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Commercial Fundraising

First of Its Kind Litigation Finance Stock Offering

Litigation Finance has taken the investment world by storm. Mechanisms to vet cases are always improving, and the industry has adapted to changing circumstances. The problem? As a maturing asset class, Litigation Finance is typically only available to wealthy investors. Thanks to a startup from partners Roche and Freedman, that has changed. ABA Journal reports that retail investors can buy a share in a federal lawsuit filed by hemp growers. The minimum investment is only $100. The risks to investors are substantially lower than those typically endured by third-party funders. In the case, known as Apothio, hemp growers allege that the government illegally disposed of at least $1 billion in hemp crops in California. There’s a possibility that the case will be dismissed. If that happens, investors will see 80% of their investment returned. If the case succeeds, investors may see as much as a 350% return. Funds deployed to the Apothio case are provided on a non-recourse basis. So if the case goes to trial and loses, investors lose their entire investment—as is typical of litigation funding agreements. Are there downsides for consumers? Obviously, any investment carries risk. Litigation as an investment can be perilous, and many laymen lack the knowledge and experience needed to vet legal investments effectively. One professor at Indiana University applauds the laudable efforts of Roche and Freedman, but they worry that new investors won’t understand the intricacies of their investment, leaving them unable to make informed decisions. This would include background info and a summary of underlying legal issues. Roche’s team is developing new methods of explaining case data to investors in a manner that is easily digestible for those without legal expertise. The Apothio case was filed in the Eastern District of Columbia in 2020. Motions to dismiss are pending.
Commercial People Moves

Mary Gangemi Becomes Board Member of LCM

Litigation Capital Management has appointed its Chief Financial Officer to its board this week. Mary Gangemi, who joined the company in April 2020, was promoted as a board member, effective immediately. London South East reports that Gangemi has extensive experience in wealth and asset management, and has provided financial oversight to multiple corporations across the UK, Europe, and Asia. Gangemi is working with Chief Executive Patrick Moloney in LCM’s London office. This brings LCM’s executive team into a single hub. Note--an earlier version of this article stated that Mary Gangemi was appointed as Chief Financial Officer.  That is incorrect.  Mary Gangemi was already CFO, and was appointed to the board.  We regret the error.
Commercial

Key Factors to Consider When Seeking Legal Disbursement Funding

Identifying a reliable legal disbursement funder can be a minefield, especially if you aren’t sure what to look for. Most funders want to know a lot about your business. This should include case origins, fee structuring, risk appetite, and a track record of success. Legal Futures explains that funders should also want to look at your company’s recent financials and predictions for the coming year. Funders should also ask about existing loans, liquidity, and working capital. From a client perspective, there are a few questions everyone seeking disbursement funding should ask:
  • How is the funder’s track record and experience?
  • Where are the funds coming from—funders of outside investors?
  • Can I understand the terms? Are they reasonable?
  • Is the process clear and easy to navigate?
Asking the right questions and knowing what to be aware of will make the search for legal disbursement funding easier and more effective.
Commercial

Litigation Funding as Alternative Investment Class

From an investor perspective, Litigation Finance allows investors to earn money from legal claims without seeing a day in court. While this was once an opportunity only available to sophisticated, well capitalized investors, it’s becoming democratized thanks to global startups like LegalPay. Live Mint explains that legal funding is considered an alternative investment because it is uncorrelated to the rest of the market. When COVID sent the world into financial turmoil, litigation funding remained profitable and has only grown in scope and profitability. India-based LegalPay offers two avenue to access the market: litigation funding, and interim financing under IBC (insolvency & bankruptcy code). Litigation funding carries more risk—but also has the potential for higher returns. Typically, cases under consideration for funding are carefully vetted, then funding is offered to the most promising opportunities. Funds provided to litigants are issued on a non-recourse basis. There’s a risk of walking away with nothing if the case loses. If the case wins, investors could see 2-4 times their investment when the award is collected and split among the parties.
Commercial

New Zealand: From Funding to Summary Judgment 

Experts highlight that New Zealand’s class action provisions were last updated in 1882, and today do not reach modern benchmarks for class action litigation. Some suggest that New Zealand is prime for smart and sophisticated regulatory guidance to usher in and protect a golden age of third party litigation investment.  Casl.com.au reports that New Zealand’s Law Commision is conducting a full scope review of class action litigation funding guidance. Looking to neighboring Australia for advice, the Association of Litigation Funders of Australia (ALFA) has joined the New Zealand Law Commission in conducting pioneering research, written/oral submission and roundtable discussions aiming to produce a report to the Minister of Justice, due May 2022.  The New Zealand Law Commission seeks to leapfrog past Australia’s process of rushing ad-hoc and piecemeal approaches to litigation funding regulation. New Zealand is embracing avantgarde design features in cultivating a bright future for it’s litigation finance marketplace.  
Commercial

Tips for Success in High-Stakes Disputes

Litigation requires many factors to be successful: a strong and effective strategy, the ability to adapt to changing circumstances, a talent for minimizing risk. This applies to both in-house and outside counsel, as well as a company’s board members and executive team. Omni Bridgeway assembled a panel of experts to discuss business-critical issues in litigation from the perspective of clients, counsel, and funders. Amanda Klein, chief legal officer at Toronto Hydro has suggestions for external counsel for large corporate clients:
  • Align legal strategies with the interests of shareholders. Regardless of the strength of the legal case, high stakes disputes must also have an eye on how litigation impacts external shareholders.
  • High-stakes litigation may be smaller than you think. Important cases may not be worth millions, but can set a lasting precedent that impacts entire industries.
Eliot Kolers, partner at Stikeman Elliott and head of Toronto Litigation & Dispute Resolution Group, asserts the importance of storytelling from a litigator’s perspective. Helping a judge see the client’s side without getting bogged down in legal minutia can go a long way toward a positive result. He also recommends:
  • Valuing experts in the industry. When framing the legal issues as a compelling story, experts can clarify complex issues in a way that laymen can easily understand.
  • Client communication. This is essential for a number of reasons—particularly to avoid surprises and to prepare involved parties for questioning.
From a funding perspective, Paul Rand—Omni Bridgeway’s Canada CIO, has suggestions:
  • Seeking multiple opinions on a claim is always a good idea, as differing perspectives may reveal facts or ideas that could have been otherwise missed.
  • Never assume clients won’t be open to legal funding. Not all clients realize this is an option, and even fewer fully understand how it works. Keeping options open can lead to better outcomes.
  • Reverse engineer a strategy. Starting at the end and working back to a viable plan can be successful. Sure, some adjustment will be necessary, but starting with an end point in mind can be beneficial to all parties.
Commercial Regulatory Issues

Australian Chief Justice Weighs in on Class Action Debate

Chief Justice James Allsop has a lot to say about class action reform in Australia. He asserts that class actions have an inherent public benefit—one that’s in constant danger of being minimized or even forgotten. This came within days of AG Michaelia Cash revealing that the government would not continue its quest for litigation funding reforms. This includes the proposed 30% cap on payouts to third-party funders. Financial Review details Chief Justice Allsop’s statement that Parliament and other interested parties put aside personal prejudices and preconceived notions about the industry when deciding how to move forward. It’s essential, he said, that people keep in mind that class actions are vital to the public good. Some have suggested that a 30% cost and funding cap would reduce the number of spurious or low value class actions being launched. But is that happening? Evidence suggests that it isn’t. Logic suggests that no funder wants to bankroll a case without merit. Legal author Jason Betts suggests that giving claimants 70% of an award seems more fair. But is it? Especially given that funders take on 100% of the financial risk? Would this change even make a difference, or would cases simply be filed in Victorian Supreme Court instead? It’s been suggested that judges be given leeway to make or approve decisions regarding the division of award funds, because they’re able to look at each case individually rather than relying on broad mandates. We'll have to wait and see how the Aussie regulatory system shakes out. 
Commercial People Moves

Omni Bridgeway Expands Employee Roster in Australia

Litigation Finance giant Omni Bridgeway has announced some new appointments in its Investment Management team and Investment Committee in Australia. Omni Bridgeway is a global leader in legal finance and risk management, with offices across the world. Since 1986, Omni Bridgeway has offered assistance from the first case filing through award enforcement and recovery. Market Screener details the new additions to the Omni Bridgeway team:
  • Michelle Painter SC brings decades of experience to her new position on Omni Bridgeway’s Investment Committee, where she will evaluate cases for funding with the rest of the team.
  • Christopher Kahwaji joined the Sydney team in 2021 as an Investment Manager. Formerly a class action specialist at Herbert Smith Freehills, Kahwaji’s experience managing commercial disputes and complex litigation is significant.
  • Chris Liscica, formerly of the litigation and regulatory team at DLA Piper, brings extensive experience to Omni Bridgeway. His specialties include general liability, personal injury cases, and professional indemnity.
  • Phillipa Briggs joins the Sydney team as an Investment Manager where she will engage in due diligence and management of funded cases. Her experience includes time at Hunt & Hunt, and in private practice at Minter-Ellison.
  • Grant Covington, formerly Special Counsel at Wotton & Kearney, joins the Sydney team as an Investment Manager. He was also Special Counsel with Moray & Agnew.
Omni Bridgeway CIO Tania Sulan expresses delight in welcoming her new colleagues, and is confident of their ability to improve the client and investor experience.
Consumer

Choosing the Right Consumer Legal Funding Company

You have a meritorious case with a good chance of winning. That’s good news, right? But did you know it could be months or even years before that money is in your hands? Appeals, delayed negotiations, unwillingness or inability to pay...all of these can contribute to an even longer wait to get what you’re owed. By availing yourself of the services of a Consumer Legal Funding company, you can get that money when you need it most. Finance Monthly details what you should look for in a Consumer Legal Funding company, and how to determine which is the best one to meet your specific needs. The first thing to keep in mind is that before signing any contract—speak with your lawyer. They will have a solid understanding of how lawsuit loans work in a pre-settlement context. There are three main factors that deserve consideration:
  • Duration for transferred funds. Many plaintiffs are in a tight financial spot while waiting for a case to be resolved—and therefore may require immediate funds. Ideally, the funding process from application to approval shouldn’t take more than a few business days once the funder has received the necessary information from your legal team. It’s vital that you ask how long the loan process will take from start to finish.
  • Transparency. A reputable company will be clear and concise when explaining interest rates, the payoff table (what you’ll pay, and under what circumstance). This will allow you to easily compare the various companies you’re considering.
  • Interest rates. Obviously, the amount you’ll ultimately pay back is important. Companies should be open about rates and be willing to provide numbers in writing. Be suspicious of any company that doesn’t.
Knowing what to look for and which questions to ask is an essential part of finding the right legal funders for your situation.
Commercial Legal Innovation

Bribes, Grease Payments and Global Litigation Finance 

Both competition law and consumer protection law focus on eliminating global marketplace manipulation. Deceptive acts and practices in many offshore businesses are byproducts of illegal bribes, or legal grease payments. Exclusionary price fixing of international virtual currency markets suggests that innovation is necessary to level the playing field.  Boston College International and Comparative Law Review researchers have suggested that ‘greasing the palms’ of international regulators is not necessarily forbidden. During the COVID-19 pandemic, many virtual currency firms made significant efforts to increase earnings via marketplace manipulation. Conditional regulatory approvals have prompted deceptive advertising practices which led to marketplace fraud and earnings manipulation. Famous international banks have made a business out of regulatory arbitrage frameworks … allegedly issuing bribes when necessary.  To navigate such bad behavior, price fixing agreements can be negotiated as a litigation finance tool. Engaging virtual currency fixing, as with Proof of Transfer (POX) powering NYCCoin and MIA Coin, supports the idea of government “donation bounties.”  Such practices are a hot topic of discussion for United States innovation policies.  The Department of Justice has recently begun to consider various instances of litigation finance solutions to help eliminate cross-border bribery and marketplace manipulation architectures.  For reference, we highlighted 32 key points in“The Foreign Corrupt Practices Act: It’s Time to Cut Back the Grease and Add Some Guidance.” Feel free to scan the doc and see our key takeaways (highlighted inside). 
Commercial

Podcast: The Litigation Finance Asset Class 

With the litigation finance industry experiencing meaningful growth, many investors are finding the space to be an attractive alternative asset class. The United Kingdom has witnessed litigation finance investment increase twofold, now valued at £2B a year.  A new podcast from Robert Rothkopf, Managing Partner of Balance Legal Capital, explores industry trends driving venture capital and private equity investments in litigation finance. Rothkopf is credited with being a pioneer in the UK’s third party funding industry.  Balance Legal Capital is a member of the Association of Litigation Funders (ALF). ALF serves as an independent association engaged by the Ministry of Justice in self-policing England and Wales litigation funding agreements. Listen to the podcast to learn more about Rothkopf’s insights.
Commercial

Pandemic-Powered Third Party Funding 

During the COVID-19 pandemic, world economies came to an abrupt halt. Nearly every industry was forced to reimagine itself in a bid for survival. Two years into the new normal, litigation finance’s exponential growth has been buttressed by an onslaught of COVID-19 related litigation claims.   Bill Tilley of Amicus Capital Group recently published a LinkedIn essay exploring third party funding trends witnessed during the pandemic. Tilley highlights that a large number of new litigation investors have joined the market to meet the demand for claims. With industry awareness on the rise, many regulators are looking to introduce third party funding mandates with consumer protections in mind.  Tilley forecasts that quality litigation will continue to experience increased costs, spawning a need for alternative litigation lenders. The time to a verdict is slowing, as the pandemic has contributed to litigation supply chain disruptions. Third party investors must be willing to devote time and resources and be patient as they await resolution.   Tilley says, with the pandemic waning, third party investment is continuing to surge with exponential year-on-year increases well into 2030. 
Announcements Commercial Fundraising

BALANCE LEGAL CAPITAL COMPLETES FIRST CLOSE AT GBP130M IN NEW LITIGATION FUND

BALANCE LEGAL CAPITAL LLP, a London-based provider of litigation and arbitration finance, today announced it has raised a further GBP 130M from 8 institutional investors in the first close for a new UK fund, bringing Balance’s total AUM to over GBP 250M. Balance is targeting Q2 2022 for a second and final close.

The investors in the new fund include repeat investors from Balance’s prior vehicles plus further global institutional investors located across the UK, US, Switzerland, the Nordics, and Australia. In addition to its discretionary capital pools, Balance has direct access to significant further co-investment capital from its investors, enabling it to fund the largest litigation budgets.

As ever, Balance has delegated authority over its litigation investment decisions.  Balance will use the new funds to continue to invest in commercial disputes and class actions with a focus on disputes in common law jurisdictions (ex. USA), particularly the UK and Australia.  Balance invests across all sectors and commercial claim types including contract, tort, shareholder disputes, joint venture disputes, competition, class actions and more.

Robert Rothkopf, Managing Partner of Balance Legal Capital, said “We are thrilled to announce the launch of our new fund, which will further enhance our ability to support claimants and law firms in litigation proceedings.  This is the second multi-investor fund we have launched in two years and demonstrates the strong demand for our capital.  We’re grateful to our investors for continuing to back us in our new fund, to our high-calibre team at Balance, and to the law firms, barristers and insolvency practitioners we partner with to obtain justice for businesses and individuals.” 

Balance Legal Capital LLP was advised on the establishment of its new fund by Herbert Smith Freehills LLP, London.

About Balance Legal Capital

Balance Legal Capital was founded in 2015 by Robert Rothkopf (former Herbert Smith Freehills litigator) and Simon Burnett (a former Freshfields litigator).  Its investment committee includes Lord David Gold (former global senior partner of Herbert Smith and head of disputes) and Ian Terry (former managing partner of Freshfields and global head of disputes).  Fraser Shepherd (former litigation partner at Gilbert + Tobin, Sydney), Donny Surtani (former litigation partner at Herbert Smith Freehills) and Nick Gardner (former head of Intellectual Property Litigation at Herbert Smith) are senior advisers to the investment committee.

Example cases funded by Balance include (1) the audit negligence claim by the Patisserie Valerie Group (in liquidation) against Grant Thornton UK LLP (solicitors – Mishcon de Reya LLP); and (2) group proceedings for vehicle owner clients of Leigh Day in the emissions claims against BMW, Vauxhall, Peugeot, Citroen for selling diesel vehicles allegedly containing unlawful emissions defeat devices.

Balance Legal Capital LLP is a member of the Association of Litigation Funders of England and Wales (ALF) where Robert Rothkopf is a board member.  Balance Legal Capital LLP is also a founder member of the Association of Litigation Funders of Australia (ALFA) where Simon Burnett is a board member.  Balance Legal Capital LLP is authorised and regulated by the UK’s Financial Conduct Authority and by the Australian Securities & Investments Commission.

https://www.balancelegalcapital.com

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Case Developments Commercial

Appeal Tribunal Refuses Google’s Request for ATE Premium Disclosure

The Competition Appeals Tribunal recently ruled that requiring disclosure of after-the-event insurance premiums would amount to an unfair advantage. In this case, tech giant Google sought disclosure in the name of transparency. Law Gazette details that the CAT is concerned with transparency as it pertains to funding agreements in collective proceedings. Bridget Lucas, QC referenced the unique nature of class action proceedings—which necessitate CAT approval of a proposed class representative. She explains that this stems from the knowledge that a PCR’s funding arrangement is relevant to CAT’s assessment of the CPO filing. CAT found that funding agreements and ATE premiums must only be disclosed if they are relevant. The ruling stems from a claim brought by over 19 million claimants regarding app distribution and payment processing. The case could be worth nearly a billion GBP. Vannin Capital is funding the collective action. The special regime for collective actions does require claimants to disclose funding agreements. Ultimately though, the court decided that the need for disclosure in this case is outweighed by an unwillingness to give one side a tactical advantage.
Commercial

Why Law Firms Should Welcome Litigation Funding

It’s common for law firms to adopt ‘thin reserve’ strategies to keep budgets lean and liquidity high. But when a pandemic occurs, it can leave the legal services industry in a lurch. Augusta Ventures explains that there are numerous reasons for law firms to consider litigation funding as an option. Litigation Finance can be a valuable tool in terms of working capital. When liquidity issues impact entire industries, collecting on bills can be a challenge. When firms fail to pay their own bills in a timely way, confidence erodes and reputations can be damaged. But litigation funding can be used for working capital, monetizing existing legal assets while alleviating the money crunch so many firms are feeling. Some firms address shortfalls by delaying or lowering partner distributions—which most partners are not generally in favor of. This option can engender bad will among partners and staffers, and may send the signal that a firm is in dire financial straits, thus lowering its standing in the field. Litigation Finance can address these issues in a timely and low-risk manner. Third parties can fund single cases or portfolios, providing non-recourse funds that can be used to address budget shortfalls, or as working capital to ensure bills are paid and partners are compensated. As Litigation Finance continues to grow and adapt to the needs of firms and clients, new and innovative solutions will present themselves. Presently, firms would do well to consider the benefits of Litigation Finance in terms of liquidity and reputation.
Commercial People Moves

Omni Bridgeway Launches DC Office with Former Alston & Bird Partner

Litigation Finance powerhouse Omni Bridgeway is opening its fifth US office—this time in Washington DC. The new office will be led by Jason Levine, noted trial lawyer and former partner at Alston & Bird. Levine joins Omni Bridgeway at a time of unprecedented demand for legal funding services. Law.com details that Omni Bridgeway is growing fast in the US—expanding its staff by 20% since November 2021. Jim Batson is the co-chief investment officer and managing director for the US. He explains that demand for funding services is steadily increasing now that business is returning to normal. Levin’s experience includes winning regulatory, commercial, anti-trust, and class action cases across multiple industry sectors. He’s earned a total of $3 billion for corporate clients, and avoided over $17 billion for defendants he’s represented. It’s expected that Levin will work from home near DC for the time being, though he expects to meet some clients in person.
Commercial Regulatory Issues

How State Laws Can Impact Litigation Funding

Can the medieval doctrines of champerty and maintenance impact litigation funding agreements today? Most jurisdictions have abolished the outdated concepts prohibiting anything that looks like third-parties betting on litigation—but it still behooves counsel to know the laws of their case's jurisdiction.  Lake Whillans details that in most places, there’s a push toward creating a welcoming atmosphere for funders and the clients and lawyers who work with them. Let’s look at four major jurisdictions in the US: California, New York, Delaware, and Illinois. In California, champerty and maintenance were never prohibited to begin with. The larger issue is disclosure, which is required by statute. This includes the identity of any funder of a claim or counterclaim—but does not require full disclosure of funding agreements. In fact, in Impact Engine v Google, courts found that the funding agreement and related materials were protected by the work product doctrine. New York law Section 489 prohibits the selling of claims with the intention of pursuing legal action. Of course, most TPLF agreements do not assign claims to another party. It’s much more common for claimants to retain their claims. The non-recourse nature of funding makes agreements exempt from usury laws. Delaware rejected the allegation that legal funding equates to champerty and maintenance. In Charge Injection Technologies v DuPont, DuPont asserted that funders become the true party of interest in the case. The judge rejected this, pointing out that the funding agreement was negotiated without coercion and that funders did not control settlement or strategy decisions. Illinois set a valuable precedent in Miller v Caterpillar. Caterpillar contended that Miller’s funding agreement violated a standing ban on maintenance. The court disagreed, saying the funding was not used for meddling purposes, and was instead in the interest of justice.
Announcements Consumer

Litigation Is Driving Up U.S. Commercial Auto Insurance Costs, Study Finds

Social inflation—the impact of rising litigation on insurers' costs—increased claim payouts for commercial auto insurance liability alone by over $20 billion between 2010 and 2019, according to a new paper by Insurance Information Institute (Triple-I), in partnership with the Casualty Actuarial Society (CAS).
The Triple-I/CAS paper, Social Inflation and Loss Development confirms and quantifies one of the primary factors driving up the cost of commercial auto insurance. A separate Insurance Research Council (IRC) paper illustrated how losses across several insurance lines have accelerated in recent years much faster than economic inflation alone can explain. In addition, while the Triple-I/CAS paper focused on commercial auto insurance, it also identified evidence of similar trends in other lines, such as "other liability occurrence" and claims-made medical malpractice. An occurrence policy pays claims arising during the policy term, even if they are filed many years later. Claims-made insurance can provide coverage when a claim is made, even if it arises from an incident that occurred years ago. Drivers of Social Inflation
Considered to be a growing cost of doing business in the insurance industry, social inflation is influenced by negative public sentiment about larger corporations, litigation funding, and tort reform rollbacks at the state legislative level, all of which have increased liability costs. Shifting public perceptions and attitudes may lead jurors to sympathize with plaintiffs when awarding damages. Jurors may also believe the business, or the insurance company, has unlimited financial resources, leading to what's commonly known as "shock" verdicts.  These monetary damage awards are much higher than expected based on the evidence presented at trial, often exceeding $10 million. Emotional appeals to juries by plaintiff's attorneys are nothing new. Neither are class action lawsuits. But the plaintiff's bar has gone to a new level with tactics like third-party litigation funding and litigation lending, the report notes.  Funding of lawsuits by international hedge funds and other financial third parties – with no stake in the outcome other than a share of the settlement – has become a $17 billion global industry, according to Swiss Re. Law firm Brown Rudnick sees the industry as even larger, estimating it as a $39 billion global industry in 2019, according to Bloomberg. Some states have implemented rules requiring disclosure of third-party litigation funding in lawsuits, which would give defense attorneys and juries insight into the entities other than the plaintiff who are financing the legal fees of plaintiff's attorneys. Such efforts predictably meet resistance from third-party litigation funders. In 2020, the 13 largest commercial litigation funders in the world formed the International Legal Finance Association (ILFA) to advocate for litigation funding and oppose blanket disclosure requirements. Commercial transportation is among the sectors most severely affected by more frequent lawsuits generating higher insurance claim payouts.  A 2020 study by the American Transportation Research Institute found that, from 2010 to 2018, the size of jury verdict awards grew 33 percent annually, as overall inflation grew 1.7 percent and healthcare costs grew 2.9 percent. More frequent lawsuits and costlier jury verdicts can lead to increased insurance costs as rates are adjusted to reflect the changing risk profile. It can even force insurers to stop writing certain forms of coverage. Higher claim costs tend to be passed along to policyholders in the form of higher premiums. In extreme cases, climbing claim costs can ripple through the entire economy, creating conditions analogous to the 1980s liability crisis, where liability claims were adversely impacting the U.S. insurance industry to the point where some insurers faced insolvency.
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Commercial Regulatory Issues

Draft of Australia’s Amendment to Improve Outcomes for Litigation Funding Participants

The future of the litigation funding marketplace in Australia is a hot topic of late. Canberra (Australia’s capital city) is putting pressure on litigation investor returns by suggesting a 30% cap on the ROI of litigation agreements. Citics of Canberra’s blanket move are furious, many alluding that any such mandate will stifle access to justice.  The Australian Senate’s Economics Legislation Committee recently published a 71 page report that explores an amendment to improve litigation funding regulation in the country. The legislators who authored the report suggest they are working to solve a problem of Australian attorneys taking the lion's share of class action lawsuit rewards. Canberra’s report seems to suggest that every Australian should have access to justice and the associated monetary awards of litigation success.  Senators look to empower courts with decision making powers on approval of any litigation funding agreement and associated distribution structure. Likewise, Australia’s common litigation fund currently offers various economic benefits to those in need. Senators allude to the common fund’s assets being utilized to pad attorney returns, in some instances.  As the litigation finance regulation journey unfolds in Australia, the government’s report offers Canberra’s frame of mind on the subject.
Commercial

Investing in Justice via Litigation Finance

“Funding is the lifeblood of the Justice System,” is the famous quote by David Edmond Neuberger, who served as President of the Supreme Court of the United Kingdom from 2012 to 2017. Neuberger teases that quality litigation takes investment. Global legacy stock markets have thrived on financial (cross-border) innovation.   Lawyer-Monthly.com recently exhibited thoughts and ideas arguing that “investing in justice” is the modern elevator pitch for litigation finance.  Even more, Lawyer-Month.com highlights that the evolution of equitbale rule of law (across all global jurisdictions) will hinge on the success/failure of litigation finance systems and process architecture(s). With the cost of quality litigation for meaningful claims, progress to the rule of law hangs in the balance.  No longer is it considered to be “open-minded” when considering alternative third-party solutions to fund and invest in litigation finance. Today, platform technology is widely setting expectation benchmarks for pioneers of the industry. Similarly, the next generation of economic pioneers of litigation finance will have deciphered what use (if any) blockchain software technology and virtual currency hold for litigation innovation.  Lawyer-Monthly.com notes a significant marketing challenge for ligiation finance, corresponding to individual countries. They exhibit and plot a chart of such instances across the globe. 
Commercial

The Global Patent Infringement and Litigation Financing Market 

International patent protection and litigation investment is forecasted to experience exponential growth between 2022 and 2030, according to new research by Absolute Market Insights. New investors into the emerging patent litigation space are expected to implement the foundations for legacy franchises.  Absolute Market Insights’ research reports that the patent infringement marketplace in North America accounted for $183.25M in 2021 revenues. Forecasted compounded annual growth rates for the sector are pegged at upwards of 6% year-over-year. Business patterns in the space are limited by restraints associated with corporate business structures, according to Absolute Market Insights research.  Research signals the importance of technology in any winning business focused on patent litigation finance. With a $3,300 price tag for individual report access, $6,600 for firm access and $7,300 for global access, Absolute Market Insights infers that their research is an investment for anyone engaged in patent litigation finance globally.
Commercial

A Global Litigation Finance Barometer 

All dashboard metrics are signaling that the global litigation finance market is experiencing a renaissance. Corporate directors are embracing litigation finance as a business tool, building litigation portfolios while seeking third party investors to fund successful claims. Risk mitigation is the overarching theme for corporate finance adoption of litigation investment solutions.  Deminor.com published a feature profiling top business benchmarks for the global litigation finance industry. One risk management benefit of litigation finance is that funders have a wide berth of active jurisdictional insight, meaning that corporate finance directors can piggyback on a funder’s knowledge of successful jurisdictional avenues for claim success. Likewise, balance sheet earmarks for litigation have traditionally been a headache for international enterprise, as quality litigation tends to be expensive.  Corporate directors are keen on turning to litigation investors to offset balance sheet line items. With the balance sheet freed up from costly litigation budgeting, many are discovering the benefits of funds being invested back into the business for research and development. Smaller agencies have often felt outgunned when debating whether to pursue a potential litigation scenario. Deminor suggests that litigation finance shoulders the burden of equal access to justice, and that considering costs should not be a factor for meaningful claims. 
Consumer

Lawsuits May be the Only Valuable Possession of Newly Released Prisoners

Chicago has been called the ‘wrongful conviction capital’ for its policing tactics that allegedly lead to bullying defendants into false confessions, or withholding evidence that would clear a wrongly convicted individual. Being released from prison after a wrongful conviction is obviously better than the alternative, but the newly released prisoner must then contend with starting life over from scratch. Bloomberg Law explains that the only asset someone in this position might have is a lawsuit. Enter litigation funding. A newly popularized focus on ESG investments (those involving environmental, social justice, and government-focused issues) is leading to greater availability of funding for recent exonerees. While the funding is provided on a non-recourse basis, if a case is successful, as much as three times the funded amount may be owed back to the funders. Compensation for time spent in prison for wrongful convictions can happen in two ways. In most states, verifying innocence will earn compensation. Alternatively, if it can be proven that a wrongful conviction occurred due to police misconduct, a civil lawsuit can be very lucrative. The recently exonerated may be reticent to accept third-party funding, even non-recourse funding, due to what is viewed as the excessive fees and percentages that return to funders when cases are successful. Funders in turn assert that fees are commensurate with the financial risk they assume—which is 100%. At the same time, these newly released prisoners may find themselves in such dire financial straits that they have little choice but to accept funding. Even under the best of circumstances, successful outcomes can take years to realize. The good news is that many funders do see that there are moral, ethical, and financial motives to offer help to exonerees. This is the essence of increasing access to justice, which is what Litigation Finance does best.
Commercial Regulatory Issues

The Complexities of Third-Party Legal Funding in India

Litigation Finance is alive and well in India and was affirmed to be in line with public policy since the Ram Coomar Coondoo and Others v Chunder Canto Mookerjee (1876) case. Like most other jurisdictions that have embraced the practice, Indian courts accept that litigation funding expands and promotes access to justice. Furthermore, India has abolished outdated concepts like champerty and maintenance. RKA Associate explains that in India, a Privy Council mandates that funding agreements may not be entered into for gambling purposes. Agreements must also be free of extortion and moral wrongdoing in order to be in keeping with public policy. Suganchand v Balchand tested this mandate when one party was accused of gambling on a case for a large profit—and the agreement was not legally upheld. Indian law is largely derived from English Common Law. But as India now has a large and thriving economy, plus an advanced legal system, the country is now dealing with various complexities without relying on English Common Law. Some of the Litigation Finance complexities India is currently addressing include:
  • Conflicts of interest. Third-party funders may have existing relationships with arbiters or judges, which could influence decisions and is counter to the interests of a fair proceeding.
  • Confidentiality. Courts continue to grapple with whether or not funders can negate attorney-client privilege. Obviously, this is a vital issue that requires uniformity across jurisdictions.
  • Codes of Conduct. India does not have a legally enforceable code of ethics for funders. It’s suggested that instituting qualifications for becoming a funder may actually help the industry grow and reduce the potential for malfeasance.
  • Public Policy. The morals of a society can evolve over time, which means enacting rigid laws can be more restrictive than helpful.
Like much of the developed world, legal costs are high in India, impacting access to justice for most people. India has recognized the importance of TPLF, and in all likelihood, will continue to develop a legal framework in which the industry can thrive.
Commercial

Recoverability of Success Fees & ATE Premiums in Commercial Litigation

Should success fees from conditional fee agreements or after-the-event insurance premiums be recoverable in commercial litigation cases? The debate rages despite a decade-old ‘Jackson Review’ affirming that non-recoverability of these expenses reduces legal costs—a net gain for courts and the public. Dispute Resolution Blog explains when the precedent for non-recovery was defined, the Jackson Review (and the 2012 LASPO Act) was focused on the glut of personal injury and medical negligence cases in the early 2000s. Soon after, the use of conditional fee arrangements was expanded and after-the-event insurance was introduced. This led to unprecedented growth spurred by law firms seeking a high volume of cases—knowing that costs would be recovered. At the time, the belief was that more cases meant more income—which put an undue focus on quantity over quantity. That is not the case in modern Litigation Finance. Contemporary funders are known for carefully vetting cases to ensure that they have merit, are likely to be successful, and that defendants will have the ability to pay an award. It’s worth noting that the Jackson Review is a 584-page document. Only 7 pages of which address commercial litigation funding. That implies that, while worth a mention, third-party legal funding wasn’t believed to be a problem even then. With that in mind, it may make sense to revisit the issue of recoverability. Given the myriad differences between, say, commercial claims and personal injury cases, it could be argued that these necessitate different frameworks. An appeals court judgment from 2019, Peterborough & Stamford NHS Trust v McMenemy and one in Reynolds v NUHF Trust made exceptions regarding the recoverability of ATE premiums in specific instances. Non-recovery is not a new concept, but it does appear to be based on outdated mores and practices that simply aren’t feasible today. Surely it’s time to revisit the issue to reach a more modern conclusion on recoverability.
Announcements Commercial Deals

New research on affirmative recovery programs reveals opportunity for legal departments to add value

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research demonstrating that companies can unlock value in their legal departments through more systematic affirmative recovery programs. As revealed by extensive one-on-one interviews with over 50 general counsel, heads of litigation and other senior legal leaders at major corporations globally, most companies have affirmative recovery programs to recover money for the business by pursuing meritorious litigation and arbitration claims when their companies are harmed. Still, many see room for improvement, with those with more systematic affirmative recovery programs showing the benefits of doing so. Christopher Bogart, CEO of Burford Capital, said: “Our latest independent research is consistent with my own prior experience as a GC. Done right, affirmative recovery programs can transform in-house legal departments from cost centers to revenue generators, greatly enhancing the commercial standing of senior legal leaders in their companies. “GCs benefit from hearing from their peers and from having the right tools and partners. In that spirit, we hope this new research helps companies and law firms alike realize the value of affirmative recovery programs in maximizing corporate value, and that by adding legal finance to the mix, they can greatly increase certainty around their litigation budget and cash flows.” Key findings from the research include: •    Affirmative recovery programs are expanding but are still rarely robust. o Affirmative recovery programs are increasingly common, with two of three GCs, heads of litigation and other senior in-house lawyers interviewed saying that their companies have an affirmative recovery program. However, only a few legal leaders say their programs are robust. ▪ Three of five GCs interviewed say their companies neglected to pursue meritorious recoveries. ▪ Half of all GCs interviewed would exchange some upside on pending claims in exchange for removing costs and downside risk of loss. Senior in-house lawyers recognize that when they do pursue affirmative recoveries, new tools to increase certainty and manage costs will lead to better results. ▪ Three of five GCs interviewed say quantitative financial modeling would be advantageous to affirmative litigation recoveries. •    Legal finance has a role to play. o In-house lawyers whose companies use legal finance consistently say their companies have robust affirmative recovery programs that meet their needs. o Senior in-house lawyers admit to varying levels of knowledge about legal finance, but many are hungry for more information—and many remain unsure about how it works. o Reputation and experience top in-house lawyers’ priorities when selecting legal finance partners. •    More systematic affirmative recovery programs benefit organizations, teams and leaders. o Interviews with senior in-house lawyers suggest that more effective affirmative recovery programs benefit the overall enterprise, elevate legal within the organization and earn credit for legal teams for innovation and cost and risk management. •    Key quotes from the report: o “Everything about what I do is about the value that the legal department generates for the company, so new creative ways of generating revenue and reducing risk is very appealing.” (GC, multinational logistics company) o “If you are on the plaintiff’s side, you can finance your claims through a legal finance company if the business does not want to lay out the expenses, which is great. The lawyers need to understand that this option is available.” (GC, capital market company) o “My peers are speaking about claims as assets, which was not part of the conversation five years ago.” (Head of litigation, multinational retail corporation) o “We don’t leave a dime on the table.” (GC, capital market company) o “In the last five years, we have probably recovered over $1 billion in settlements or other recoveries.” (Group GC, privately held construction company) The 2022 Affirmative Recovery Programs Report can be downloaded on Burford’s website. The research report is based on 1:1 interviews conducted by phone with 52 general counsel, heads of litigation and other senior in-house lawyers with direct responsibility for their companies’ commercial litigation and arbitration. The interviews were conducted between October and December of 2021 by Ari Kaplan Advisors. About Burford Capital Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its principal offices in New York, London, Chicago, Washington, DC, Singapore and Sydney. For more information, please visit www.burfordcapital.com.
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Commercial

Litigation Finance Bounces Back as Normalcy Returns

Like many industries, Litigation Finance experienced a slowdown during much of the COVID pandemic. Now that some sense of normalcy is approaching, backlogs will be addressed and deal flow is expected to accelerate. Alpha Week notes that contrary to predictions, legal activity decreased by 85% during COVID. While businesses have not yet returned to pre-pandemic levels, many in the legal and financial fields assert that it soon will. The three most developed markets for Litigation Finance include Australia, the United States, and the United Kingdom—with India and Singapore being considered welcoming jurisdictions for litigation funders. India’s newly developed bankruptcy and insolvency framework has provided a foundation for the practice of TPLF. It’s noteworthy that in India, every firm’s financial records are public information. This means it’s easy to access records from a defendant company to determine whether they can pay a judgment or award. If they can’t, funders are unlikely to offer assistance. Small law firms are especially likely to utilize legal funding, but it can be used by firms of any size, as well as businesses, claimant classes, and individuals. The flexibility and adaptability of the litigation funding industry allow for monetizing individual claims or portfolios of cases, and may involve selling legal claims in exchange for money that can be used for operating costs or expansion. The litigation funding industry has no shortage of capital. Late last year, Longford Capital raised nearly $700 million for its new fund. Lexshares, an NY-based funder, raised $100 million. Insiders say these numbers are merely scratching the surface of the available opportunities. The industry shows every sign of growth, and no signs of slowing.
Commercial Fundraising

Henderson & Jones Innovates With New Financing

London-based Henderson & Jones (H&J) is a boutique litigation finance firm with a focus of buying and selling insolvency claims. H&J prides itself on maximizing returns through strategic litigation by shouldering the risk and costs associated with winning a successful claim.  BDaily.co.uk reports that H&J has arranged £5MM in working capital from Secure Trust Bank Commercial Finance to help fuel innovation and growth inside the firm. With a history of litigation finance success for claims in the ballpark of £50MM, H&J is battling to challenge malfeasance in the legal sector by facilitating access to justice.  H&J’s managing director expects growth in supporting appropriate first-class litigation finance opportunities, further noting that profitability in the sector is on the rise with new efficiencies in systems and processes. H&J’s new working capital facility is expected to add comfort to the management team’s future plans and directives. 
Case Developments Commercial

Scramble to Recoup Rittenhouse Bail Windfall Involves Multiple Players

In a completely unsurprising turn of events, financial supporters of Kyle Rittenhouse have been bickering over who gets the nearly $2 million raised for the shooter’s bail. These include corporate entities and trusts, legal teams, and actor and conservative activist Ricky Schroder. Law and Crime details that a recent proposal suggests that Schroder would receive $150K, the law firm representing Rittenhouse would get $925K in trust, and an equal amount would go to the ‘Fight Back Foundation.’ While the $2 million raised for the teenage shooter’s bail was touted as an outpouring of support from an infuriated populace, closer examination reveals that most of the money came from a few wealthy entities who are now squabbling over it. Creditors for noted Trump lawyer John Pierce have filed a claim suggesting that the bail money should go toward paying back a $2.5 million judgment. Rittenhouse severed his relationship with Pierce, as well as adjacent Trump attorney Lin Wood. A trust formerly owned by Pierce’s law firm gave $300K to Rittenhouse’s bail fund with the expectation of being paid back fully, with interest. It has since requested that the court should hand over the entire bail fund to the trust. Rather than pay the money back, Rittenhouse accused Pierce of financial impropriety. In fact, the young defendant has been quite vocal on FOX News and other outlets in denigrating his former lawyer. Pierce has denied any wrongdoing and claims to have no interest in the bail fund. A Wisconsin jury acquitted the teen on self-defense grounds after he shot two people he alleged were trying to take his weapon.   At the end of January, Judge Bruce Schroeder approved the proposal to split the money between Ricky Schroder (no relation), the Fight Back Foundation, and the trust overseen by Rittenhouse’s defense team.
Commercial Regulatory Issues

Fifth Circuit Rules on Lack of Standing 

‘Locus standi’ or ‘standing’ is a law definition that sets conditions on legal remedies. The overall premise is that the court must be convinced of adequate details of connection to, and harm resulting from, a particular legal action or legislation. The opposite of standing is ‘lack of standing’ … And that is exactly how the Fifth Circuit ruled in regard to a litigation funding agreement challenge in Texas Bankruptcy Court.  OmniBridgeway.com profiles Judge Jacques L. Weiner Jr.’s ruling, when a debtor challenged the legitimacy of being harmed by a litigation funding investment. The arrangement was organized and approved by the court after attorneys realized a lack of funds to pursue bankruptcy proceedings. A funder was identified and a 30% return on investment was agreed upon.  Soon after, a debtor challenged the litigation funding agreement, on grounds that the 30% ROI attached allowed the investor’s return to be prioritized before debtors associated with the bankruptcy. To assess the question of ‘standing’ in this scenario, Judge Weiner employed the “person-aggrieved test.” Weiner noted that this test is more sophisticated than traditional constitutional standing.    In the end, Judge Weiner bypassed the question of the litigation funding agreement’s legitimacy. Rather, Judge Weiner concluded that the debtor raising the question was not materially impacted by the arrangement. And, as such, lacked standing in the overall concern.