This claim, which was put forward in a report by the U.S. Chamber of Commerce’s Institute for Legal Reform, a prominent industry antagonist, has now found support among state officials, as a group of 14 state attorneys general have called for action from the federal government to review this alleged threat. Outlined in an article by Reuters, the letter sent to U.S. Attorney General Merrick Garland was signed by these Republican state AGs led by Georgia’s Chris Carr and Virginia’s Jason Miyares. The letter requested that the Justice Department outline what measures it has taken to address the use of third-party funding by foreign entities, stating that the potential of adversarial nations using the process to undermine American economic or security interests was a serious threat. Whilst the Justice Department did not provide Reuters with a comment in response to the letter, the International Legal Finance Association (ILFA) released a statement arguing that the letter was merely a repetition of the Chamber’s claims and was not supported on any factual basis. Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC), stated the following: “The funds that ARC companies provide consumers are not used to pay for the cost of litigation and bringing cases forward. The funds are used to cover household needs, such as keeping a roof over consumers’ heads.”  Schuller went on to note that “If there is a concern as to who is funding the lawsuit itself, then any proposed regulation or legislation needs to concentrate on that aspect, and not on consumers who need funds to make ends meet while their cases make their way through the legal system.”