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Commercial Deals

Rise in Interest Rates Poses Challenges for Litigation Funders

While many industry observers have noted that the current state of the market (inflation, rising interest rates) may result in higher levels of litigation and associated funding activity, there will no doubt be difficulties for funders who struggle to raise capital in this environment. Speaking in an article for Law 360, Edwin Coe’s head of class action and financial litigation, David Greene, discussed the potential impact of the challenging economic circumstances and rise in interest rates on litigation funders. Greene acknowledged that certain funders have come under increasing pressure from the lack of available capital, without which they cannot make new investments to fuel future returns. Greene highlighted that with interest rates on the rise, alternative investments such as litigation finance may not be perceived in such a favourable light, resulting in funders needing to achieve higher levels of returns on investments to accommodate the increased risk. As a result, Greene suggests that we will continue to see funders take a more selective approach to the cases they invest in, as those with a lower ROI will simply not be able to provide adequate returns to justify the risk of lost capital.
Case Developments Commercial

LCM Funds Panthera Resources’ Claim Against Indian Government

Litigation funding remains a uniquely powerful tool within international arbitration and cross-border disputes, allowing entities to bring claims in situations that otherwise might have resulted in overly burdensome costs. A gold exploration and development company’s claim against the Indian government illustrates this ‘access to justice’ benefit. Originally reported by Proactive Investors, Panthera Resources announced that it has entered into a funding agreement with Litigation Capital Management’s subsidiary, LCM Funding SG Pty Ltd. The arbitration funding agreement will see LCM Funding provide $10.5 million in capital to finance Panthera’s claim against the Indian government, alleging that India had breached the Australia-India Bilateral Investment Treaty. Panthera’s managing director, Mark Bolton, stated that the funding agreement with LCM is a “tremendous vote of confidence” for the merits of the company’s claim, whilst providing Panthera with the capital to see its claim through to a conclusion. Panthera have also secured the services of Fasken Martineau LLP to lead the claim, drawing on their experience with disputes in the mining, energy and infrastructure sectors.
Commercial Regulatory Issues Special Features

Immunity from Lawyer Malpractice – Uniquely Australian

The following article was contributed by Valerie Blacker, a commercial litigator focusing on funded litigation, and John Speer, a lawyer in the Dispute Resolution and Litigation Team at Piper Alderman. While large class actions receive the lion’s share of media attention, litigation financiers also regularly fund litigation involving a single plaintiff. Given that solicitors are required to maintain professional indemnity insurance, they can be, in instances of negligence, an attractive prospect for financiers: they are well-resourced and have the capacity to satisfy any judgment awarded against them. The Brisbane Litigation team at Piper Alderman have brought successful professional negligence claims against our clients’ former solicitors involving both funded and unfunded arrangements.[1] This article discusses a common defense raised in these types of proceedings – the advocates’ immunity. The immunity in brief In Australia, the advocacy function is immune from a negligence claim.  The immunity applies to a lawyer’s work in the court room. The immunity is rooted in the public policy principle that there should be finality in litigation. It prevents unsuccessful parties from seeking to re-litigate disputes by way of a collateral attack on their lawyers’ performance in court. A barrister mainly appears in court, and a solicitor mainly performs legal work outside of court.[2] But why does it matter? If a lawyer has been negligent, shouldn’t the client be able to seek relief? Apparently not – in some jurisdictions. Despite having been abolished in the United Kingdom and even in New Zealand, advocates’ immunity remains firmly in place in Australia. Indeed, there were at least eighteen court actions in 2022 that have made reference to the immunity as a defense. Avenues for redress The immunity is often called upon by solicitors performing ‘out-of-court’ work, but which (so the argument goes) is so ‘intimately connected to the conduct of the case in court’. In two recent examples, the immunity applied to shield a solicitor for failing to present evidence that should have been presented (Golden v Koffel [2022] NSWCA 8), and was extended to protect a solicitor who had given faulty advice (Jimenez v Watson [2021] NSWCA 55). If a solicitor’s negligent work was actually done in court in the course of a hearing or was done out of court but which led to a decision affecting the conduct of the case in court, the alternative options for an aggrieved client are frankly inadequate. For example, (1) an unsuccessful party may apply for an order that his or her solicitor be made personally liable for the successful party’s costs in the litigation; (2) an aggrieved client can challenge a solicitor’s bills through an application to the court for a costs assessment; and (3) disciplinary action can be taken which can result in a fine, a reprimand or in a solicitor being disqualified from practice. At best these alternative options may reduce a client’s costs but none of them will truly compensate a client for the wrongs caused by a lousy solicitor. Narrowing the scope of the immunity In a more positive move, the Courts have now made it clear that the immunity does not extend to a solicitor’s work in bringing about a settlement agreement (as an agreement between parties to settle is not an exercise of judicial power).[3] It is also now possible to be compensated for the expense of engaging new lawyers.[4] NT Pubco Pty Ltd v Strazdins is also notable. The Court there held that a failure to advise clients to seek independent legal advice was held to be likely outside the immunity.[5] The relevant wrong in that case concerned a failure by solicitors to relay to their client comments made by the court at several interlocutory hearings that the client should have been pursuing a particular kind of relief in its litigation. That would be akin to failing to commence proceedings in time. That too should fall outside of the immunity as the aggrieved client’s cause of action was complete and whole before the proceedings were started and the negligent conduct was completely separate from the litigation. The primary justification for retaining the advocates’ immunity is to ensure the finality of judicial determinations. However, if a client brings a negligence suit against a former solicitor is that not also a separate proceeding that deals with a different issue? As Kirby J warned, upholding the immunity not only reduces equality before the courts, but is capable of breeding contempt for the law. His Honour questioned ‘why an anomalous immunity is not only preserved in Australia but now actually enlarged by a binding legal rule that will include out-of-court advice and extend to protect solicitors as well as barristers’.[6] In these circumstances, can the reasons traditionally given for the immunity still persuade, particularly when the rest of common law world has abolished it? At the risk of offending the doctrine and re-litigating this issue, perhaps we should continue the debate. About the Authors: Valerie Blacker is a commercial litigator focusing on funded litigation. Valerie has been with Piper Alderman for over 12 years. With a background in class actions, Valerie also prosecutes funded commercial litigation claims. John Speer is a lawyer in the Dispute Resolution and Litigation Team located in Brisbane, Prior to joining Piper Alderman John was an associate to the Honourable Justice B J Collier in the Federal Court of Australia, as well as to Deputy President B J McCabe in the Administrative Appeals Tribunal. John has also worked as a ministerial adviser and chief of staff in the Parliament of Australia.   For queries or comments in relation to this article please contact John Speer | T: +61 7 3220 7765 | E:  jspeer@piperalderman.com.au [1] These matters resulted in a confidential settlement. [2] New South Wales and Queensland have a ‘split’ profession, meaning that the roles of barrister and solicitor are separated. [3] Attwells v Jackson Lalic Lawyers Pty Ltd (2016) 259 CLR 1,  [5], [38], [39], [45], [46], [53]. [4] Legal Services Commissioner v Rowell [2013] QCAT OCR207-12. [5] [2014] NTSC 8 at [134] and [137]. [6] D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1, 109 [346].
Announcements Case Developments Commercial

Dutch class action progressing against Airbus relating to large-scale corruption and bribery

For many years, Airbus allegedly facilitated large-scale bribery and corruption in its aviation business. Airbus did not adequately inform the investing public about its wrongful conduct. Investigations by various authorities subsequently resulted in Airbus having to pay a fine of approximately € 3.6 billion (US$ 4 billion). When this information became publicly known, the price of Airbus shares fell sharply, causing huge loss to investors. They are entitled to be compensated by Airbus. The class action is open to all institutional investors and retail investors in Airbus who purchased and held its ordinary shares through the Paris, Frankfurt or Spanish stock exchanges during the period 1 January 2008 to 31 July 2020. No cure, no pay: Investors who have suffered loss can join the class action by registering with Airbus Investors Recovery Stichting (AIRS) at no upfront cost. AIRS is represented by leading law firm Scott+Scott, and has obtained funding from Woodsford, a specialist in environmental, social and corporate governance related engagement and a leading litigation funder. For more information visit www.airbusinvestorsrecoverystichting.com/register
Commercial Special Features

Funder Spotlight: Hedonova

Hedonova is a hedge fund that was established in 2020, and it specializes in alternative investments. The company has offices located in various parts of the world, making it accessible to investors from different regions. Alternative investments are unique investment opportunities that do not conform to the standard categories of investments such as stocks and bonds. Hedonova's portfolio of alternative investments encompasses a diverse range of assets, including startups, real estate, fine art, wine, and cryptocurrencies. The fund structure of Hedonova is based on a single fund structure that provides an excellent investment option for shareholders who wish to invest without the burden of managing the day-to-day distribution of their investments. This structure provides an added advantage to investors who have limited knowledge or experience in managing investments. Hedonova's focus on alternative investments means that its portfolio diversifies risk, offering investors an excellent hedge against the volatility of conventional investment categories. The unique combination of alternative investment and the single fund structure makes Hedonova an attractive investment option for savvy investors looking for high-yield, low-risk investments. Website: https://www.hedonova.io/ Founded: 2019 Headquarters: Los Angeles, CA USA About Hedonova At Hedonova, our mission is to provide high-yield, low-risk investment opportunities to investors who are looking to diversify their portfolios beyond traditional investment categories. We specialize in alternative investments, which are unique and offer an excellent hedge against the volatility of conventional investment categories. We believe that by offering a diverse range of alternative investments, we can create a portfolio that will protect investors from market fluctuations and generate consistent returns over the long term. Our single fund structure is designed to make investing in alternative assets accessible and hassle-free for all types of investors. We are committed to building long-lasting relationships with our investors based on trust, transparency, and open communication. We believe that by fostering a strong partnership with our clients, we can better understand their unique needs and investment goals, and provide tailored investment solutions that meet their expectations. Our team of seasoned professionals has extensive experience in alternative investments and a deep understanding of market dynamics. We are dedicated to utilizing our expertise to identify and pursue investment opportunities that deliver optimal returns while minimizing risk. Our ultimate goal at Hedonova is to generate consistent and sustainable returns for our investors over the long term. We believe that by combining our expertise, ethical values, and active portfolio management, we can provide our clients with a superior investment experience that empowers them to achieve their financial goals. Points of Differentiation: Alternative Investment Expertise: Hedonova specializes in alternative investments, which are unique investment opportunities that offer high returns and diversify risk. Our portfolio includes a range of assets, such as startups, real estate, fine art, wine, and cryptocurrencies, to provide our investors with a diverse range of investment opportunities. Global Accessibility: Hedonova has offices located in various parts of the world, making it accessible to investors from different regions. We believe that by having a global presence, we can offer unique investment opportunities that are not available in local markets. Single Fund Structure: Our single fund structure provides an excellent investment option for shareholders who wish to invest without the burden of managing the day-to-day distribution of their investments. This structure provides an added advantage to investors who have limited knowledge or experience in managing investments. High-Yield, Low-Risk Investments: At Hedonova, we are committed to providing our investors with high-yield, low-risk investment opportunities. Our focus on alternative investments means that our portfolio diversifies risk, offering investors an excellent hedge against the volatility of conventional investment categories. Active Portfolio Management: Hedonova's experienced investment team actively manages our portfolio of alternative investments, staying up to date with market trends and seeking out new opportunities to optimize returns for our investors. This approach ensures that our portfolio is well-positioned to adapt to changing market conditions. Ethical Investing: At Hedonova, we believe in investing ethically and sustainably. We carefully evaluate each investment opportunity to ensure that it aligns with our values and standards. By investing in socially responsible assets, we aim to generate returns that not only benefit our investors but also contribute to the betterment of society and the environment.  Key Stakeholders  Suman Bannerjee Chief Investment Officer  Suman Bannerjee is a highly accomplished Chief Investment Officer (CIO) with over 20 years of experience in the financial industry. He currently serves as the CIO at Hedonova, a global alternative investment management firm, where he is responsible for managing the firm's investment strategies and ensuring the performance of its portfolios. Before joining Hedonova, Suman held senior roles at several leading financial institutions, including Millennium and Société Générale Equipment Finance (SGEF). At Millennium, he served as the Global Portfolio Manager. In this role, he was responsible for designing and implementing investment strategies, managing the firm's risk exposures, and generating returns for investors. At SGEF, he was the Vice President of Equipment Finance and Supply Chain Finance, where he oversaw the origination, underwriting, and management of equipment and supply chain finance transactions, and was responsible for ensuring the profitability and growth of the business. Suman earned his Bachelor's degree in Philosophy from the University of Cambridge, where he was a recipient of the prestigious Gates Cambridge Scholarship. He is also a Chartered Alternative Investment Analyst (CAIA) charter holder and a member of the CAIA Association, which is the leading professional association for alternative investment professionals. Throughout his career, Suman has demonstrated deep expertise in investments, risk management, and portfolio management. He is highly regarded for his analytical skills, strategic thinking, and ability to identify and execute profitable investment opportunities. He has a track record of generating significant returns and has a reputation for being a trusted advisor to his clients. Jurisdictions and Sectors Served At Hedonova, we pride ourselves on being a truly global organization with a presence in some of the world's most prominent financial centers. We have strategically chosen our office locations in Los Angeles, Delaware, Tallinn, and Paris to ensure that we can offer our investors unique investment opportunities that are not available in local markets. Our team members are spread across every continent, and we believe that diversity is our strength. They come from various backgrounds and bring different perspectives, experiences, and expertise to the table. We believe that this diversity enables us to evaluate investment opportunities from multiple angles and make informed decisions that are in the best interest of our clients. At Hedonova, we are open to everyone. We believe that everyone should have access to alternative investment opportunities, regardless of their location, background, or level of investment expertise. Our mission is to make investing in alternative assets accessible, hassle-free, and rewarding for all types of investors. Whether you are a seasoned investor or just starting, we are here to help you achieve your investment goals. We are committed to fostering a culture of inclusivity, respect, and open communication. We believe that by listening to our client's feedback, we can continuously improve our services and better serve their unique needs. We are dedicated to building strong, long-lasting relationships with our clients based on trust, transparency, and mutual respect. Key Metrics Our investment strategy has generated a return of 32% in 2022, which significantly outperformed the market average for conventional investment categories such as stocks and bonds. This metric reflects our ability to identify and invest in alternative assets that deliver high returns while minimizing risk. We believe that this level of performance is a testament to our active portfolio management, ethical investing principles, and commitment to delivering exceptional value to our clients. Quotes from Key Stakeholders “If you want to be wealthy, spend your time earning, learning, or relaxing. Outsource or ignore everything else.” “Investing because you are scared to miss out on gains will leave you with larger losses.” “Wealth is created by leverage. Leverage has different forms. Labor leverage is when you use someone else's time, capital leverage is when you use someone else's money. In the last two decades, code was leverage used to automate service delivery to billions. Now there's another form of leverage - audience. “Code, content, and capital is the new land, labor, and capital.” “The best way to think about asset allocation between stocks and alternatives is timing. It's best to invest in stocks when markets are at historical lows, and it's best to invest in alternatives when inflation is high. “
Commercial Deals

Funder of Public Interest Litigation Looks to Partner with Commercial Funders and Law Firms

A new British funder is looking to provide capital to cases that not only are meritorious in nature, but also retain a societal value, where the legal action is in the public interest. Detailed in an article by Legal Futures, next month will see the official launch of Law for Change, which is seeking to provide financing for cases that are in the public interest and that could not receive the capital needed through general crowdfunding. Law for Change is classified as a community interest company (CIC), as it is not aiming to raise funds from the wider public, and therefore will not be considered a charity. Stephen Kinsella, specialist partner at Flint Global, is one of the founders of Law for Change and stated that they will only pursue “cases that clarify the law”, regardless of whether there is compensation to be secured or not. Law for Change has already provided funding for nine cases, including a claim focusing on the government’s failure to respond adequately to the Grenfell Tower inquiry, and a legal challenge to the government’s policy to send asylum seekers to Rwanda. Kinsella stated that he has already reached out to commercial litigation finance companies to see if they would contribute funds to Law for Change, and if they would also be interested in partnering with commercial law firms where cases require the resources that only large firms can provide.
Commercial

Systemic Issues May Slow Growth of Litigation Funding in India

Outside of the main established markets for litigation finance, there has been much discussion around which jurisdiction will be the next to see a dramatic uptick in the adoption of third-party funding. Whilst the Indian market is often regarded as one with a high probability for expansion due to the size and potential scope for legal funding, industry experts within the country have highlighted barriers that could slow or limit the market’s growth. An article by Financial Express lays out some of the chief obstacles facing the litigation finance industry in India, focusing on the country’s often delayed system of processing claims, as well as an understanding that the outcome of disputes is often unpredictable. LegalPay’s chief executive, Kundan Shahi, emphasized that the protracted timeline for cases in India means that prospective funders would need to be incredibly patient to see returns on investment, and that this is a limiting factor for industry growth. Sumit Rai, an arbitration expert from Mumbai, also points to the sluggish pace of the Indian legal system and notes that even after securing an award, plaintiffs and their funders may still have a long wait ahead to see the financial return. Rai also suggests that the unpredictable nature of court judgements in the country will make it harder for funders to accurately predict risk levels for each case, stating that the sheer burden of cases and pressure on judges makes it very hard to find universally consistent approaches to similar cases.
Case Developments Commercial

Harcus Parker and Bench Walk Advisors Bringing Claim Against Mastercard and Visa

Within the UK, lawsuits focusing on anti-competitive behaviour by corporations have become some of the most sought-after claims for litigation funders and law firms alike. New reporting suggests that we will soon see another claim filed at the Competition Appeal Tribunal (CAT) against two of the world’s largest payments companies, Mastercard and Visa. An article by Sky News reveals that the litigation firm, Harcus Parker, will be filing claims against Mastercard and Visa, with one source revealing that the value of the action will exceed £7.5 billion, and may reach a significantly higher total amount. The lawsuit will focus on the claim that these two payment processing companies “overcharged businesses for so-called multilateral interchange fees (MIFs)”, and that the value of these fees are imposed unilaterally by Mastercard and Visa on banks who engage in their card schemes. Whilst Harcus Parker did not confirm the potential value of the claim, it did state that the case will be funded by BenchWalk Advisers. The claim will seek to represent businesses with “an average annual pre-pandemic turnover of at least £100m” on an opt-in basis, whilst registered businesses with less revenue will be represented on an opt out basis. Thomas Ross, partner at Harcus Parker, said that the MIFs enforced by Mastercard and Visa are “unlawful and should be abolished”, whilst neither of the two targeted companies provided a comment to Sky News.
Announcements Commercial Deals

AIR Asset Management Partners with Kerberos Capital Management to Add Legal Finance Allocation to its Multi-Strategy Product

AIR Asset Management ("AIRAM"), a Chicago-based hedge fund management firm focused on investing in life settlements, annuities, and private credit, today announced its strategic partnership with Kerberos Capital Management ("Kerberos"), a leading private credit asset management firm that specializes in direct lending to law firms. The partnership enables AIRAM to enhance and further diversify its multi-strategy investment product through adding a legal finance asset allocation focused on law firm lending.  "We are excited to partner with Kerberos to offer investors this highly complementary allocation, which aligns with AIRAM's mission to deliver attractive risk-adjusted returns through resilient, non-correlated investment products," said Stephen Luongo, Chief Investment Officer of AIR Asset Management. "The loans Kerberos underwrites to law firms provide AIRAM an attractive value proposition, including reliable interest income that not only contributes to overall returns, but also supports liquidity and risk management. We look forward to leveraging Kerberos' track record, leadership, and deep expertise in law firm lending to expand our private credit mandate." The Kerberos investment team is led by Joe Siprut, who was a nationally recognized attorney prior to founding Kerberos. Kerberos boasts an extensive roster of relationships in the plaintiff's bar and law firm lending space, making it one of the few litigation funders with underwriters that have significant experience from their former capacities as trial lawyers and senior litigators. Its strategy focuses on originating and underwriting loans to law firms that generate success-fee-based revenue by litigating mass tort, class action, and personal injury claims. "I have long admired what AIR Asset Management's CEO Rich Beletuz and his team have built, and we are thrilled to be supporting their expansion into legal finance," said Joe Siprut, Founder, Chief Executive Officer, and Chief Investment Officer of Kerberos. "A clear benefit of our strategy is our uniquely diversified approach, which allows for cross-collateralization, low default rates, and a steady return profile, from which AIRAM's impressive suite of non-correlated offerings is well positioned to benefit. I'm excited to work with AIRAM's talented team of investment professionals as we execute on our shared goal to deliver for our respective investors."*   About AIR Asset Management AIRAM is a rapidly growing SEC-registered hedge fund management firm with $600M in AUM in life settlements, annuities, and private credit investments. The firm has specialized in longevity-linked investing since 2014 and has offered qualified investors the opportunity to access attractive risk-adjusted returns that are largely uncorrelated to traditional asset classes. AIRAM's experienced team of professionals from diverse backgrounds serves an investor base of institutional, registered investment advisers (RIAs), single and multi-family offices, and high net worth investors. About Kerberos Capital Management Kerberos Capital Management is a boutique alternative asset manager that seeks to provide our clients excess return at every point along the risk-reward spectrum with an emphasis on yield, opportunistic, and hybrid strategies. Kerberos' flagship strategy is providing innovative capital solutions to law firms. The depth of our private credit and direct lending platform has enabled us to generate differentiated absolute and risk-adjusted returns in litigation finance markets, regardless of the business cycle or economic environment.
Commercial People Moves

Omni Bridgeway CEO to Retire in October

One of the world’s leading litigation funders has announced a change in leadership, as Omni Bridgeway’s CEO and managing director Andrew Saker stated that he will be retiring and leaving his position on October 26. Mr Saker will end his tenure as chief executive after the company’s annual general meeting, and will continue to support Omni Bridgeway as a non-executive advisor for a further year. The news was detailed by an article in The Market Herald, with Omni Bridgeway announcing that Raymond van Hulst, currently managing director and co-chief investment officer EMEA, will be taking over as CEO following Mr Saker’s departure. Mr van Hulst stated that he was enthusiastic about the “significant opportunities” for the company’s future, and would be looking to continue Mr Saker's “vision of globalization.” Speaking about Mr Saker’s tenure as CEO, Omni Bridgeway’s chairman Michael Kay said that “Andrew and his team have built a truly global platform”, and that Omni “has transformed from a balance sheet funder to a co-investor and manager of non-recourse funds investing in legal assets in eight funds managing approximately $3 billion.”
Announcements Commercial

Litigation Capital Management: Progress on direct balance sheet investment

Litigation Capital Management Limited (AIM:LIT), an alternative asset manager specializing in dispute financing solutions internationally, announces positive progress on an investment forming part of its portfolio of direct investments.

Successful award in investment in arbitration

The Company is pleased to announce a positive development on one of LCM’s 100% direct balance sheet investments which was heard by an ICC International Court of Arbitration tribunal.  A partial award on liability and quantum was granted in favour of the funded party. This means that the funded party has succeeded in the claim and the only matter yet to be determined is the costs award. The Company expects the funded party to also be successful in an award of its costs, however, that costs award does not affect LCM’s interest or its potential returns.

The award is subject to challenge in the court by the respondent. That challenge is not in the nature of an appeal. LCM is confident that the award will be upheld. LCM has invested approximately AUD$ 2.9m (USD $2m) in this arbitral dispute.  The investment performance is protected by a compounding interest rate.

Patrick Moloney, CEO of LCM, commented: “We are pleased with the positive adjudication in this investment. Despite the Respondent challenging the award we are confident that the award will be maintained. In the current uncertain macro-economic environment our direct investments, as well as those made alongside our fund investments, continue to demonstrate the non-cyclical and uncorrelated nature of the returns from litigation funding.

This award is expected to generate a return in line with management expectations”.

Enquiries

Litigation Capital Managementc/o Tavistock PR
Patrick Moloney, Chief Executive Officer
  
Canaccord (Nomad and Joint Broker) Tel: 020 7523 8000
Bobbie Hilliam
  
Investec Bank plc (Joint Broker)Tel: 020 7597 5970
David Anderson 
  
Tavistock PRTel: 020 7920 3150
Tim Pearsonlcm@tavistock.co.uk
Katie Hopkins 

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

LCM has an unparalleled track record driven by disciplined project selection and robust risk management. Currently headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT.

www.lcmfinance.com

Commercial Deals

Brazilian Lawyer Calls for Funders to Support Litigation for Indigenous Communities in the Amazon

Litigation funding is a powerful tool to redress the balance between powerful defendants with vast wealth and resources at their disposal, and claimants who lack the financial resources to fight back. This contrast is often most sharply seen in cases where indigenous communities are fighting for justice against government entities or corporations that have harmed them, who without third-party funding, would be unable to gain access to the legal system. In a new effort to bring justice on behalf of indigenous communities, Daniel Cavalcante, a lawyer from Brazil, is calling on law firms and litigation funders to support lawsuits against large international corporations harming the people and the environment of the Amazon. In a video published to his YouTube channel, Cavalcante describes how indigenous peoples in the region “suffer the most diverse types of violence, prejudice and oppression”. Cavalcante states that this oppression and harm is being conducted both by foreign companies and by state governments, who have perpetrated “a true ethnic-cultural genocide that decimated their habits, customs and traditions”.
Case Developments Commercial

LCM Announces £7MM in Profit from Carillion Litigation Against KPMG

Investments by litigation funders are always a delicate balance between the risk of a lost case against the potentially lucrative returns should the claim be successful. However, as a new announcement by Litigation Capital Management (LCM) demonstrates, backing the right case can lead to impressive financial gains for a funder. Reporting by City A.M. highlights LCM’s announcement early this week, which stated that the funder had achieved a £7 million return in profit from funding a claim by Carillion’s liquidator against KPMG. The claim that LCM had originally financed in 2021, involved the liquidator filing a lawsuit against KPMG for its failure to competently audit Carillion’s accounts, which had subsequently led to the collapse of the company in 2018.  KPMG had announced last week that it would be settling the case, without disclosing the settlement figure publicly. However, LCM had invested £5.2 million into the lawsuit and with an overall financial return of £12.5 million, resulting in the stated £7 million amount in profit.  LCM’s chief executive, Patrick Moloney, stated that the capital for the investment had been sourced from pension funds in Europe and the US, as well as investment banks and university endowments.
Case Developments Commercial

Harcus Parker Leading Group Litigation Against UK Energy Suppliers

As everyday consumers around the world struggle with rising prices and constrained income, it is no surprise that there is significant interest in litigation representing these consumers against corporations who abuse their power. In the UK, a new group litigation effort looks to take on Britain’s energy companies for their practice of paying brokers to attract new customers and then secretly passing on the cost of those broker fees to these customers. An article by Express & Star covers the news that Harcus Parker, a London-based litigation firm, is reaching out to companies, charities, schools and other organisations who may have been affected. The group litigation focuses on the allegation that energy firms paid ‘secret commissions’ to third-party brokers or introducers, who encouraged customers to sign up with these energy suppliers and then effectively forced the customer to cover these costs by increasing their energy bills. Harcus Parker’s senior partner, Damon Parker, stated that consumers have been unknowingly footing the bill for these practices, with energy suppliers and outside brokers having failed to disclose the existence or amount of these payments. Harcus Parker has stated that it has secured over £10 million in litigation funding to fight the case, and has estimated that the total compensation owed by these energy companies could exceed £2 billion. Potential claimants can contact Harcus Parker through its website.
Case Developments Commercial

Woodsford Funds Class Actions Against Hyundai and Kia in Australia

As class actions continue to gain interest and investment from the litigation funding industry, the automotive sector remains an area full of opportunities, with consumers empowered to bring claims against manufacturers accused of malpractice or deceptive behavior.   Reporting by WhichCar details that multiple class actions have been brought against Hyundai and Kia in the Federal Court of Australia, with the claims alleging that they sold vehicles to consumers that had defective engines with serious faults. The actions, which are being represented by Johnson Winter Slattery and funded by Woodsford Litigation Funding, cover sales of vehicles from 2011 to the present and includes over 20 separate models of car between the two carmakers, with a potential of almost 195,000 cars being affected by these issues. Charlie Morris, chief investment officer at Woodsford, stated that the class actions were designed to ensure these companies face accountability and that the consumers affected can receive adequate financial compensation. Robert Johnston, a partner at Johnson Winter Slattery, emphasised that Kia and Hyundai’s actions specifically harmed Australian consumers, as they were aware of the issues and even recalled vehicles with similar defects in other countries. Hyundai stated that it “stands by the integrity and reliability of its vehicles”, whilst Kia did not respond to WhichCar’s request for comment.
Commercial Regulatory Issues

DAF Appeal in UK Supreme Court Could Endanger Third-Party Funding

As the European Union considers proposals for enhanced regulation and oversight of third-party litigation funding on the continent, there has been much speculation that the UK’s litigation finance industry could benefit from representing a more welcoming market. However, an ongoing appeal by the defendant in two group claims has the potential to disrupt the status quo of litigation funding in the UK, and create major problems for funders operating in the country. An article by Reuters provides an update on the appeal by truck manufacturer DAF, which is now set to be decided by the UK’s Supreme Court. DAF’s has been appealing two lawsuits brought by two groups of truck owners at the Competition Appeal Tribunal (CAT), which allege that that company took part in a cartel that fixed prices and slowed the progress of engine technology that reduced harmful emissions. DAF’s appeal centers around the argument that the claimant groups engaged in funding agreements that fail to comply with regulations that outline the parameters of damages-based agreements. DAF’s lawyer, Bankim Thanki, argued that the Supreme Court should not consider any effects on the wider litigation finance industry, as they are irrelevant to the validity of the appeal. However, the Association of Litigation Funders (ALF) has argued that if the court upheld the appeal on these grounds, then it would put the UK litigation funding industry “in a state of disarray”. The Royal Haulage Association (RHA), which brought one of the original cases against DAF, has highlighted that by permitting the defendant’s appeal, the court would seriously endanger every single collective proceeding in the UK, which all involve funding agreements.
Commercial Deals

Westfleet Advisors Release 2022 Litigation Finance Market Report

As noted in the recent GAO report, there is a distinct lack of publicly available data about the litigation funding industry, which has contributed to the lack of awareness and understanding of the practice by policymakers and legal professionals outside of the industry. However, a new report by Westfleet Advisors provides new insights into the most recent state of the market, and offers some interesting takeaways as to the current direction of litigation finance in the U.S. Westfleet Advisors’ 2022 Litigation Finance Market Report provides an overview of the American third-party funding industry, highlighting that the market continues to demonstrate strong growth, as new capital commitments from funders grew by 16% last year, to reach a total of $3.2 billion. Not only has the scale of new commitments continued to grow, but the average size of these investments has also risen to $8.6 million per transaction. Interestingly, the percentage of client-directed deals has dropped down to 31%, as lawyer-directed deals have become the dominant deal type, reversing the trend of 2021 which saw a near 50/50 split between client and lawyer-directed deals. Given the regularity with which patent litigation dominates the headlines for litigation funding, 2022 actually saw a decline of that market share down from 29% in 2021 to 21% last year. Westfleet suggests that this outsized representation of patent litigation cases being funded in 2021 may have been the result of several portfolio funding deals for patent lawsuits. More insights into the U.S. litigation finance market can be found in the full report.
Commercial

Funding Industry Faces Challenges Ahead

With the two high-profile examples of Lionfish and Novitas Loans having recently made headlines for their struggles, industry analysts and leaders are offering a cautionary perspective on those who see the practice as a guaranteed path to success. A new article by The Times features senior leaders from law firms and funders discussing the potential pitfalls that the funding industry could face, as well as the measures existing funders can take to stay ahead.  Martyn Day, managing partner at Leigh Day, suggests that the determining factor for success will be whether funders can find the right level of risk versus reward, and that in order for a funder to have long-term viability, it needs to have a sufficient level of capital to absorb any losses whilst still backing future cases. David Mann, managing partner of Mann Roberts Solicitors, goes a step further and argues that the industry may be suffering from an oversupply of funders without an equal volume of both valuable and meritorious cases, although the current economic instability may spur an increase in suitable cases to support these service providers. Factor Risk Management’s co-founder, Mohsin Patel, suggests that some parties have incorrectly seen litigation funding as a “pot of gold”, but emphasizes that established funders will be able to continually develop a track record and grow their expertise to offer more favorable investment opportunities. Ellora MacPherson, chief investment officer at Harbour, also points to the fact that successful funders are engaging in broader partnerships with law firms and providing capital to support these firms’ growth, without having to exclusively rely on high-risk investments in individual cases.
Commercial Deals

Big Law in the U.S. Remains Hesitant to Engage in Litigation Funding Deals

Litigation funders and law firms have produced powerful partnerships by combining the legal resources and capital needed to provide access to justice for many plaintiffs. However, despite this often mutually beneficial relationship, data from Westfleet Advisors’ latest research on the industry suggests that many of the big U.S. law firms are still taking a cautious and wary approach to engaging with third-party funding arrangements. An article from Bloomberg Law highlights the findings of Westfleet Advisors’ 2022 industry report, which states that the proportion of cases involving America’s 200 largest law firms has dropped from 41% to 28% between 2021 and 2022. Westfleet’s CEO, Charles Agee, suggests that part of this hesitancy from the big legal players stems from these firms being uncomfortable with the “cross-collateralized” pricing in portfolio funding that can lead to law firms having to pay back the invested capital after only one or two successful cases. Agee goes on to point out that due to this reluctance from some law firms to engage in portfolio funding with traditional funders, some have turned to more standard loan deals with hedge funds and alternative asset managers that offer comparatively lower interest rates. However, Agee stresses that this is not replacing the majority of deals that funders would engage in, and that the usual funder-law firm relationship still remains attractive to those outfits who would rather avoid traditional loan structures.
Commercial Regulatory Issues

Partner Resistance and Regulatory Uncertainty Remain Hurdles for Adoption of Alternative Business Structures

In recent years, we have experienced the relaxation of rules governing ownership of law firms in a small number of states, beginning with Utah in 2020 and Arizona in 2021. However, despite these developments, there has yet to be a wider adoption of Alternative Business Structures (ABS), with industry commentators suggesting that resistance to change among law firms stems from an unwillingness to divert from the traditional partnership model. A new article from The American Lawyer provides an overview of the current attitude towards ABS adoption in the U.S., highlighting both the resistance within the current leadership of law firms and the lack of regulatory unity within the country. Allen Fagin, senior adviser to Validity Finance, argues that control is the determining reason behind law firms’ hesitancy to changing ownership models, and that the possibility of partners losing their individual financial returns to outside investors is a major stumbling block. Despite the ongoing opposition to the practice from many law firms, litigation funders are looking for opportunities to make such investments, with Validity’s CEO Ralph Sutton stating that these align with the industry’s overall goal, which is to provide the capital needed to widen access to justice. Burford Capital has already made one such investment in PBC Litigation in the UK, with Burford’s co-founder Jonathan Molot pointing out that funders and law firms are really “natural partners”. However, the lack of regulatory cohesion between states in the U.S. will no doubt continue to present issues, and David Perla, co-COO at Burford, suggests that it will take time for all parties to become more comfortable with the new regulatory structure before there is wider adoption.
Announcements Commercial

LegalPay announces the exit of its First Litigation Financing SPV, generating more than 27% returns

LegalPay, India’s largest legal financier, has announced the exit of its commercial litigation financing SPV (Special Purpose Vehicle), delivering 27% IRR over a tenure of less than 2 years. LegalPay currently manages INR 2,500 crores in claims under management and looks to add additional INR 5,000 crores in calendar year 2023.  LegalPay, India’s leading legal financier, has announced the full exit of its Litigation Financing fund that it had started in August 2021. The Company funded late-stage commercial and arbitration litigations across India through this fund.  Under the supervision of its experienced leadership team, LegalPay uses an in-house proprietary technology using decision trees and scoring algorithms to screen and fund these commercial litigations. Such above-par returns are a testament to the Company’s robust technology-based screening, sourcing, and diligence infrastructure.  LegalPay was founded in 2019 by Kundan Shahi with the aim of financing legal expenses. LegalPay is India’s first and largest litigation and interim finance provider. It is backed by investors such as 9Unicorns. LegalPay finances dispute across sectors such as logistics, EPC, Saas, and financial services. Businesses are using litigation financing as a way to offload the cost and risk by paying a portion of the recovery only in the case of a successful outcome. In addition to the capital infusion to the dispute, LegalPay provides massive intangible value such as strategic expertise and legal professional network.  “We are proud to have generated such a high IRRs on our commercial disputes litigation financing fund, while demonstrating our expertise and strength of our technology infrastructure,” said Kundan Shahi, CEO of LegalPay. “We remain committed to solve the problem of legal financing and make such product an absolute necessity for businesses, regardless of their financial prowess.”  LegalPay has established itself as a market leader in litigation finance, and its strong performance as demonstrated by its fund closure reinforces its position as a market leader. The fund’s high IRRs is a positive development for the company and its stakeholders, highlighting LegalPay’s commitment to delivering value to its customers and shareholders.  LegalPay has also provided similar exit to its investors through their Health Care SPV where investors were able to make 26%+ IRRs in less than 9 months.  Currently, investors can diversify their portfolio on LegalPay’s platform and enjoy such benefits. They can invest in Interim Financing Bonds on LegalPay’s website. These bonds are fixed-income instruments to finance the expenses of companies undergoing the Corporate Insolvency Resolution Process (CIRP) which are linked to an individual’s DEMAT account. These diversified bonds are live on the website with a minimum investment of Rs.10,000/- and provide attractive and high-yielding returns between 14-16% on your investments.
Commercial Deals

Request for Funding in Irish Breach of NDA Case

A new request for funding by an Irish law firm seeks financing for commercial proceedings in the London High Court on behalf of a private company and two of its directors. The claim is being brought against an unnamed European Union state authority in relation to the alleged breach of a non-disclosure agreement which then led to the alleged theft of the plaintiff’s intellectual property. The EU state authority is reportedly one with “delegated responsibility for motorway infrastructure”, whilst the claimant’s intellectual property is described as “a patented micropayment solution”. The proposed defendants reportedly engaged in anti-competitive behavior and abused their power with regards to the “toll road collection business”, leading to the plaintiffs losing profits whilst the defendants gained. Interested parties should contact: doran@doranwotoole.com +353 1 204 2990 Doran W. OToole & Co Solicitors Bray Office County Wicklow Ireland
Announcements Case Developments Commercial

Winshear Gold Commences Arbitration Proceedings Against the Government of Tanzania for the Expropriation of Its SMP Gold Project

Winshear Gold Corp. (TSXV: WINS) (‘Winshear’, the ‘Company’, or the ‘Claimant’), formerly Helio Resource Corp., provides the following update on the dispute with the United Republic of Tanzania (“Tanzania”) which is the subject of arbitration through the International Centre for Settlement of Investments Disputes (“ICSID”), a member of the World Bank.

The Company reports that the evidentiary hearing commences today in Washington D.C.. A three-person tribunal panel is presiding over the court hearings, which are expected to conclude on or before the close of business on Friday February 17th, 2023.

The ICSID Convention has been ratified by 158 States, including Tanzania. An award issued by an ICSID tribunal is enforceable in any one of those 158 member States as if it were a judgment of one of their own courts.

Winshear is represented by the international law firms LALIVE and Boies Schiller Flexner in the arbitration process. Both firms specialise in international arbitration with the Claimant seeking compensation of in excess of CDN$130M for the loss of its investment in Tanzania (including interest which continues to accrue). In addition, the Claimant seeks reimbursement of its arbitration costs and fees by Tanzania.

A litigation funding facility for US$3.3M is in place with Delta Capital Partners Management (“DELTA”), a firm out of headquartered in Chicago Illinois that specializes in litigation funding. This funding facility covers all legal costs associated with arbitration and is only repayable in the event of a successful award that is recovered from the United Republic of Tanzania.

Background to Claim

In July 2017, the Government of Tanzania amended the Mining Act 2010 by, inter alia, abolishing the Retention Licence classification. The Company’s SMP Mineral Resource was wholly contained within four Retention Licences.

On 10 January 2018, Tanzania published the new Mining (Mineral Rights) Regulations 2018, which cancelled all Retention Licences at which point they ceased to have any legal effect. The rights over all areas under Retention Licences, including the Retention Licences held for the SMP Gold Project, were immediately transferred to the Government of Tanzania.

During the time from January 2018 to December 2019, the Company actively engaged with the Tanzanian Ministry for Minerals and the Mining Commission in an effort to resolve a suitable tenure mechanism for the Project Licence to be reinstated, without success.

On 19 December 2019, the Mining Commission of Tanzania announced a public invitation to tender for the joint development of areas covered previously by Retention Licences. The invitation provided that the successful bidder should compensate the previous Retention Licence holder.

On 20 December 2019, the Mining Commission of Tanzania announced a revised public invitation to tender, which removed the condition that the successful bidder compensate the previous retention licence holder.

Through the measures described above, Tanzania has removed the ownership of the Project from the Claimant, and the Claimant alleges that Tanzania, in doing so, has breached its obligations to the Claimant under the Canadian-Tanzania BIT and international law. These include, but are not limited to:

  1. Tanzania’s obligation not to nationalise or expropriate the Claimant’s investments or subject them to measures having effect equivalent to nationalisation or expropriation without prompt, adequate and effective compensation under the BIT; and
  2. Tanzania’s obligation to accord fair and equitable treatment and full protection and security to the Claimant’s investment and not to impair by unreasonable or discriminatory measures the maintenance, use, enjoyment or disposal of the Claimant’s investment under the BIT.

Under the BIT the evidentiary hearing underway in Washington is being video recorded and will be made available to the public for review. Winshear will make this available to shareholders and the public on its website when it is available.

About Winshear Gold Corp.

Winshear Gold Corp. is a Canadian-based minerals exploration company advancing the Gaban Gold Project in the Puno region of Peru. Gaban is a possible hard-rock source for the modern-day alluvial gold rush underway in the Madre de Dios basin downstream.

The Company is in the process of concluding fully funded arbitration proceedings against the Tanzanian Government to recover its investment and damages for the expropriation of its SMP Gold Project in Tanzania.

For more information, please contact Irene Dorsman at +1 (604) 200 7874 or visit www.winshear.com

ON BEHALF OF THE BOARD OF DIRECTORS

“Richard D. Williams” Richard Williams, CEO

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautions Regarding Forward-Looking Statements

This news release includes certain statements and information that may contain forward-looking information within the meaning of applicable Canadian securities laws. All statements in this news release, other than statements of historical facts, are forward-looking statements and contain forward-looking information.

Generally, forward-looking information can be identified by the use of forward-looking terminology such as "intends" or "anticipates", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would" or "occur". Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information, including the risks normally associated with arbitration cases. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except in accordance with applicable securities laws.

Commercial Deals

Harbour Survey Shows UK Lawyers Are Eager to Launch New Firms

The legal sector is undergoing a period of dynamic change, with litigation practices experiencing high demand for their services, despite the strain placed on firms’ budgets amid global economic instability. New research suggests that experienced legal practitioners in the UK are now seeing opportunities to grow outside of the traditional system of legacy firms. The Law Society Gazette reports on a new survey produced by leading litigation funder, Harbour, which revealed that 50 percent of law firm partners interviewed are “seriously considering setting up their own practice.” The research commissioned by Harbour uncovered that this consideration of breaking away from their parent firms is being driven by a desire to gain independence, improve their working conditions, and retain a higher portion of profits. Harbour’s chief investment officer, Susan Dunn, stated that partners are attracted by the “flexibility and financial benefit” that is provided by launching their own outfit. Interestingly, this trend was not just seen among partners at the large household names of the legal industry but also among “smaller firms, and across the regions” of the UK.
Commercial

UK Legal Sector Continues to Grow Despite Economic Downturn

Many industries are struggling under the current economic climate. However, new data released shows that the UK’s legal sector ended 2022 in a strong position, with sector-wide revenues continuing to grow, despite the adverse financial environment. Reporting by City A.M. highlights new data from the Office for National Statistics (ONS), which reported that between November and December of last year, the UK’s legal sector saw a six percent increase in revenue. The country’s legal industry revenues reached £4 billion in this period, with the sector defying the overarching negative trend faced by the accounting and wider professional services sectors, both of which saw revenues decline. Julie Norris, partner at Kinglsey Napley, pointed to the resilience of the legal industry during economic downturns, due to the fact that “litigation, insolvency, and employment” will remain areas of high demand during a recession. City A.M.’s article also highlights that litigation funders remain ready and waiting to invest in new lawsuits, whilst UK law firms have not yet shown an eagerness to make any significant staff redundancies.  
Commercial Deals

Woodsford and Phi Finney McDonald Partner on Australian Class Action

As class action activity continues to increase in jurisdictions across the globe, investor-led claims are becoming an increasingly frequent occurrence and funders are standing ready to provide the needed capital. The filing of a new class action in Australia looks set to continue this trend, with a claim being brought against one of the country’s largest gambling and entertainment companies. An article by Australasian Lawyer details the lawsuit brought on behalf of the shareholders of The Star Entertainment Group Ltd., alleging that the company misled and deceived investors whilst also failing to meet disclosure obligations. The case is being led by Phi Finney McDonald and is being financed by global litigation funder, Woodsford. The class action, which represents Star shareholders who owned shares between March 2016 and June 2022, claims that the business did not disclose its breaches of anti-money laundering and counter-terrorism legislation, amongst other legal violations. This is not the first time that Phi Finney McDonald and Woodsford have worked together, having led a similar class action against Westpac and having collaborated on class actions targeting ANZ, Macquarie and Nuix.
Commercial Special Features

The Secret to Success with Trade Secrets – 5 Factors That Litigation Funders Should Consider When Evaluating Trade Secrets Cases

The following article is a contribution from Ben Quarmby and Jonathan E. Barbee, Partner and Counsel at MoloLamken LLP, respectively.  Litigation funders have trade secrets on their minds.  Since the introduction of the Defend Trade Secrets Act (DTSA) in 2016, trade secrets litigation has been on the rise.  Over a thousand trade secrets cases were filed in federal court in both 2021 and 2022.  By all accounts, that trend is set to continue.  Big verdicts have followed, with some trade secrets verdicts now rivaling the biggest patent verdicts.  In the information age, a company’s most valuable intellectual property may not be its patents after all, but the wealth of non-patented, proprietary information surrounding its ideas—its trade secrets. Trade secrets cases can be more attractive to litigation funders than patent cases.  The funding of patent deals is regularly scuttled by patent expirations, validity concerns (especially Section 101 patent eligibility concerns), the threat of inter partes reviews (IPRs) at the United States Patent and Trademark Office, and the perceived focus of the Federal Circuit on reversing the largest patent verdicts that come before it.  Trade secrets side-step many of these issues.  They do not expire.  They are less likely to be sunk by an obscure prior art reference.  They are not subject to IPR proceedings.  And they are generally not subject to scrutiny by the Federal Circuit.  They also offer many of the same benefits to plaintiffs as patent cases: they too can be rooted in invention stories that will resonate with juries and lead to exemplary damages. They offer their own challenges, of course.  Unlike patent cases, there is no “innocent” misappropriation with trade secrets.  A defendant must often come into contact with the plaintiff’s trade secrets for a claim to arise.  Successful trade secret claims usually require a chain of events that put the trade secrets in the hands of the defendant.  Patent plaintiffs do not face those hurdles. Finding promising trade secrets cases requires identifying the types of companies that will regularly find themselves in situations that lead to trade secret misappropriation: joint ventures, startups seeking investment by larger industry players, acquisition targets, and companies operating in industries with high employee turnover and mobility.  And once those cases are found, performing due diligence on them requires a very specific type of focus. The following steps are critical:
  • Identify the Trade Secrets. Ensure at the outset that there are clean, concrete, and well-defined trade secrets to assert.  In some jurisdictions, plaintiffs must identify their trade secrets before proceeding with discovery—failure to do so with sufficient precision can stop the litigation dead in its tracks.  If plaintiffs can clearly identify the form of the trade secrets (e.g., scientific data, customer lists, product recipes, hard copy documents, etc.), the chain of custody for those trade secrets, and any changes made to the trade secrets over time, their case is far more likely to withstand the test of litigation.
  • Verify the Plaintiff’s Protective Measures. Defendants will generally argue that a plaintiff has not taken adequate steps to protect its trade secrets.  You need a clean and clear story to tell about the steps a plaintiff has taken to protect its intellectual property.  Tangible evidence of such steps—company policies, firewalls, passwords—is invaluable.  And there should be a narrow or controlled universe of third parties—if any—with whom the information has been shared.  Each additional third party with access to the information can increase the uncertainty surrounding the trade secrets and affect the value of the case.
  • Estimate the Value of Trade Secrets. Calculating damages in trade secrets cases can be trickier than in patent cases.  It is harder to find comparable licenses or valuations for similar types of trade secrets since trade secrets are just that—secret.  There are also fewer established damages methodologies in trade secrets cases.  While this allows for more flexibility and creativity in crafting a damages theory, it can also make trade secret damages susceptible to challenges.  The Georgia-Pacific factors used so often in patent cases can help determine reasonable royalty rates in trade secrets cases, but courts have yet to adopt those factors as the definitive standard for trade secrets.  In conducting due diligence, hire a damages expert to estimate the value of trade secrets before filing a case.
  • Assess the Value of Injunctive Relief. Trade secrets cases are often better candidates for injunctive relief than patent cases.  Determine the strength of a case’s injunctive relief prospects early on.  The likelihood of injunctive relief has to be factored into the economic value of a trade secrets case, since it will directly impact the likelihood of early settlement.
  • Determine the Narrative. Storytelling matters in every IP case.  But it perhaps matters in trade secrets cases even more so.  It is imperative to have reliable witnesses who can illustrate the plaintiff’s narrative in a compelling and clean way.  Test the potential witnesses before considering funding.  Let them tell their story—and challenge that story—under conditions that will most closely approximate those at trial.  Attractive cases should tell a persuasive story about how the trade secrets reflect plaintiffs’ know-how, experience, and competitive edge, and also expose the motives for defendants to steal those trade secrets.
These considerations are a starting point.  Due diligence should be tailored to the particular facts and nuances of each potential trade secrets case.  Careful consideration of these factors will help ensure that funders make the wisest investments, while avoiding common pitfalls in trade secrets litigation.
Commercial

LexShares’ Fourth Quarter 2022 Highlights 

As the global litigation investment marketplace continues to mature in meaningful ways, LexShares reflects on the firm's Q4-2022 success.  According to LexShares, overall financial performance of the industry continues to advance and attract favorable attention from a variety of investors looking to profit from the increasing usage of litigation finance.   LexShares forecasts that business owners will embrace creativity in searching for capital lines, and litigation investors are targeting qualified legal funding franchises as a result. As 2022 closed, all signs pointed to legal professionals' increasing engagement with the services offered by the litigation finance industry.  LexShares reflects on the 60 Minutes expose of the industry, which snagged over 11M viewers, many of whom may have discovered litigation finance for the first time. Overall, LexShares suggests that the global litigation investment marketplace is attracting traditional money managers who are seeking to invest in uncorrelated litigation finance instruments.
Commercial Deals

Funders Predict More Partnerships With Law Firms in 2023

Whilst all signs point to litigation funding continuing its growth trend into 2023, that does not necessarily mean that it is going to be a year without challenges in the wider litigation industry. As law firms come under pressure from the sheer volume of litigation combined with the impact of the economic downturn on their own balance books, two leading funders predict that law firms will increasingly look to litigation finance companies to manage costs and risk. A recent article in Law.com features commentary on the outlook for the year ahead from David Perla, co-COO at Burford Capital, and Ralph Sutton, CEO of Validity Finance. Perla highlighted the continued uptick in litigation and the need for law firms to cut costs as a primary catalyst for increased partnerships with funders moving forward. He also reported that the law firms he is dealing with have “an increased appetite to take on risk or to increase risk,” and that Burford makes for an ideal partner to share in that risk. Validity’s CEO also reinforced the prediction that 2023 would be a strong year for funders, stating that “litigation finance always picks up in downturns because capital is short”. However, Sutton did raise the concern that there is still a lack of understanding of the funding industry, even from law firms in major markets, and that a focus on billable hours is a stumbling block for a wider adoption of these kinds of law firm-funder partnerships. On the need for wider education and understanding, Perla highlights the importance of engaging with operations and innovation executives at law firms, whom he has found to be the best ambassadors when it comes to providing a gateway of information about funding options to the wider law firm.
Commercial Fundraising

Korean Litigation Finance Startup Raises $6MM in Funding Round

As funders continue to see success in emerging markets around the world, investors are also continuing to show a willingness to provide capital to newer startup funders, who are gaining footholds in these burgeoning markets. This was demonstrated once again this week as a Korean legaltech startup announced it had raised over $10 million, following its latest funding round. An article by AsiaTechDaily details the announcement by Law&Good, which revealed the startup had raised $6 million through its Series A2 funding round. The capital raised will be used by the company to expand its remote lawyer hiring services, and further develop its litigation finance offering. Law&Good became Korea’s first native litigation funder in 2022, having funded a number of local litigation proceedings, which had been referred to the company through its own platform by consumers and small businesses. Law&Good’s founder and CEO, MK Min, highlighted the company’s focus on customer experience above all else, and its use of data to select the most suitable lawsuits to finance.