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Case Developments Commercial

What Sberbank’s Liquidation Means for Litigation Finance

Litigation Finance Journal has been covering the Sberbank CZ liquidation. New details are emerging regarding the liquidator’s intent to recover creditor losses. Sberbank CZ’s liquidator is trying to deliver on a single sale of the bank’s assets to one buyer, rather than dicing the assets up into numerous packages. In other words, the liquidator is trying to flip the bank in a quick sale.  Seznam.cz reports that Sberbank CZ’s assigned liquidator is debating if liquidation is the best approach, as opposed to insolvency proceedings. Sberbank CZ was classified as a relatively healthy bank before the war in Ukraine.  Seznam reports that the value of Sberbank CZ is similar to a car hitting a wall … In that the bank’s value was still relatively stable before the accident (‘the wall’ being the war in Ukraine).  Click here to read Sezam.cz’s complete update on the Sberbank CZ liquidation.
Commercial Legal Innovation

Terra Common Litigation Fund Prompts ‘Red Flags’ Warning  

Crypto markets are suffering in the wake of the Terra UST stablecoin’s collapse, which came after losing its $1.00 peg. In the process, over  $60B in value was wiped out, leaving token holders confused over what might have happened to the algorithms meant to safeguard the Terra community from such a devastating loss. A common litigation fund has been organized, but many are worried about certain red flags associated with the fund’s launch.  CryptoSlate reports that the social aspects behind Terra’s demise are ‘catastrophic.’ A compensation fund has been organized as a decentralized autonomous organization (DAO). Donors can donate to the fund, and in doing so, gain voting and other administrative rights to decision making functions.  Those concerned with the lack of regulation of cryptocurrencies claim they see red flags associated with the fund, however not much in the way of specifics have been delivered, and thus far no guidance from regulators or attorneys has been issued.   Click here to read more about Terra’s common litigation fund.
Case Developments Consumer

£6M in Back Dues Paid to UK Litigation Funder 

Novitas Loans made a 2021 announcement to freeze new loans servicing customer engagement of legal products and services. The franchise pivoted to new business with a focus on growing its long-term customer base. This, as July 2021 balance sheet line items signaled significant losses over the period.  Novitas noted a decision by leadership to audit its customer rolodex and product lines to link and remit the back payments. Partnering with a variety of legal service companies including probate, finance and medical litigation firms, Novitas booked pre-tax proceeds of £10.3M in 2020. From there things worsened, with 2021 figures suffering a loss of £50.6M pre-tax. Making matters worse, 2021 assets under management declined over 15% to  £183M. The firm says it will stay in operation to support existing customers.
Commercial Legal Innovation

Shakespeare Martineau is the United Kingdom’s New LitFin Solution

The United Kingdom is home to a new litigation investment solution powered by Shakespeare Martineau. Quick funding accessibility via alternative sources pair clients to several products, such as conditional fee agreements, after the event insurance, damage-based policies and third party investment.  According to LF Insider, Shakespeare Martineau says that the organization will be coordinating its product portfolio with various funders to provide a full slate of opportunities. This will include boutique and large-cap funders, along with insurers.  This framework will host a marketplace that is home to a competitive broker environment. Shakespeare Martineau will profit from its “FeeManage” product solution that crafts litigation funding products, accompanied by a charge fee.   FeeManage is designed to perform during active economic events that put pressure on corporate executives. Shakespeare Martineau aims to offer its services during times of need. 
Consumer Special Features

Litigation Financing is an Investment in Democracy

The following is a contributed piece from Rory Donadio, CEO of www.tribecalawsuitloans.com There are many ways to look at what those of us in litigation funding do. Is it a pre-settlement cash advance or a non-recourse loan? Is it truly lending, or is it an investment? But far more important than what we call our work, is what we actually do. According to a September 2021 Bloomberg Law Litigation Finance Survey, 88% of the responding attorneys believe that litigation finance enables better access to justice. Without justice for all, democracy fails. So, I submit that litigation financing is an investment in democracy. Since the inception of this industry, back when it was ripe for opportunity and unregulated like the wild west, I have been excited and driven to help real people in their search for justice. We help level the playing field between large, powerful companies and financially damaged individuals who have been harmed. A pre-settlement loan robs the insurance company of the plaintiff's economic desperation they are so eager to weaponize as they strive to protect their clients from accountability. With the litigation funding we provide, ordinary Americans can do the extraordinary — hold the most powerful entities in our society accountable for their actions. What could be more fundamental to democracy than this? We are investing in democracy. Believe it, and never let it go.

Advice to Others in Litigation Financing

When Tribeca advises newcomers to the industry, I tell them to diversify their portfolios to invest in a wide range of cases. I encourage them to prioritize relationships with everyone — with clients, lawyers, the mailman, the person checking your groceries at your local store, that stranger who looks like they need a friend, and of course, other funders and brokers. Most importantly, I advise them never to lose sight of the genuine good you can do with litigation funding. Never forget that we are helping real people in need — that we are investing in democracy. Let me share a story of one of our clients, who I am now proud to call my friend. Derrick Hamilton’s case is one — of many — that clarified how litigation financing is indeed investing in democracy.

When Democracy Falters

In 2011, Derrick Hamilton was released from prison after serving 21 years for a murder he did not commit. He was fully exonerated in 2015. In this country, we say it is better to let ten guilty men go free rather than convict a single innocent man. Yet our judicial system snatched more than two decades of this man's life. Our legal system failed him. As bad as his wrongful imprisonment was, the way he was treated after his release was almost worse. He was released from prison into poverty with no support structure. And when he sued the state for compensation for the wrongful imprisonment — you know what happened next — the state's attorneys stalled. Despite knowing the state wrongfully locked this man away from his family, his friends, and his life, knowing the state owed him compensation for this vast injustice, the attorneys representing New York and Connecticut still dragged out his compensation negotiations for six years. Think about that for a moment. There were no complex issues to analyze or painstaking research required. Nevertheless, more than two decades of this man's life were stolen — a fact recognized by all sides. They delayed his compensation — for six entire years — because they could. They hoped that his financial straits would force him to accept far less money than he was owed, just to make the pain stop. It nearly worked. Fortunately, we were able to help fund his wrongful incarceration lawsuit. I gained so much more than a business deal from the experience.

All Money is Alike

If you are desperate and cannot scrape the funds together to keep a roof over your family's heads, or provide necessary medical care, then every dollar is precious. But when you have enough money to cover all your needs and wants, then every dollar is just like any other. Forever chasing money simply adds up to bigger stacks of paper. But when we invest in people, we create opportunities to flourish. Unfortunately, sometimes these opportunities are squandered. But through passion, hard work, and faith in God, some people turn their chance to thrive into a way to lift up those around them. When this happens, you know your investment has paid rich dividends.

Investing in People Reaps Enormous Dividends

Supporting cases like Derrick’s crystallized my sense of the work we do. I recognized that, in a small way, I was investing in him and our democracy by helping him continue his fight for justice. I initially helped one man. Then, with the pre-settlement funding we provided, Derrick opened a business of his own, and invested in someone else's restaurant. He netted the money he needed to hire other exonorees to work with him, pursuing justice for others still behind bars. He did this all while continuing to fight for the compensation he deserved. When I look at all Derrick accomplished with the lawsuit loan I provided — just a cash advance on the money he was owed — I am both humbled and in awe. I helped Derrick Hamilton, but he, in turn, helped his family start a business and another company grow. He has employed other men in his very same circumstance, others unjustly imprisoned, and together, they help even more people. Every dollar is a duplicate of another, but a single life that is improved reaches far and wide, bettering the lives of others. Whether someone we help plants a garden, raises a child, or creates opportunities for others our society has left behind, it is a beautiful thing. And each of these lives is singular, unrepeatable, and utterly unique. Calculating the way one life can enhance so many others, strengthening our society and making our democracy work just a little bit better is much messier than standard accounting, and more challenging. The math is harder, but it’s so much more rewarding!

Building a Team and Moving Forward

More advice for others starting out in litigation financing — surround yourself with quality people who share your vision. After 28 years in the industry, I now have an incredible staff that does just that. They are open-minded, caring, and hardworking. They dig into the ways legal funding invests in people and strengthens our democracy. They never shy away from the messy accounting involved. What's different for me today, is that I am not afraid of admitting that I have made a mistake, I can own it, and I can learn from it. When I was one of the litigation financing industry’s pioneers back in the 90s, there were no guardrails or guidelines. In many ways, we were inventing the industry as we worked. Together we helped a lot of people, but I also made plenty of mistakes. I lost deals and made loans I should have walked away from, but these mistakes helped to form the man and the investor I have become today. My faith has allowed me the comfort of knowing there is enough for my storehouse. I don't have to have every deal. I credit self-reflection, passion, work ethic, and my relationship with God as the secrets to my success. In addition, the willingness to make mistakes and to learn from them — to grow — is as essential to success in this field as in any other. Each case is so different from the next; there's plenty of trial and error involved. So when mistakes happen, the truth is better revealed because you see the problem more clearly. The goal should not be to avoid failure but to learn from it and move on. My mantra has become, “Yesterday's denials are today's approvals.” I find my passion for litigation financing redoubled. I feel honored to be in a position to invest in our democracy’s justice system.

Where is the Litigation Financing Industry Headed?

As long as we have positive regulation in the market, the litigation financing industry will continue to grow. We must be proactive with legislation to keep companies honest and keep the industry available to those who need it. I see legal funding as a genuinely noble business, where we use our money to help vulnerable people in distress meet their needs and secure the compensation they deserve. Sadly, some see nothing but an opportunity to victimize these people further and take quick profits with no regard to the damage they inflict. Our industry needs sensible regulations that do the following:
  • Rein in predatory lending practices
  • Allow consumers to get the help they need
  • Protect the litigation funder's investment in the case
Currently, there are bills in Kentucky, North Carolina, New Jersey, Colorado, and New York that we are watching closely. At this time, most appear to be positive legislation that can benefit our industry and our clients. Too often, legislators don't understand our industry, or they paint the good and bad actors with the same brush, so it's vital to be proactive as legislation is written and debated. Litigation financing can serve a diversity of clients and needs. Sometimes, it helps individuals pay their rent while settlement negotiations drag on. Other times, it can provide a litigator with the funds they need to hire an expert witness or get an expensive analysis completed that can make their case. It can also be used for operating capital for commercial entities during litigation to cover their costs. Get creative in the way you look at legal funding, and you'll always find people who will benefit from your support. I am the CEO of Tribeca Lawsuit Loans. We fund a wide diversity of personal injury and mass tort litigation. The cases I am closely watching in 2022 include: Lastly, wrongful imprisonment cases will forever be near and dear to my heart. Accordingly, I’ll be fascinated to see how the class action lawsuit against Hertz — for its disgraceful practice of falsely accusing customers of rental vehicle theft—shakes out. The author of this article is Rory Donadio. Rory can be reached by email: rory.donadio@tribecacapllc.com  
Commercial Regulatory Issues

Video: Liberty Mutual on Global Litigation Finance Transparency 

Mike Fallon (President of Major Accounts at Liberty Mutual Global Risk Solutions) spoke with Meg Green at Engage RIMS 2022 in San Francisco about the impact social inflation has on litigation finance. Mr. Fallon suggests that greater transparency is necessary from Liberty Mutual Global’s perspective. Mr. Fallon’s interview with Ms. Green suggests that during jury deliberations, jurors should be aware of fundamental funding arrangements that brought the case to court. Fallon notes that social inflation is a byproduct of COVID-19 supply chain disruptions. Mr. Fallon also describes how litigation finance is a prime utility for many who require investment dollars to bring a case to completion.  Click here to watch the interview.
Commercial

The Attorney’s Litigation Finance Lexicon Handbook 

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

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

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

Insolvency Funding in France 

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

Law Society of Scotland on Post Office Scandal Litigation 

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

The Legal 500 Lists the UKs Top Litigation Financiers 

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

Rankings Table

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

Video: Mass Tort Finance Innovation 

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

The Arkin Cap Debate 

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

Global Electricity Cartel Faces Class Action 

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

MoneyWeek on Bankrolling Global Litigation Finance 

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

Litigation Investment Ethics for the Modern Attorney

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

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

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

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

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

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

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

ABOUT LCM

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

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

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

Consumer

New York’s Clergy Concerned About Consumer Litigation Funding Act 

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

Sberbank CZ Litigation, Insolvency and Liquidation

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

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

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

Third Point LLC on Shell PLC Restructuring 

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

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

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

Lexshares’ Q1-22 Litigation Finance Industry Outlook 

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

Burford Capital’s Insights for Women in Law

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

Forecasting Litigation Investment Consolidation 

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

The Frothy UK IP Litigation Space 

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

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

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

New York Court of Appeals Rejects Litigation Agreement Discovery 

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

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

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

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

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

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

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

About Omni Bridgeway

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

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

About Northleaf Capital Partners

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

Announcements Commercial People Moves

Validity Finance Approaches Fourth Anniversary with New Key Hires and Promotions

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