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Commercial Legal Innovation

The Value of Appellate Funding 

The time and effort behind multi-year litigation is at the mercy of the appeals process. Litigation finance is rapidly being engaged to fund various approaches to the appeals process. Furthermore, quality appeals financing is often engaged in the form of judgment preservation insurance.    Woodsford has published the firm’s approach to investing in cases associated with appellate proceedings.  Bringing a case to court is contingent on financial planning and liquidity. The same can be said for navigating the appeals process. The concept of navigating the appeal of an award is generally not part of per-appeal litigation investment contracts. Those seeking to overturn claim awards via the appeals process may find it daunting  to be on the other end of claimants and their litigation funders, with ample resources at their disposal.  Adversaries often seek to leverage appellate pre-settlements as a negotiation exercise. Judgment preservation insurance is being embraced as a tool that mitigates recovery delays associated with the appeals process.
Commercial Legal Innovation

New York as Capital of International Arbitration Demand

Serving as the center of global finance, New York may soon grow to become the world’s capital of international arbitration proceedings. Today, New York is ranked sixth in the world for arbitration proceedings, tied with Beijing, China. New insights published by Burford Capital suggest that market forces are fostering a scenario for New York to move up arbitral ranks as world markets seek relative stability. This, as New York’s court system has historically been recognized as one of the world’s most legitimate, while also embracing responsible legal innovation.  Buford Capital’s research profiles international arbitration as the most agreeable way to settle cross-border disputes. Global jurisdictions such as Latin America, the Caribbean, the Middle East and North Africa are expected to experience an increase in claims seeking international arbitration as a solution to settle differences.  As global financial markets are forecast to ebb and flow over the near future, Burford seems to suggest that New York legal innovation has systematically survived the test of time. Making New York an agreeable destination for quality international arbitration proceedings.    Burford’s research points to a forecasted increase in international arbitration surrounding the construction industry. Similar to leading quality innovation in law, New York is also home to some of the world’s most notable success in construction. As investment in construction-based international arbitration proceedings is expected to increase, New York may take advantage of market share opportunities where possible.
Commercial

Legal Teams Support CEO and CFO Investment Vehicles 

Traditionally, CEOs and CFOs have approached legal expenses from a risk averse perspective. Yet litigation finance is increasingly being understood as a modern instrument of legal innovation and balance sheet protection. Something has got to give.  Burford Capital discusses these concepts in a new LinkedIn post that suggests corporates who engage litigation finance will reap rewards. Burford seemingly suggests that those who are not looking to leverage litigation investment as a tool will succumb to loss of market share. Burford suggests that CEOs and CFOs who design a portfolio of litigation assets may be respected as best-in-class in terms of financing quality litigation.   Litigation portfolio architecture is innovating litigation finance from a one case risk mitigation utility to a bundle of cases that hedge overall corporate and legal risks. Buford also suggests that law firms that engage in ethical litigation finance practices stand to inherit reputational benefits typically associated with legal innovation.   
Commercial Regulatory Issues

LexShares Debates Delaware’s Legal Finance Disclosure Guidelines  

Litigation Finance Journal has been covering Delaware’s Chief Judge, who has ordered  disclosure of litigation finance agreement details, in a move the court claims helps provide funder transparency (akin to KYC/AML). LexShares has published a debate on the significance of Delaware’s disclosure mandate, discussing the implications for quality United States regulation of the litigation finance industry.  Lexshare’s insights suggests a hawkish approach to disclosures, questioning if claimant interests are being promoted or protected. Traditionally, third party funders have been skeptical of mandatory disclosure of litigation agreements. LexShares seemingly suggests that common regulation of litigation investment is not on the horizon in the United States.  Litigation Finance Journal has reported the World Bank’s Settlement of Investment Disputes has adopted a common set of rules and regulations for third party legal investors. Meanwhile, in Singapore and Europe, universal rules and standards are being discussed as imminent requirements for the industry to reach its full potential.
Announcements Commercial People Moves

Apex Litigation Finance to appoint Stephen Allinson as ‘Head of Legal’

Litigation funding specialists, Apex Litigation Finance have announced the appointment of Stephen Allinson, Solicitor and Licensed Insolvency Practitioner, as their new Head of Legal. Stephen is a credit, debt and insolvency specialist who has worked in the field since 1987. His extensive background also includes setting up his own consultancy and before that he was a Business Recovery and Insolvency Partner at a major law firm. As well as acting as a consultant within the legal field, Stephen also pursues other projects in the legal, insolvency and credit fields, and is a Visiting Lecturer at the University of Law. In addition to Stephen’s extensive licensed insolvency work, he has also been an Associate Member of the Association of Property and Fixed Charge Receivers. A multi-disciplinary consultancy whose council is selected through leading members of combined professions, to offer professional support in property, legal and insolvency matters. Stephen says: "I am absolutely delighted to be joining the growing team at Apex. Without a doubt, litigation funding is now a vital area in the litigation sector. With its concentration on mid-tier claims, Apex is well placed to become a very important player in this market. I am looking forward to working with Maurice and the team, and with the many solicitors and insolvency colleagues who will, no doubt, wish to discuss opportunities with us." Furthermore, Stephen is no stranger to the position of Chairman as he was appointed Chairman of the Board of The Insolvency Service in January 2017, serving in that role until May 2021, and is also the Chairman of the Joint Insolvency Examination Board (JIEB), a member of ICAEW Investigation Committee and a Chairman of the Methodist Church Disciplinary Process. Apex CEO Maurice Power says: “We are excited to announce Stephen’s appointment and to welcome him to our growing team. His skill and experience will add real value to the Apex proposition and further cement our position as a litigation funder of choice for the insolvency sector.” Apex was proud to attend and to sponsor the first in person R3 National Conference since COVID. The Apex team thoroughly enjoyed greeting new and existing contacts and demonstrating how the Apex funding model is a perfect fit for insolvency litigation. As Apex continues to grow the team, they are keen to hear from interested individuals from various disciplines, including legal, insolvency, litigation funding, AI development, and business development. Specific litigation funding experience is not essential. Apex will look at an individual’s skillset and identify those who can contribute to their success. Interested applicants are asked to contact Apex via enquiries@apexlitigationfinance.com by sending a current cv and details of why they would be the right fit for Apex. About Apex Litigation Funding: Apex Litigation Finance Limited brings together experts from the legal and finance sectors to provide third party litigation funding to litigants (corporates, liquidators, and individuals) who are unable to pursue a claim due to the prohibitive cost of litigation. Although the claim may have merits, uncertainty over the total costs and the potential risk of being ordered to pay the defendant’s cost, should they lose the claim, prohibits access to justice for many claimants. Our process is augmented by artificial intelligence systems to assess risk. As a professional litigation funder, Apex will make available funds to pay legal and other costs associated with a claim in return for an agreed share of any successful return. If there is no recovery, or if the claim is lost, there is nothing to repay.   For details, please see www.apexlitigation.com
Commercial Regulatory Issues

Litigation Finance Confidentiality Concerns

As litigation finance grows in popularity, the industry will be on the hook for responsibility associated with confidential client information. Right now, litigation investment facilities hold inherent third and fourth party risks associated with confidential information. Sentry Funding has published insights suggesting that litigation financiers have been overly focused on assessing potential client awards, and have forgotten to respect legal fundamentals associated with client confidentiality.  Sentry Funding suggests that a robust confidentiality agreement is the first step in mitigating risk associated with confidentiality. Sentry suggests that with Europe’s upcoming patent and trademark marketplace expansion, European litigation investment professionals should be extremely cautious. Patent and trademark protection has a long history of confidentiality breaches, which could pose problems for plaintiffs.   Sentry’s research underscores the importance of litigation investors spearheading legal innovation through exemplary confidentiality practices, and outlines several steps claimants can take to ensure proper confidentiality.
Commercial Deals

Potential Uptick in IP Finance and Investment on the Way

Law Business Research’s IAM-Media.com has published new guidance that the United States and European patent and intellectual property marketplace will soon experience increased activity. West U Capital is making headlines in the United States as a powerhouse with a patent and trademark pedigree hard to match. In other news, Europe will soon open its Unified Patent Court (UPC), which is rumored to represent over 24 of the 27 European Union member states. Over 40 countries are eligible to join the UPC, helping to solidify the notion that increased IP marketplace activity should be expected forward.  IAM-Media.com has collated an outline of several global patent and trademark marketplace events for litigation investors to consider. Specifically, trends point to an inflow of capital in patent, trademark and intellectual property portfolio building. Trends also suggest a growing disparity between United States and European risk as trends point to Europe’s UPC being a conduit for aggressive IP claims against US enterprises.  As an added bonus, Litigation Finance Journal has included 33 highlights to Citibank’s Metaverse and Money report that includes several IP and trademark issues expressed by leaders in the United States, Europe and Russia, that could become part of UPC portfolios.
Case Developments Commercial Special Features

Funding a Credit Crunch: How Litigation Finance Has Fueled Global Actions Against Visa and Mastercard

Mastercard and Visa are no strangers to legal action, having endured class actions and legal challenges all over the world. Currently, a collective action funded by Bench Walk Advisors accuses the credit giant of illegally overcharging Multilateral Interchange Fees (MIFs) in the UK. It has been asserted that MIFs, here charged as a percentage of each purchase, are unlawful. If the courts agree, merchants will be compensated for the money lost—possibly with interest. A similar case was recently settled in Canadian courts. Merchants across Canada will share a $131CA million settlement for businesses accepting Visa and Mastercard since 2001. Given these developments, we thought it prudent to take a look back at the Visa and Mastercard claims. What happened? How did we get here? How are litigation funders impacting the case? And what can we expect from all of this going forward? So, without further ado… The Story Behind the Case Visa and Mastercard have been accused of overcharging merchants on multilateral interchange fees, or MIFs. This fee is charged to the merchant’s bank in every credit card transaction. It also makes up the largest portion of the Merchant Service Charge—which is assessed simply so that the merchant may accept Mastercard and Visa payments from customers. Unlike other types of merchant fees, MIFs are not set with regard to market rates. In this case, the credit card companies are accused of unlawful and anti-competitive practices. Because merchants have no choice but to pay these fees, lest they forego the ability to accept credit card payments—Visa and Mastercard appear to be taking full advantage of the leverage they maintain over merchants. Merchants and banks pass these charges on to consumers, which means everyone is adversely impacted by this type of overcharging. The Upcoming UK Class Action The UK class action was launched in August of last year with funding from Bench Walk Advisors. Bench Walk is taking over for Therium Capital Management, the original funder slated to finance the exceptionally large claim, valued at GBP 15 billion. Interestingly, the Competition Appeals Tribunal (CAT) scrutinized the funding agreement, and observed that there was enough funding in the agreement to cover the potential costs of the claim, even with extensive disclosure motions. Bench Walk is said to be providing up to GBP 45.1 million in funding, with an additional GBP 15 million slated for adverse costs. The CAT has found estimated costs to be roughly GBP 32.5 million for the claim, leaving plenty in the budget should disclosure motions rain down, or the claimant class experience any additional unforeseen consequences. In August of 2021, a London court approved the class action. Claimants assert that as many as 46 million Britons may receive roughly GBP 300 each if the case is successful. As is de rigueur in funded cases, Mastercard is calling the class action “spurious” and asserting that it’s a glib and cynical ploy to make money. Ironic, no? According to financial ombudsman Walter Merricks, these consumer-focused class actions are designed to hold big businesses responsible for misdeeds. Noted class action focused firm Harcus Parker is helming the UK case, which includes merchants and customers who used credit cards between May 1992 and June 2008. In 2015, UK law capped MIFs at .3% on consumer credit transactions, and .2% for consumer debits. While the cap was not applicable to corporate or inter-regional transactions, Harcus Parker asserts that such MIFs should be zero. Bench Walk Advisors’ funding will help more than 100,000 companies pursue claims against Visa and Mastercard. The Case in Canada  Settlements with Capital One, Bank of America, National Bank, and others have been reached with merchants. Lawyers for the Canadian class action include Consumer Law Group, Branch MacMaster LLC, and Camp Fiorante Matthews Mogerman LLP. The settlement includes a provision giving merchants the ability to make surcharges (up to a cap) for the next five years minimum. This codicil seems less consumer-focused, as the end result will be customers paying surcharges with each credit card purchase. Consumers may find this especially galling, given recent inflation and a COVID-inspired increase in credit card shopping, both in-person and online. In Canada, Mastercard and Visa have settled with class action participants to the tune of $131 CAD. Merchants will be reimbursed for MIFs paid on credit transactions from 2001 forward. Smaller businesses (those which make under $5 million in yearly sales) may claim as much as $30 per year, up to a maximum reimbursement of $600. Both settlements have been approved by the courts. Meanwhile, none of the banks involved have not admitted any malfeasance. The Canadian class action did not rely on traditional litigation funding. Rather, lawyers were compensated from settlement funds as approved by the courts. Does this mean that third-party legal funding isn’t necessary for a successful class action in Canada? Not necessarily. The differences between funded class actions and cases taken on contingency can vary widely depending on the case at hand. In the United States In September of last year, Visa and Mastercard were both ordered to face antitrust class actions over MIFs by a Brooklyn judge. The class action includes claimant merchants who accepted Mastercard or Visa between 2004 and 2019. A settlement was reached in 2012, but was not approved by several large merchants. It was then overturned on appeal—resulting in a new settlement offer of a whopping $900 million more than the original settlement. A representative from Mastercard, which vociferously defended against the antitrust and unlawful fees allegations, stated that the company is pleased to have reached an agreement. That’s not surprising, given how frequently the company finds itself in court on the same type of accusation. Again, a Mastercard spokesperson asserted that the class actions were brought by “US-based lawyers and litigation funders primarily focused on making money...wasting the court’s time...” It’s noteworthy that in the US case, major retailers may see an even larger windfall. Walmart, Target, Kroger, and other large merchants have opted out of the settlement in the hopes of striking a better deal. A court has found that the credit card companies violated antitrust laws—ordering a preliminary settlement amount of between $5.5-6.25 billion. In short, US merchants may be reimbursed for interchange fees overpaid for the past 15 years. The preliminary settlement was approved by the courts. However, the Second Circuit Court of appeals has entertained objections to the settlement approval in March of this year. It’s unclear when a decision will be reached. Mastercard Around the World Mastercard in particular is no stranger to lawsuits, particularly those surrounding interchange fees. Jurisdictions around the world have pursued, or attempted to pursue, class action cases against the credit giant. These include:
  • European Union: 2012—resulting in Mastercard repealing earlier pricing changes and promising greater transparency in pricing.
  • France: 2009—resulting in Mastercard committing to reduce interchange fees across the board.
  • Poland: 2007—determined Mastercard’s interchange fees to be unlawful, while the Protection of Competition and Consumers disagreed. An appeal is pending
  • Hungary: 2009—Visa and Mastercard both found to have violated competition laws and fined $3 million.
  • Italy: 2010—Mastercard fined 2.7 euros, though this was annulled the following year.
  • United States: 2012—Mastercard opted out of a settlement of $7.25 billion, reducing the settlement amount to $5.7 billion. This is still a record-setting amount of an antitrust class action.
How are Litigation Funders Helping? As the appeals are being decided and the claims period draws near, a number of funders are offering post-settlement funding to claimants with payouts en route. This provides an avenue for struggling merchants to gain access to reimbursements without waiting. For small businesses hurt by rampant overcharging, this can be tremendously helpful. We can see from this that Litigation Finance can do more than ensure that class actions are funded and that claimants have their day in court. The industry can also monetize payouts, offering choices not previously available to members of a class. In short, it’s not just access to justice that the Litigation Finance industry provides, but access to much needed funds that can keep business afloat, especially during turbulent economic times. So What’s Next? All eyes will no doubt be watching for the outcome of the UK anti-competition case against Visa and Mastercard. The European Commission has already declared that Mastercard breached its duty when setting its fees, thus the meritorious nature of the claim should never have been in question. It is now up to a court to decide the culpability of the credit card giants, as per UK law. One interesting final note: you might have been wondering how a financial ombudsman such as Walter Merricks can possibly discern the specific payout that each of the 46 million or so claimants deserve? Well, the answer is he likely can’t, but that won’t affect the outcome of the case. The Supreme Court has found that the impossibility of Merricks’ task does not take defendants off the hook. Instead, Merricks may seek an aggregate award with data that affirms an appropriate amount of damage, even if he cannot apply a methodology that is fair to everyone in terms of a final payout. As opponents of the action have duly noted, the court’s ruling could potentially “open the floodgates” to a bevy of future class actions, similar in scope to what we’re witnessing here. Perhaps ironically, many in the funding community are nodding their heads, as the potential for large, US-style class actions in the UK is viewed as a positive development – greater access to justice, after all. We will continue to bring you updates on the Merricks claim as it winds its way through the UK legal system.
Announcements Commercial People Moves

Omni Bridgeway APAC Leadership Developments

Omni Bridgeway (ASX:OBL), the world’s largest legal risk finance and management team, is pleased to announce new appointments in its Asia Pacific leadership team. Managing Directors and co-Chief Investment Officers (APAC) Oliver Gayner (Sydney) and Tom Glasgow (Singapore) assume new roles as Managing Directors and co-Chief Investment Officers (APAC), responsible for jointly overseeing all aspects of Omni Bridgeway’s investment management, due diligence processes and operations across the Asia Pacific region. Tom has led Omni Bridgeway’s Asian operations since joining the company in 2017 and has built the largest and most respected legal risk finance and management team in the Asian region, applauded by clients and recognised and awarded by industry participants and commentators. In addition to his expanded regional role, Tom will also manage Omni Bridgeway’s international arbitration portfolio, leading our team of arbitration specialists across the globe. Oliver joined Omni Bridgeway in September 2015 and is a highly experienced legal risk financier with an international practice who has played an integral role in Omni Bridgeway’s expansion into Asia, EMEA and Latin America. Omni Bridgeway’s APAC team serves clients across Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pacific Islands, The Philippines, South Korea, Vietnam and beyond. The joint appointment advances the ongoing global integration of Omni Bridgeway’s business operations, and also reflects the cross-border nature of funding in the region. Managing Director - Transformation We also congratulate Tania Sulan who assumes a newly-created role as Managing Director – Transformation, in which she will oversee the implementation of strategic projects for the Board. Tania joined Omni Bridgeway in November 2007 and previously led the Australia New Zealand team as Chief Investment Officer – ANZ, and prior to that she led the establishment and growth of Omni Bridgeway's Canadian operations as Chief Investment Officer – Canada. Andrew Saker, Omni Bridgeway’s Managing Director & CEO and Chief Strategy Officer, said: “These exciting appointments recognise the immense talent in our leadership team and reflect the ongoing  integration and transformation of our business, from its origins as a founder of the dispute finance industry, to our present status as a global fund manager, specialist in legal assets, and the largest legal risk management team in the world.” ABOUT OMNI BRIDGEWAY Omni Bridgeway is the global leader in financing and managing legal risks, with expertise in civil and common law legal and recovery systems, and with operations around the world. Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery. Since 1986, it has established a record of financing disputes and enforcement proceedings.
Announcements Commercial

ILFA Announces Inaugural International Legal Finance Conference in New York

The International Legal Finance Association (ILFA) today announced it will host its first annual International Legal Finance Conference on Monday, October 24, 2022, at the prestigious Morgan Library in New York City.

The conference will draw together legal and finance leaders from across the world—including providers of legal finance, investors, law firms, corporate general counsels and CFOs to discuss the best practices in managing litigation and arbitration costs and risks and monetization of legal assets. A range of speakers from across the legal finance ecosystem will present on the industry’s most substantive topics such as managing in-house legal budgets, managing financial and reputational risk, the impact of global economic trends on liquidity pressures, enforcement and monetization of awards, law firm financing and portfolio funding.

“As the world’s only global trade association for commercial legal finance, we are excited to launch this industry-leading conference,” said Gary Barnett, Executive Director for ILFA. “The event will provide a forum for legal finance professionals and users of legal finance including corporate counsel to explore the role of litigation finance in today’s global marketplace as a cost and risk management tool, as well as for investors in legal assets.”

“The conference marks an exciting moment for ILFA and comes at a pivotal time for our industry,” said Neil Purslow, ILFA Chairman and Co-Founder and CIO of Therium Capital Management. “Conference attendees will have a unique opportunity to learn from leaders in the field about how it can be used as an integral part of their cash management strategy.”

To register for the legal finance conference or view additional details, visit http://conference.ilfa.com/

About the International Legal Finance Association

ILFA was founded to represent the global commercial legal finance community, and its mission is to engage, educate and influence legislative, regulatory and judicial landscapes as the global voice of the commercial legal finance industry. It is the only global association of commercial legal finance companies and is an independent, non-profit trade association promoting the highest standards of operation and service for the commercial legal finance sector. ILFA is incorporated in Washington, DC, and will have chapter representation around the world. For more information, visit www.ilfa.com and find us on Twitter @ILFA_Official and LinkedIn.

Case Developments Commercial

Therium Funds Multi-Billion Pound Action Alleging Truck Cartel Price Collusion 

Six producers of big rigs have allegedly conspired in a 14-year scheme to defraud government regulators over emissions mandates. The Competition Appeal Tribunal has approved a £2B claim marking a historic first for United Kingdom collective actions. The Road Haulage Association (RHA) is representing an estimated 18,000 claimants as the beneficiaries of the hopeful award.  Law Gazette reports that Therium is the litigation funder that will earn a total of 6% of the award’s proceeds of anything over £2B. Therium will be granted 8% of an award of over £3B. Therium will NET 30% of collective proceeds if the award amounts to anything less than £150M. While the payout ratio of the funding deal is large, claimants say litigation would not be possible without access to third party investment.  Similarly, RHA claims that the case’s lifespan may vary as well, depending on tribunal preference of proceedings. RHA underscores the importance of the litigation agreement’s scaled architecture. 
Commercial

The 2022 Litigation Finance Report

For five years (est. 2017), Lake Willians and Above the Law have surveyed legal professionals to glean their perspectives on the litigation finance industry. The 2022 Litigation Finance Report profiles graphs and charts depicting a robust litigation investment marketplace that is growing with exponential returns.  According to the survey, trends signal that litigation finance is widely profiled as a valuable tool for legal professionals. Those who would engage litigation finance a second time after initial usage is tracked at 94%.  Professionals with first-hand experience using litigation finance have jumped from 30% to 70% over the last three years. Engagement of litigation investment is viewed as a savvy way to hedge risk, while adding meaningful compliments to corporate balance sheets. The future of third party funding looks bright, with 80% of respondents who have not utilized litigation funding open to considering the practice. The report sports a bounty of figures, charts and graphs that visualize the industry's growth.
Case Developments Commercial Special Features

Federal Court of Australia makes first aggregate damages award in a funded representative proceeding in Toyota Class Action

The following piece was contributed by Martin del Gallego and Matthew Harris of Australian law firm, Piper Alderman. This article considers a recent decision of the Federal Court of Australia, awarding damages to class action claimants on an aggregate basis.  Aggregate damages is a rare global award which covers all group members described or identified in the award.  This was the first instance of aggregate damages being awarded to a funded litigant in Australia, and may spur a trend in representative claims brought on this basis. In Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 344, Justice Michael Lee relied on s 33Z(1)(e) of the Federal Court of Australia Act 1976 (Cth) (the Act) to award damages to group members in possession of certain Toyota vehicles throughout the entirety of the claim period, calculated as the percentage reduction in value of their vehicle or vehicles.  It has been estimated that Toyota’s total aggregate damages bill may exceed AU$2 billion. Key Takeaways
  • For an order of aggregate damages to be made in a representative proceeding, the Court needs to be satisfied on a principled basis with which to assess and distribute the relief;
  • The analysis must be informed by general principles governing the assessment of damages, and can result in an award of aggregated damages applying to a specific class of group members within a representative proceeding;
  • While the judgment is liable to spur a trend in claims for aggregate damages, precisely how such an award will impact the approval of legal costs and a funder’s commission remains to be seen.
Background to the proceedings The case before the Court concerned claims relating to Toyota’s supply of 264,170 defective diesel vehicles to Australian consumers between 1 October 2015 and 23 April 2020 (Relevant Period).  These vehicles were fitted with diesel combustion engines and a ‘diesel exhaust after treatment system’, or ‘DPF’, aimed at reducing harmful pollutants and other emissions from the engine.  The case alleged that the vehicles were defective because the DPF was not designed to function during all reasonable driving conditions, and even if driven normally, there was a propensity for the car’s exhaust to emit excessive white smoke and malodour, and cause reduced fuel efficiency and trigger ‘excessive’ notifications prompting the need for service or repair. In alleging that the vehicles were not of ‘acceptable quality’ in breach of the statutory guarantee under s 54 of the Australian Consumer Law (ACL), and that Toyota’s conduct had been misleading and deceptive in contravention of ss 18, 29(1)(a) and (g), and 33 of the ACL, the lead applicant sought two types of damages under s 272 of the ACL:
  • Under s 272(1)(a), damages for the reduction in value of each relevant vehicle resulting from the failure to comply with s 54 of the ACL; and
  • Under 272(1)(b), other reasonably foreseeable loss or damage incurred as a result of the defect and failure to comply with s 54 of the ACL, including excess taxes, fuel consumption, financing costs, servicing costs and lost income.
Of these heads of damage, only two were suitable for determination at the initial trial of the lead applicant’s claim:  the ‘reduction in value’ damages under s 272(1)(a) and damages for excess GST paid by group members in connection with acquiring the relevant vehicles under s 272(1)(b).  (A separate question had been asked and answered in an earlier interlocutory application in the case, clearing the way for a potential aggregate damages award, in respect of only part of the lead applicant and group members’ claims.[1]) Aggregate Damages Having found in favour of the lead applicant, on among other things, their ‘acceptable quality’ cases, Justice Lee also found that the same determinations could be made on a common basis for the remainder of group members.  His Honour found that the lead applicant and group members were entitled to damages for the reduction in value of their vehicles, and for excess GST paid in connection with that reduction.  Accordingly, it was necessary for his Honour to determine a principled basis for arriving at a quantum of the reduced value which could be applied on an aggregate basis to all relevant group members. The Federal Court’s power to award damages on an aggregate basis is found in s 33Z of the Act. This section provides, among other things, that the Court may, in determining a matter in a representative proceeding, make an award of damages for group members, sub‑group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies,[2] or award damages in an aggregate amount without specifying amounts awarded in respect of individual group members.[3]  Further, subject to section 33V of the Act, the Court is not to make an award of damages under s 33Z(1)(f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment.[4] Noting that class actions were not the ‘Galapagos islands’ of litigation, Justice Lee observed that an award of damages, even on an aggregate basis, was subject to two overarching principles as to the award of compensatory damages.[5]  His Honour observed that an award of compensatory damages must be considered in the light of the overriding compensatory principle, and that even where the process of estimating damages is difficult, the Court ‘must do what it can’, this principle equally applying to an assessment of ‘reduction in value’ damages. Justice Lee found that the Court is not permitted, by s 33Z of the Act, to take an approach of awarding aggregate damages on a per vehicle basis and determining the separate question of distribution at a later stage. Because of this, his Honour was faced with a challenge of how to distribute relief to group members who had possessed the relevant vehicles for only part of the Relevant Period.  His Honour termed these group members as ‘Partial Period Group Members’ and concluded at [432]: The bottom line is that without knowing the price at which, or the time at which, the Partial Period Group Members bought and sold Relevant Vehicles on the secondary market, one cannot determine on a principled basis how the compensation for the owners of those Relevant Vehicles ought to be assessed or distributed. One must always bear in mind the whole object of any award of damages is to put the claimant in the position the claimant would have been in but for the contravening conduct. Ultimately, the Partial Period Group Members will be required to undertake an individualised assessment of their loss. For the ‘Entire Period Group Members’, that is, people who possessed the relevant vehicles throughout the entirety of the Relevant Period, the Court awarded aggregate damages under s 33Z(1)(e) of the Act.  The award of aggregate damages for the Entire Period Group Members was calculated on the basis of a 17.5% reduction in value of the average retail price of the particular type of vehicle at the particular time it was purchased.  In circumstances where the group member paid a price lower than the average retail price for their vehicle, the lower of the two prices was said to be the applicable comparator from which the 17.5% reduction in value is to be calculated.[6]  In being satisfied there was a reduction in value of the relevant vehicles of 17.5% resulting from the failure to comply with s 54 of the ACL, Lee J also found that Entire Period Group Members were also entitled to recover the excess GST they paid on that reduction in value, calculated as 10% of the reduction in value.[7] Regarding the claim for damages under s 33Z(1)(f) of the Act, the Court declined to award aggregate damages on this basis, because his Honour was not satisfied that a reasonably accurate estimate could be made of the total amount owing to group members as required by s 33Z(3). Conclusion Williams is the first instance of a Court awarding aggregate damages in a funded representative proceeding, and provides helpful guidance on how the Court will approach such claims, particularly where only part of the claim is suitable for determination on an aggregate basis.  That said, while Justice Lee found in favour of the class on the issue, it is plain that such an assessment will need to be carried out on a case-by-case basis. About the Authors Martin del Gallego, Partner Martin is Chambers & Partners recognised commercial litigator with 15 years’ experience in high stakes, high value litigation. Martin specialises in class action and funded litigation, with expertise across a broad range of sectors including financial services, energy & resources, construction and insolvency. Matthew Harris, Lawyer Matthew is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Matthew is involved in a number of large, complex matters in jurisdictions across Australia. -- For queries or comments in relation to this article please contact Kat Gieras, Litigation Group Project Coordinator | T: +61 7 3220 7765 | E:  kgieras@piperalderman.com.au [1] Williams v Toyota Motor Corporation Australia Limited [2021] FCA 1425. [2] Federal Court of Australia Act 1976 (Cth) s 33Z(1)(e). [3] Ibid s 33Z(1)(f). [4] Ibid s 33Z(3). [5] Williams [421]-[423]. [6] Williams [446]. [7] Williams [492].
Announcements Commercial People Moves

Validity Finance Expands into California with Addition of Former Covington & Burling Litigator Mark Chen and Several Distinguished Advisors

Leading litigation funder Validity Finance  announced it has expanded to California, adding experienced litigator Mark Chen as portfolio counsel in Los Angeles.  Mr. Chen was previously special counsel with Covington & Burling in LA, representing clients in complex commercial disputes, including major intellectual property cases in the entertainment sector. In his new role, he will help assess Validity’s funding opportunities with law firms and businesses in Southern California and the West Coast.

Validity also named as senior advisors two high-profile California litigators, Thomas J. Nolan and J. Thomas Hannan. Mr. Nolan is trial counsel in the Los Angeles office of Pearson, Simon & Warshaw; Mr. Hannan is of counsel to Bartko Zankel Bunzel & Miller in San Francisco. In their new advisory roles, they will assist Validity in furthering relationships with law firms and entities in need of litigation finance for commercial disputes. Additionally, Validity appointed noted litigation valuation expert Gene Phillips as a special advisor. The L.A.-based Mr. Phillips will assist Validity in quantitative analysis, damages valuation and strategic relationship-building. Mr. Philips is CEO of PF2 Securities, which provides research and expert witnesses in large-scale financial disputes. With its latest expansion coinciding with the firm’s fourth anniversary, Validity has achieved a national footprint, with offices in New York, Houston, Washington, DC, and Los Angeles. “We’re excited to establish a presence in Southern California, one of the country’s most robust legal markets and home to some of the nation’s busiest civil court venues,” said Validity CEO Ralph Sutton. “We’ve previously collaborated with Los Angeles-based trial firms in funding successful matters and the time was right to plant our flag here,” he added. “We’re especially pleased to bring on Mark Chen from Covington to enhance our LA operations. He brings a strong track record representing both plaintiffs and defendants in high-stakes cases, including many high-profile matters.

While at Covington & Burling, Mr. Chen litigated matters for clients across a range of industries, including tech, healthcare and entertainment. His representations included multiple matters for the U.S. Olympic Committee, Sony Music Entertainment, and others.

Mr. Chen graduated summa cum laude from Cornell Law School, where he was an editor of the Cornell Law Review, and later clerked for Hon. Stanley Marcus, Senior U.S. Circuit Judge with the U.S. Court of Appeals for the 11th Circuit. Mr. Chen holds a B.A. in business administration from the University of California, Berkeley.

New Senior Advisors Tom Nolan and Tom Hannan

Commenting on the appointment of Messrs. Nolan and Hannan as senior advisors, Mr. Sutton said, “Tom and Tom are both veteran California trial lawyers who have served as lead counsel in numerous major cases. They bring important perspective, expertise and broad relationships based on decades of successful trial practice. We’re fortunate to welcome them as senior advisors as we grow our West Coast presence.” A fellow of the prestigious American College of Trial Lawyers, Mr. Nolan is one of the nation’s preeminent trial lawyers, with broad experience in complex commercial disputes including class actions, antitrust, fraud, contract, and intellectual property matters. His extensive trial record includes winning jury verdicts of more than $1billion for his clients and defeating claims exceeding $15 billion asserted against his clients. Mr. Nolan started his career in public service as a federal prosecutor, during which time he served as the chief of fraud and special prosecutions in the Los Angeles U.S. Attorney’s Office. He then spent nearly 30 years in big law at Howrey, Skadden and Latham & Watkins before joining Pearson, Simon & Warshaw in 2020. Mr. Hannan is an accomplished trial lawyer with a national reputation and noted success representing both plaintiffs and defendants in complex commercial cases.  Mr. Hannan served as judicial law clerk to renowned US district judge Alfonso J. Zirpoli in the Northern District of California. He practiced law for over 40 years with his equally well-known partner Ron Lovitt at Lovitt & Hannan. Together, they successfully litigated a wide variety of professional negligence, fraud and complex commercial matters.

New Special Advisory Role for Gene Phillips

Commenting on Gene Phillips’ addition to Validity’s distinguished roster of outside advisors, Mr. Sutton said, “While the law firms and clients with whom we work are the ones ultimately litigating our funded matters – whether bringing cases or negotiating settlements – it’s essential that our due diligence includes strong economic and data-driven analysis in helping us deploy our capital. That process will benefit tremendously from the contributions of Gene Phillips as special advisor. Gene is one of the industry’s leading litigation experts, and his large network of lawyers and experts will add strategic depth to Validity”. Mr. Phillips holds a BSc degree in mathematics and applied mathematics, and a BSc Hons degree in the Mathematics of Financial Derivatives, from the University of the Witwatersrand in South Africa.

About Validity Validity is a commercial litigation finance company that provides non-recourse investments for a wide variety of commercial disputes. Validity’s mission is to make a meaningful difference in our clients’ experience of the legal system. We focus on fairness, innovation, and clarity. For more, visit www.validityfinance.com.

Commercial Fundraising

Bloomberg Law on Historic ‘Secondary Deal Fund’ Landing $750M 

Bloomberg Law profiles Ashley Keller and Adam Gerchen as serial law entrepreneurs who have now raised $750M to fund the first secondary transaction litigation fund. Six years ago, Mr. Keller and Mr. Gerchen made headlines by selling their litigation finance firm for upwards of $160M to Burford Capital. Bloomberg Law reports that the secondary deal landscape for litigation finance is in its infancy. News of Keller and Gerchen’s new secondary market fund (under the banner of Gerchen Capital Partners) is being viewed as a signal of the maturing nature of litigation investment broadly.  According to Bloomberg Law, $225M of proceeds from the fund have been dispatched. In one instance, funds were disbursed to purchase a 30% stake from Omni Bridgeway’s investment in an Australian class action. Sources say Omni was overweight with ‘combustible cladding’ claims in Australia and decided to offload some of the risk to the secondary market.  Bloomberg reports that Gerchen Capital Partners submitted $19.5M to Omni for the stake. A regulatory filing discloses Omni banking a $16M profit for the transaction. Bloomberg’s insights suggest that Mr. Keller and Mr. Gerchen are looking to usher in a robust secondary marketplace for litigation investors. Active debate around a robust secondary market for litigation finance is ongoing. Many suggest that savvy litigation funders would only offload assets if concerned about losing the claim, or not being able to enforce a successful outcome. However, others suggest the needs of litigation franchises change over time, as claims can often take years to reach resolution. Hence there may be a need for a secondary market in Litigation Finance.
Commercial Deals

Patent Portfolios are in Vogue

Bela Malik (Patent Agent at Affordable Patent Agency, LLC) writes on LinkedIn that child patents are a means to building a strong and healthy patent portfolio. Ms. Malik says that filing child patents is a way to stay on top of the intellectual property market as a patent innovates beyond original design. Ms. Malik suggests that a diverse patent portfolio allows for various investment alternatives, as inventors court investors to fund the protection of their rights.  According to Malik’s essay, the USPTO is susceptible to United States’ Supreme Court rulings, which contain constant fluctuation in what is considered fundable/investable patent law.  When investors are seeking to raise capital for numerous projects, having a solid child patent portfolio is appealing to third party funders. Additionally, quality design of a patent portfolio is viewed as a hedge against competitors who may seek to innovate beyond simple patent certifications. Inventors know that USPTO law has liberal views of ‘fair competition,’ and it has therefore been profitable to err on the side of caution when profiting from patent portfolio litigation claims.  Ms. Malik’s overall position appears to urge an evolution beyond ‘one and done’ patent applications, towards a broader position of building patent portfolios as part of risk mitigation. 
Commercial Legal Innovation

Podcast: The American Bar Association Promotes ‘Financing the Good Fight’ 

The American Bar Association’s Commercial and Business Litigation Committee recently conducted a podcast interview featuring former federal prosecutor Kenneth Harmon and former litigation attorney Giugi Carminati, who discussed litigation finance and the wide range of benefits associated.  During the podcast, Mr. Harmon and Dr. Carminati touch on various third party investment topics including educational barriers currently affecting global litigation funding. According to the American Bar Association, the podcast is aimed at providing sound advice to those looking to expand their knowledge of the growing litigation finance ecosystem, and how investment in the space can be leveraged as a tool to access the civil judicial system.  Click here to listen to the podcast’s insights.
Commercial Deals

Burford Captial’s Insights on Funding Quality Litigation

Researchers worldwide signal that the cost of a quality litigation team of experts is expected to rise well into the future. When thinking about the future of global enterprise, chief executives are eager to engage vehicles to help their organizations thrive cross-border. Burford Capital claims that franchises that embrace the balance sheet advantages of legal investment will have wider opportunities in commerce than those who choose to ignore the advantages of litigation finance products and services.  According to Burford’s essay on the matter, Chief Financial Officers and their in-house General Councils have fretted while budgeting for multi-year litigation offensives. Burford suggests that those who balk at funding quality litigation will find themselves behind the eight ball over the next decade.  Burford’s researchers have tallied more than 75% of large enterprises holding a range of $20M to $100M in unenforced litigation claims. Burford seeks to expand various lines of business by educating executives of large enterprises about the benefits of LF investment.
Announcements People Moves

Victory Park Capital Bolsters Legal Finance Team with Additions of Chad Clamage and Ahmed Eltamami

Victory Park Capital (“VPC”), a leading global alternative investment firm, today announced the additions of Chad Clamage, Principal, and Ahmed Eltamami, Vice President, to the firm’s investment team. Clamage and Eltamami are primarily responsible for sourcing, analyzing, executing and managing investments within legal finance. They will work closely with Luke Darkow, Principal, and Richard Levy, Chief Executive Officer, Chief Investment Officer & Founder, who leads the legal finance strategy at VPC.

“We are proud to welcome Chad and Ahmed to the firm,” said Levy. “Their breadth of experience in the legal finance industry will be highly valuable as the pace of investment opportunities in this asset class continues to accelerate.”

Clamage brings several years of experience in legal finance to VPC. Most recently, he was a vice president at Burford Capital, where he underwrote and managed litigation finance investments. Prior to that, Clamage was counsel at Mayer Brown LLP, where his practice focused on class action defense, mass tort and appellate litigation. Before Mayer Brown, he clerked for the Honorable Diane S. Sykes of the United States Court of Appeals for the Seventh Circuit. Clamage received his J.D. from Stanford Law School and his B.A. in economics from Stanford University.

Eltamami was previously an associate on the quantitative team at Burford Capital, where he was responsible for analyzing investments within the underwriting and investment arm and managing the existing portfolio. Prior to that, Eltamami worked in the dispute consulting industry where his work focused on expert witness engagements in a variety of complex litigation. Eltamami received his B.A. in Economics-Accounting and completed the Financial Economics Sequence from the Robert Day School of Economics and Finance at Claremont McKenna College.

VPC takes a private credit-oriented investment approach to the legal asset class and targets investments in legal specialty finance, law firm funding and litigation finance.

About Victory Park Capital

Victory Park Capital is a global alternative investment firm that provides capital to emerging and established businesses in the U.S. and abroad. The firm’s differentiated offerings leverage an extensive network of industry relationships, disciplined deal origination, creative financing capabilities, broad credit structuring and special situations expertise. The firm was founded in 2007 and is headquartered in Chicago with additional resources in New York, Los Angeles, Austin, Miami and London. VPC is privately held and a Registered Investment Advisor with the SEC. For more information, please visit www.victoryparkcapital.com.

Commercial Legal Innovation

New Book Titled “Third Party Funding of Dispute Resolution” Explores LitFin in India

“Third Party Funding of Dispute Resolution” is a lucid look into India’s maturing litigation investment marketplace. The authors suggest that for litigation finance to thrive across India, a holistic approach should be considered and appreciated.  An exclusive extract from “Third Party Funding of Dispute Resolution” paints a picture of a worldwide network of funders who invest in meritorious legal claims that comprise legacy portfolio interests. The book’s authors, Ms. Kritika Krishnamurthy and Mr. Anuroop Omkar, explain that India’s litigation investment community holds a myriad of possibilities. With a healthy portfolio mix at the heart of successful litigation investment franchises, the authors suggest that the world’s funders maintain a kaleidoscope of business models. In terms of returns, the authors depict scenarios where funders will receive anywhere from 10%-45% of award proceeds. The book’s premise hinges on the importance of objectivity when considering dispute resolution remedies.  Check out the link above to find out more about “Third Party Funding of Dispute Resolution.” 
Commercial Special Features

The 5 Most Popular Episodes of the Litigation Finance Podcast

The Litigation Finance Podcast features guests from across the global commercial and consumer litigation funding landscapes. With over 60 podcasts spanning five years of archives, we thought it would be interesting to take a look at the five top podcasts in terms of viewer traffic. It should be noted that the Litigation Finance industry is growing by leaps and bounds, and as new entrants emerge into the space, many come to our site and listen to recent episodes of the LFJ Podcast, hence there is a recency bias in the traffic numbers (the earliest episode on our list comes from March of 2020). That said, below are some key takeaways from our five most popular episodes: #5) Dan Bush, CIO and Director of Innovation, Law Finance Group As CIO and Director of Innovation, Dan Bush wears many hats. He has been with Law Finance for more than a decade, and helped develop one of its most popular products: AR Now. AR Now was created to solve a specific and widespread problem for law firms—clients who won’t, or can’t, pay their bills. Increasingly, clients are approaching law firms demanding steep discounts on legal bills they can’t make good on. Law Finance Group (LFG) offers firms the ability to establish payment plans with clients without impacting the firm’s bottom line. Law firm invoices can be monetized, avoiding sending clients to collections. After all, non-paying clients can impact more than operating budgets. Lines of credit, bonuses, recruitment, even firm salaries may be affected. Perhaps best of all, LFG’s involvement in the creation of payment plans remains clandestine. While this plan was developed due to COVID-related circumstances, Bush sees it outliving the impending return to normalcy. “Everybody was presented with kind of a dire situation, right? With the pandemic, the shutdown, all the economic fallout from that really provided the impetus to get this going. We really see how the product works beyond the COVID pandemic to help law firms help their clients while still bringing money into the firm.” LFG works with firms of all sizes from boutique to leading law firms. It will look at cases in any stage of the litigation process, to see how funding can help. LFG has the equity needed to invest in a wide array of cases and portfolios. It may even offer terms with partial recourse to keep fees down and percentages low. As Bush explains, flexibility is key. “A lot of firms are taking more risks than they would in the past--taking some contingent upside risk, if not a full contingency. They’re coming up with hybrid arrangements, taking some percentages of the hourly fees, which has some contingent upside.” Firms can apply to the AR Now program with a short application that is followed by due diligence and the signing of an NDA. AR Now agreements may cover a single client, small groups, or other arrangements as needed. The bottom line is that firms can take more risks when facilitating payments. It’s a ‘better late than never’ philosophy that works for firms and their clients alike. #4) Elena Rey, Partner, Brown Rudnick In addition to being a Partner at Brown Rudnick, Elena Rey is a member of the Litigation Funding Working Group—which, at the time of this interview, was in the process of creating standardized documentation for funding contracts. Why focus on standardized documentation? Rey explains: “We’ve been seeing a number of trends in the Litigation Finance market in Europe recently. This includes the diversification for funders. So, besides the core of traditional litigation funders, more and more lenders are coming into the space.” Standardizing funding documentation promises many benefits, including shortening the onboarding process and allowing firms to services a wider range of case types. It increases the level of protection for all parties, and speeds the development of secondary markets. Standardized documentation can also be used as part of the negotiation process, as a viable starting point when hammering out details. The current working group has grown into 80 members, including major funders, family offices, insurers, leading law firms and barristers, and private funders. Essentially, professionals from all over the industry are making their voices heard—with the unexpected advantage of encouraging cross-disciplinary discussion on major industry issues. And there is certainly a need for flexibility. As Rey details, all funding is bespoke at its core. Client needs are unique to each case. Commercial funders may be most impacted by standardized documentation, which promises to improve transparency and the quality of terms overall. The first set of documentation from the Working Group is set to be released as early as June of this year. It will focus on insurance, and will serve to demonstrate how impactful this advancement can be on the overall industry.  #3) Christopher DeLise, Chief Executive Officer, Delta Capital Partners  Having been founded in 2011, Delta was an early entrant into the funding industry. Delta sets itself apart by getting term sheets to potential clients with blazing speed after a very short vetting process. Many cases at Delta are vetted and have funding deployed within 48-hours—an extremely fast turnaround in the Commercial Litigation Finance space. The use of standardized documentation also leads to greater clarity and speed—helping clients make more informed decisions about their options. DeLise explains that when it comes to funding, the speed of the process can have a huge impact on origination and client satisfaction. Because Delta has been in the funding game for so long, the company has been at the forefront of the industry’s development since its inception. DeLise explains, “Part of the excitement of this industry, for me personally, is having been an early pioneer and seeing all the changes that have occurred.” In the beginning, much time was spent educating law firms and investors about the benefits of funding—now, that’s less necessary, as funding has grown increasingly popular. Some of the more sweeping changes in the funding industry include an increased number of products available, as well as the trend of personalizing funding terms to better meet client needs. Because more recent graduates and old-school industry pros are becoming more aware of the benefits of working in Litigation Finance, sourcing new talent is easier than it’s ever been. COVID has impacted all aspects of Litigation Finance. As DeLise says, “liquidity is tightening up globally.” This increases the need for funding—particularly commercial funding. This, in turn, leads to commercial entities eschewing traditional lines of credit in favor of non-recourse funding. DeLise expects that trend to continue into the future.

#2) Ben Moss, Asset Manager and Portfolio Advisor, Orchard Global Asset Management

Orchard Global is, as the name implies, a global finance entity with operating centers in the US, UK, and Singapore. Currently, Orchard Global has about 6.5 billion in assets under management. In this interview, Moss explained Orchard Global’s basic investing philosophy and ideal investment size. Expounding on this, Moss detailed Orchard’s commitment to diverse portfolios, and a commitment to making room for non-traditional funding offerings. In Europe, increased demand for litigation funding, particularly in the EU, Germany, and the Netherlands, as well as US markets, has flourished through the rise of collective actions and insolvency matters. As Moss explains, “In Europe, we see an increased awareness, appetite, and adoption of Litigation Finance.” As the legal stage is set for a post-COVID return to normalcy (hopefully), backlogs are slowly being resolved. Class actions in particular were stymied by delays and closures—though some of this was mitigated through remote working and advancements in legal and financial tech. Moss opines that COVID has actually been helpful in terms of advancing Litigation Finance, particularly commercial funding. “In terms of opportunity going forward, we see a high demand for Litigation Finance for two reasons: There will be more claims generally, and also the increased use of Litigation Finance as a tool to fund claims.” Orchard Global sets itself apart from competitors with a small team and clearly defined roles. Team members often take cases from origination through to completion—rather than handing off clients to different departments at different stages of the case. This, in turn, promotes client confidence and improves the experience of investors and clients alike. The industry is buzzing with news of upcoming attempts at standardized documentation, which promises to increase transparency and worker efficiency. Arriving as quickly as Q2, these standardized documents will outline terms for a number of types of funding. This brings about concerns regarding bespoke agreements, and the overall need for flexibility. Ultimately, Moss is expecting great things for the future of Litigation Finance, as it flourishes and develops in exciting new ways.

#1) Cesar Bello, Partner in charge of alternative asset and portfolio management, Corbin Capital Partners

Corbin Capital specializes in commercial multi-strategy and bespoke global portfolio investing. Currently, Corbin has nearly nine billion in assets under management. In this interview, Bello summarizes the appeal of Litigation Finance as an investment, saying, “It’s particularly attractive in times of market volatility, where you expect more fat tails. We think there’s a good change that type of environment will persist in the near term.” The potential for outside returns and the sought-after nature of uncorrelated assets only enhances its appeal. Describing what fund managers look at in terms of vital metrics, he explains that methodology, track record, and valuation are at the forefront. Knowing one’s place in the industry is an essential part of finding your market and sourcing cases. Risk assessment is also important, especially how risk is structured and whether or not it’s seen as completely binary, or more nuanced. On the subject of ESG investing, Bello is clear that tackling environmental, social, and governmental issues through funding is an important factor in increasing access to justice. This can include mass torts, though the Volkswagen emission case was a very public miss. Still, the thoughtful application of funds toward ESG issues is vital for clients—and for investors looking toward lucrative investments that also support the public good. Looking ahead, the industry can expect growth and price compression in the near future. Bello predicts that secondary markets will become increasingly important going forward.
Commercial Legal Innovation

Stonward’s Director Hails Litigation Funding 

Guido Demarco (Director and head of legal assets at Stonward) says that there is a learning curve to understanding the global litigation finance ecosystem. Mr. Demarco was interviewed by the Leaders League about the industry's current climate and what leaders in law should keep in mind for the future. Mr. Demarco suggests that as the global financial population becomes more familiar with litigation finance, people will begin to reap the benefits of third party investment.  Meanwhile, Mr. Demarco warns that the policy decisions being made from Australia to New York State have the ability to shape and mold the future of litigation investment. Demarco says that 2022 will be a pivotal year for the industry, as lawmakers debate meaningful litigation finance regulation.  Demarco also suggests that litigation finance portfolio building is gaining momentum as one of the industry's most valuable product opportunities. In the same vein, Mr. Demarco suggests that those who build close relationships with notable legal professionals stand to benefit from legacy relationships in litigation finance.  Demarco says that one of the major misconceptions about litigation investment is the notion that third party funders help breed ‘frivolous’ claims, rather than facilitate access to justice. Click here to learn more about Demarco’s position on the future of litigation funding.  
Commercial

Video and Whitepaper: Woodsford’s Practical Guide to Litigation Funding 

Woodsford recently hosted a webinar discussing the ins and outs of practical approaches to litigation finance. Topics covered include the benefits of litigation investment vehicles. The five W’s (who, what, when, where, why) of litigation finance. And, what are the necessary functional framework mechanisms (systems and processes) for a successful litigation finance franchise.  You can watch Woodsford’s video feature by clicking here.  Additionally, Woodsford has organized a white paper as a companion piece to the webinar. Woodsford suggests that there is ample access to funding for cases that have a meaningful opportunity for investment returns.  Click here to watch the video and read the whitepaper.
Commercial Deals

Forbes Explores SPAC’s $32.6B Medicare Litigation Enterprise  

A new Medicare/Medicaid technology company is leveraging the fundamentals of litigation investment via SPAC, with billions of dollars on the line. MSP Recovery claims it differs from Omni Bridgeway and Burford Capital, in that the company funds and litigates its own cases. In turn, MSP’s focus is on a 50/50 split of awards received between itself and insurers who have overpaid Medicare/Medicaid expenses. MSP says it is sitting on a $1.5T portfolio, and forecasts $87B in recoverable claims.  Forbes reports that MSP is having trouble actually explaining the value of its corporate enterprise. Based in Florida, MSP Recovery engaged bespoke algorithms to locate claims that insurers billed to the government.  Before going public via SPAC, Forbes reports that MSP booked no revenue. In the Forbes feature, legal scholars suggest that the nature of placing values on litigation finance portfolios is more of assessing the value associated with risk.  Forbes notes that MSP has booked a limited amount of recoveries to date. MSP suggests that this is due to many factors, specifically that many of its cases are still in litigation.
Commercial

Key Takeaways From LFJ’s Podcast With Erik Bomans, CEO and Executive Board Member of Deminor

On the latest episode of the LFJ Podcast, we spoke with Erik Bomans, CEO and Executive Board Member of Deminor. Mr. Bomans discussed recent developments and trends in litigation funding in continental Europe, including what the total addressable market looks like and how that is expected to grow over time, how country-specific jurisdictions are differentiated, some of the main barriers to investing in litigation funding in Europe, and how the regulatory environment across the continent can actually be a benefit to funders. Below are some key takeaways from the conversation, which can be found in full here. LFJ: How big is the European market for funding? How do you assess the total addressable market?  EB: We have conducted our own research and have estimated the total addressable market in Europe at $1.8B, and that includes the UK. It is a small market, we estimate that it is 16% of the total addressable market of litigation funding.  By comparison, we estimate that the total addressable market in the US is $9B. That is nearly 5x bigger than the entire European market.   When we say the total addressable market, we mean the potential for litigation funding. We get to these numbers by looking at the value of the litigation market, and we apply a percentage which is the penetration rate in that specific market.  LFJ: In terms of a country specific breakdown, I imagine most of the activity happening in Germany and France. Your company Deminor has offices in Belgium, Luxembourg and Milan, so there must be a lot of action in these other jurisdictions as well. Is that the case, is there a lot of activity across Europe?  EB: We are active in most European countries. The top countries without a doubt are the UK and Germany.  We estimate the total addressable market in the UK at $800M. The other $1B is spread out over continental Europe. With Germany definitely taking the biggest part, nearly ⅓. . The Netherlands is the third most active country in Europe.  LFJ: What are some of the barriers to investing in the litigation funding market? Can you share some challenges funders find in this market?  EB: There are pitfalls, Europe is a highly regulated market in general. Litigation funding contracts come with mandatory rules with highly regulated rules such as consumer protection. In Germany and France, legal advice can only be provided by practicing lawyers.  One of the areas in Europe where litigation funding has been scrutinized most in Europe is antitrust cases, where some funders have used the assignment level to structure their litigation funding agreements.   LFJ: How does the EU’s regulatory environment provide opportunities for litigation service providers? I want to ask you specifically about Deminor. How does the regulatory environment provide your business with growth opportunities? EB: Antitrust is the next big area of growth, with the UK and Germany taking the lead. With Italy and Spain becoming active in this area as well. Litigation finance is a risky business, but there are new areas of growth in new emerging areas of litigation funding. Definitely, there are new  opportunities there for litigation funders. But it will be important for litigation funders to pick the right cases.  LFJ: What are your predictions for how the EU litigation funding market develops over the next few years? EB: Litigation funding is strongly growing here in Europe. The business is volatile, and no matter how much you diversify, returns may always be volatile.    
Commercial Regulatory Issues

Scotland Introduces Movable Transactions Bill

Scotland continues to advance new and innovative ways for businesses to thrive via alternative financial vehicles. On May 25, 2022 Scotland’s Parliament introduced a new bill titled, “Moveable Transactions (Scotland) Bill.” In essence, the legislation proposes allowing ‘movable’ property to be engaged as finance collateral. Specific to third party funding opportunities, the Movable Transactions Bill also includes intellectual property (such as patents) to be engaged as a vehicle to secure advance funding.  According to the proposed bill, a ‘pledge’ can be engaged just like traditional litigation finance agreements. Specifically, the pledge would be a facility that can be used as collateral to issue a loan. The loan would be repaid at a later date, similar to a litigation investment contract. In this case, the non-recourse functionality of traditional litigation finance would not be applicable. The bill’s use for funding litigation may sound abstract, however, the overall concept is innovative as Scotland’s alternative finance sector grows.  As we recently reported, the Law Society of Scotland has covered third party funding’s usage in group actions such as the ‘Post Office Scandal.’ Hence, the Movable Transactions Bill may hold potential benefits to help the people of Scotland finance their way to justice.
Commercial Regulatory Issues

State Governments vs. Funded Energy Litigation 

The International Comparative Legal Guide (ICLG) reports that at London’s International Disputes Week attorneys discussed the complicated intricacies of State-investor energy litigation. State governments are becoming more aggressive in entertaining the prospect of investor-focused energy litigation. However, the pitfalls for states can be problematic. State leaders must juggle conceptual impacts of energy litigation at the expense of state credit ratings which could snowball into a host of other potential unintended consequences.   ICLG notes that the normal cross-governmental structure of many state agencies involves complexities in terms of funded energy litigation. Furthermore, litigation investors may approach a case from a totally different perspective if a state party is involved. For these reasons, lawyers discussing the topic at London’s International Disputes Week are hashing out ideas on how to best shape the future of a state’s role in energy litigation.  Similarly, as Litigation Finance Journal has profiled, States are embracing ideas focused on maximizing litigation finance portfolios via savvy litigation investment agreements.   
Commercial Deals

Mining Bosses Short on Liquidity Turn to Litigation Finance 

Recent actions taken by international governments are forcing many mining companies into contractual re-negotiations specific to mining rights. With sweeping reforms of this nature, the rights of foreign investors may be violated as they seek to claw back any promised proceeds associated with mining investments. With the average investor-state arbitration lasting 4.28 years, costing upwards of $7.49M, many mining executives are looking to litigation finance vehicles to help prime the pump.  Mining Digital Magazine reports that litigation investors such as Burford Capital are looking to profit off the fragile state of the mining industry.  With oil and gas litigation dominating the news cycle, mining businesses are on track for a decade (or more) of intense litigation. Arbitration finance is becoming increasingly popular for mining claims, as mining operators seek to profit from governments who may not be prepared to dole out funds while seeking to protect a country's environment.  Click here to read more about Mining Digital Magazine’s findings.
Commercial

2022 Lawdragon Global Litigation Fiance Who’s Who 

With the litigation finance ecosystem growing hand over fist, Lawdragon Global has put together a list of 100 leaders in the space. Lawdragon suggests that the worldwide pool of litigation finance talent includes leaders in law, business and finance.  Lawdragon maintains a list of the 100 top litigation finance professionals. Burford Capital scored nine leaders on the list, while Omni Bridgeway tallied 12. Burford and Omni’s scores topped all other firms in terms of the number of talent recognized by Lawdragon.  Lawdragon says the list has been collated through independent research and peer review, claiming its team spends time meeting with litigation finance professionals around the world to assess emerging talent that may find a spot on the next top 100 list.  Click here to review Lawdragon’s full list, and toggle between country, firm and first/last name.
Consumer

IL Governor Signs Consumer Legal Funding Law

The following piece was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). Illinois becomes the latest State to bring proper regulation to the Consumer Legal Funding industry with the signing of SB 1099. The Alliance for Responsible Consumer Legal Funding, a major Trade Association for the companies that offer Consumer Legal Funding, were proud to work with Illinois Senator Jackie Collins and Representative Curtis Tarver in the drafting and passage of this bill.  Additional sponsorship was offered by Senators John Collins, Mike Simmons, Mattie Hunter, and Ann Gillespie along with Representatives Elizabeth Hernandez and Jay Hoffman. The legislation was also supported by the Woodstock Institute, the leading consumer advocate organization in Illinois. SB 1099 brings some of the strongest consumer protections in the country involving Consumer Legal Funding. It prohibits companies from:
    • Paying or offering a commission or referral fee
    • Accept a commission or referral fee
    • Make false or misleading statements in advertising
    • Make any decision in the consumers legal claim
    • Knowingly pay or offer to pay court costs, filing fees or attorney fees
    • Provide legal advice to the consumer regarding the funding or underlying legal claim
    • Attorneys who represent the consumer are prohibited from having a financial interest in the funding company
It also mandates that companies that will offer this product must be registered with the Illinois Department of Financial and Professional Regulations and pass a background check and post a surety bond. Illinois will be the first state that will require companies that offer Consumer Legal Funding to Illinois residents that they must make them aware of Financial Counseling programs. “I would personally like to thank Senator Collins and Representative Tarver for their dedicated efforts in getting this important piece of legislation passed.” stated Eric Schuller, President of Alliance for Responsible Consumer Legal Funding, They were not swayed by the opponents of the legislation and ensured that this product can be offered to the consumers of Illinois in a fair and responsible manner.” Illinois joins Maine, Ohio, Nebraska, Oklahoma, Indiana, Vermont, Tennessee, Nevada and Utah in bringing proper regulation to the industry. Brian Garelli the President of Preferred Capital Funding said: “I would like to thank Governor Pritzker and the Illinois legislature for making SB 1099 law in Illinois. The bill added over a dozen consumer protections.  It also balances the playing field between multibillion dollar insurance companies and injury victims that might not otherwise be able to wait for a fair settlement while their case winds its way through the court system.” The law goes into effect immediately.