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Commercial Regulatory Issues

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

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

Investing in Justice via Litigation Finance

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

The Global Patent Infringement and Litigation Financing Market 

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

A Global Litigation Finance Barometer 

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

Lawsuits May be the Only Valuable Possession of Newly Released Prisoners

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

The Complexities of Third-Party Legal Funding in India

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

Recoverability of Success Fees & ATE Premiums in Commercial Litigation

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

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

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

Litigation Finance Bounces Back as Normalcy Returns

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

Henderson & Jones Innovates With New Financing

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

Scramble to Recoup Rittenhouse Bail Windfall Involves Multiple Players

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

Fifth Circuit Rules on Lack of Standing 

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

LegalPay Banks Pre-Series A

Alternative investment hedge fund Hedona has joined LegalPay’s extended Pre-Series A offering. Based in India, LegalPay’s FinTech platform offers users alternative investment solutions specializing in legal insolvency and legal debt financing.  IndiaTimes.com reports that alternative financing and asset management is picking up momentum as the United States signals a hike in interest rates in the near future. Hedona’s founder notes that LegalPay’s unique offering is made possible by a strong management team with high calabar of character. Hedona suggests LegalPay is driven to capitalize on capturing the litigation finance marketplace in India.  LegalPay’s pre-series A has included investment from the Amity Technology Incubator and Venture Catalysts. Total funding for the round has not been disclosed.
Commercial Fundraising

JustFund Launches in Australia and New Zealand 

Recently, Andy O’Connor and Jack O’Donnell proudly announced co-founding the launch of JustFund. Aiming to pioneer improvements for equitable access to justice, JustFund has been selected to participate in a preeminent Australian and New Zealand accelerator, Startmate.  JustFund notes that in Australia, only around 20% of claimants seek advice around efficient budgeting for litigation success. This prompts the notion that many in the region are not aware of the benefits of litigation finance investment. JustFund highlights success in family law matters, where litigation investment helps achieve equitable results for justice.    The launch of JustFund has received praise in the Australian and New Zealand litigation finance marketplace. We will continue to report on JustFund’s journey throughout the weeks and months ahead.
Commercial Deals

Construction Claims and Litigation Finance 

Contractors that pursue third party construction claims are seeing results, according to a new research report by Collaboration Management and Control Solutions. Construction litigation finance is not limited to rudimentary forms of organization. Technology is driving the future of construction litigation investment with surprising outcomes.  Bassam Samman, PMP, PSP, EVP, GPM authored the 10 page expose’ profiling the latest technological innovations related to efficient systems and processes related to construction litigation finance. Samman rightfully suggests that organization is key, further highlighting the necessity to digitize construction claim blueprint documents. Furthermore, Samman analyzes technological reporting use cases for instances of tracking deadlines to help push successful construction claims to fruition.         Samman notes quality and best practices in construction claim management are an artform. His report operates as a resource tool, profiling technology that is fueling the next generation of a successful construction litigation finance marketplace. 
Commercial

Litigation Funding in India 

While India has no direct legislation overseeing its litigation funding marketplace, traditionally the courts have supported a balanced approach to the sector. Indian magistrates have embraced the concept of welcoming third party funders. However, Indian attorneys are widely recommended not to work on contingency, due to ethical implications.  Ksandk.com recently profiled India’s third party litigation ecosystem. While courts are generally accepting of litigation investment contracts, there have been instances where such contracts have been rejected due to various conflicts. As with many markets, India has wrestled with the notion of social inflation related to third party litigation investment. And as with many other global jurisdictions, India has proven that frivolous litigation agreements are self policing, in that the investor’s bottom line often dictates a hope for a successful outcome.  Looking to the future of litigation funding in India, agreement transparency and confidentiality are paramount for the industry's success. Experts warn that the Indian legal system (like many others) operates with cumbersome systems and processes, costing time and ultimately money. As such, successful litigation investors must embody the virtue of patience within their business plans. 
Commercial Deals

Corporate General Counsels Look to Claim-Based Enterprise 

The task of any good corporate general counsel is to protect the firm from loss, and recover any reasonable damages in a claim. Costs associated with running a business are leveraged against profits associated with the firm’s day-to-day operations. Most executives are risk averse in entertaining the notion of supporting a general counsel, whose baseline costs are spiraling out of control.  Themis Legal Capital suggests an innovative approach to financing the modern general counsel’s office through claim-based enterprise. Given the episodic nature of meaningful litigation, budgets are often hard to estimate in advance. Once a claim comes to fruition, it can often be challenging to manage financial headaches along the way. Meanwhile, recoveries of meaningful ligiations can be 10x the investment. The debate many general counsels have is how to secure a recovery while balancing a multi-year litigation budget to yield a prospective recovery.  Claim-based funding can dramatically improve the calculus for many corporate general counsel offices. Themis suggests the concept of building a portfolio of such claim-based litigation instances. As the successful rulings start rolling in, the firm may see the general counsel's budget fully funded through payouts and settlements. This is a dream scenario which litigation funding can potentially offer.
Commercial Special Features

Key Takeaways from the LFJ Podcast with Mani Walia of Siltstone Capital

On the latest episode of the LFJ Podcast, we spoke with Mani Walia, Managing Director, General Counsel and Chief Compliance Officer and Siltstone Capital. Siltstone is a Houston-based alternative investment firm that invests in litigation finance claims, focusing on $500,000 to $5 million funding requests. Siltstone is also producing LitFinCon, the inaugural litigation finance conference in the Houston area, set to take place on March 2nd and 3rd of 2022. Below are some key takeaways from the discussion: Re: Siltstone's focus areas Siltstone was founded nearly ten years ago in 2013 by a group of entrepreneurial, energy focused investors. Our team being entrepreneurial, was able to recruit folks with a very interesting set of backgrounds—not just energy sophistication on the nitty gritty of energy assets, but a legal team that understood that there might be value in claims. Through the course of our energy work, we discovered that there may be times that we have to evaluate cases and see if there is any merit to a potential case. And that’s where my addition to the team was something that shaped how we look at things. I have a litigation background and am honored to have learned how to case pick from one of the premiere litigation firms in the country. We had the impetus to start a litigation finance fund focused on energy because of the unique skills set that our team displays. So these two strategies are distinct, they have different bases and stakeholders—but there’s overlap. Re: Limited Partners and Structuring of Funds I’ll note that our funds are separate, so we have a set of funds that are tailored to the energy investor, and then a separate set of funds for those who might want exposure to litigation finance. We’re proud to have successfully closed our second such litigation finance fund in December of last year, 2021. Some folks want a little exposure in both areas, in particular because of the uniqueness of our team—the energy expertise and the focusing on finding value in energy litigation. Re: Types of Claims: Jurisdiction, Single case v Portfolio, Sizes? First, we’re really proud to have entered into a very collegial space. Most of the litigation finance brethren that we have have helped pave the way for entities like us. We’re guided by our experience, so we enjoy a laser-like focus with helping provide solutions only in the commercial context. We haven’t ventured outside into consumer finance or injury cases. We also, for the same reasons, enjoy funding patent infringement cases. Earlier in my career, I tried patent infringement cases and by actively litigating a case or subject matter you really develop the ability to understand what makes a case meritorious or advantageous or what makes the case not good. So those are the two sub-focuses in our commercial lending. We enjoy looking at single case risk or portfolio funding. Q: On ESG Investing & Access to Justice At the end of the day, the job of a funder is to make sure there’s access to justice for somebody who thinks he or she should have a day in court. Embedded in that is an inherent ESG leveling-the-playing-field thought process. Learn more about Siltstone's upcoming event, LitFinCon (the inaugural litigation finance conference in the Houston area), here.
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Commercial Regulatory Issues

Developing Law and Litigation Funding in Israel

Courts have established a welcoming environment for third-party legal funding in Israel. Individual issues still remain vague, as no comprehensive rulings governing funding have been issued. Still, courts have responded positively to funding, which led to rapid growth in both liquidation and general litigation. Woodsford Litigation Funding details the most important developments in the Israeli markets. It speaks to funding being an accepted part of the legal landscape. Over the last five years in particular, TPLF has grown rapidly. Here are some key takeaways from the evolution of the funding landscape in Israel:
  • There are no set limits on how much fees or interest funders may charge.
  • Court approval is required for funding agreements in liquidation matters.
  • There are no specific legal provisions governing third-party funding.
  • TPLF ethics are guided by the Bar Association Rules, which do not include specific guidelines for lawyers advising clients on litigation funding.
  • No public bodies are currently responsible for oversight of funders.
  • Under Israeli law, there is no prohibition on funders having a say in the litigation process, strategy, or settlement decisions.
  • Class actions have been legally permitted in Israel since 2006.
  • Civil Procedure Regulations hold that only parties involved in litigation may be liable for adverse costs. This does not include third-party funders.
  • ATE insurance, while not prohibited, is not commonly used.
  • Except in liquidation matters, disclosure of TPLF is not automatically required. In some instances though, courts may compel disclosure.
  • Funders do not enjoy privilege protections the way client and lawyer communications do.
For a more comprehensive overview of the litigation funding sector in Israel, check out Woodsford's detailed report. 
Case Developments Commercial

Did Quinn Emanuel Urge Betrayal in Leon Black RICO Case?

A former model sued Leon Black, the founder of Apollo Global Management, alleging sexual assault. According to a brief filed last Monday, Wigdor, the firm that represents ex-model Guzel Ganieva, was approached with a deal to betray its client. Reuters chronicles that Black sued Wigdor and Ganieva in Manhattan federal court. Black asserts that the sexual assault accusation is part of a racketeering conspiracy to ruin his name. He also accuses an unidentified litigation funder. Wigdor, in turn, claimed that the racketeering accusation is improper and that the suit is a clear effort to retaliate against the firm representing Black’s accuser. Wigdor is demanding sanctions against Black and his counsel, Quinn Emanuel. The recent filing alleges that a partner at Quinn Emanuel, Michael Carlinsky, offered Wigdor’s counsel a chance to have the racketeering charge dropped in exchange for information on Josh Harris—believed by Black to be a co-conspirator. This deal, if accepted, would have required Wigdor to turn against its own client. Wigdor revealed details of the conversation with opposing counsel only after Black’s lawyers disclosed them first, in a brief opposing sanctions under Rule 11. Still, Carlinsky disputed the contents of the filing, saying the discussion was off the record—perhaps forgetting that off-the-record conversations are not immune from consequences if they involve illegal activity. Black is no longer represented by Quinn Emanuel in the suit against Wigdor and Ganieva. They did not offer a reason for this decision. A Wigdor representative asserted that the firm may be attempting to extricate itself from initial accusations against Wigdor for racketeering. Meanwhile, Josh Harris may be the mysterious unnamed funder of the sexual assault lawsuit. He is believed to have a grudge against Black after being passed over for promotion by his former mentor. Harris denies involvement and denies knowing Ganieva. 
Commercial

Litigation Finance Fine Tunes How Legal Claims are Pursued

Despite the benefits being obvious, debate continues as to whether Litigation Finance is a net positive for the legal system. Some say that easy access to lawsuit funding may result in frivolous, docket-clogging litigation. But is that accurate? Validity Finance clarifies that litigation funding has an array of benefits, some of which can occur before a case even begins. It may seem natural to presume that an increase in available funding will result in an increase in litigation. But that’s not necessarily the case. Just the prospect of plaintiffs being funded can be enough to sway potential defendants toward restitution. Funded plaintiffs can’t be dismissed or strong-armed, the way financially strapped claimants can. Litigation funding may actually deter companies from committing breaches or other offenses. Knowing they can be held accountable will increase corporate honesty and encourage good behavior. Funders apply careful vetting to cases, and nobody wants to fund a case that lacks merit. This is in direct conflict with the assertion that funding will result in “frivolous” legal actions. Realistically, the opposite is true. Funders contribute to fewer frivolous cases moving forward. Funded cases give claimants an opportunity to hire expert legal counsel, find solid experts, and conduct the necessary research. This leads to a more truthful and fair proceeding and better access to justice. While some have suggested that legal funding contributes to the cost of legal services, the evidence suggests otherwise. Funders increase price competition. Partial contingency and other alternative fee agreements serve to lower the cost of legal fees as firms compete to offer the best options to clients. Litigation Finance is a simple concept that allows risk to be taken on by the parties who are best able to bear it—while providing societal benefits and financial incentives to do so. This in turn increases access to justice.
Commercial Regulatory Issues

District of New Jersey Litigation Funding Transparency Rule 7.1.1

It’s been nearly seven months since District of New Jersey Local Rule 7.1.1 came into effect. The rule requires disclosure of the existence of third-party litigation funding within 30 days of filing a case. This includes the identity of the funder, a description of the funding agreement (but not the full agreement itself), and a statement regarding whether funder approval is necessary for strategy or settlement decisions. Lexology details that two states and about one-quarter of federal district courts require disclosure of third-party funding. Some proponents of litigation funding suggest that disclosure requirements serve no valid purpose, and may be weaponized against funded plaintiffs. While that concern is valid, so far it doesn’t appear that Rule 7.1.1 is being used punitively, or as a strategy to force settlements. At least not yet. The rule hasn’t even been in place for a year. Why was Rule 7.1.1 adopted at all? It’s been suggested that the rule is a reaction to a ruling in Valsartan N-Nitrosodimethylamine (NDMA) Contamination Products Liability Litigation, 405 F. Supp.3d 612 (D.N.J. 2019). The ruling rejected the idea that judicial trends were leaning toward disclosure of third-party funding. The Valsartan ruling negated multiple other rulings that ordered disclosure of TPLF. The ruling caused outrage among federal judges in the district. This, in turn, occasioned them to draft a local rule that would apply to all cases in the district—effectively using a legislative solution to overcome what some saw as a bad decision on the part of a single judge. In that context, it’s unsurprising that many in the funding community find Rule 7.1.1 to be arbitrary and unnecessary. Indeed, it was a response to a single ruling in one case—albeit one with a ripple effect.
Consumer

ATR Incensed by “Judicial Hellholes”

The American Tort Reform Foundation has recently published a list of jurisdictions that are innovating and expanding protections for the public good. The trouble is, ATR dramatically refers to these enlightened jurisdictions as “judicial hellholes.”  JD Supra details that ATR lists eight “hellholes” to avoid for high verdicts, litigation-finance-friendly rulings, or open-door policies. California, apparently, is number one because a court held e-commerce companies strictly liable for items sold on their sites. Also, the AG took a more expansive view of laws meant to curb public nuisance. New York makes the list because of the large number of ADA and asbestos lawsuits. South Carolina and several Illinois counties also make the list for their stance on asbestos litigation. ATR also maligns what it refers to as a “plaintiff-friendly” atmosphere. The city of St Louis makes the list as a venue known for large “excessive” verdicts. It seems clear that ATR displays a clear bias toward defendants that include alleged polluters, unscrupulous insurers, and those who fail to make legally-mandated accommodations for the disabled. As one might expect, the 2022 “Hellhole watchlist” includes dire warnings about the spread of litigation funding.
Commercial

Leveling the Playing Field with Litigation Funding

Why has Litigation Finance taken off in recent years? There are many contributing factors. The rising costs of litigation certainly play a part in the popularity of third-party funding. The COVID pandemic led to disputes as insurers and corporates battle in lawsuits involving breach, insolvency, and business disruption. The innovation happening in the legal funding landscape has made the practice more versatile than ever. Increasingly welcoming legislation has helped refine TPLF and increase consistency across jurisdictions. Lawyer Monthly details that the benefits of Litigation Funding are myriad. Its use reduces the strain on litigants because the financial risk immediately shifts to the funder. The non-recourse nature of legal funding means companies and individuals alike can take on meritorious litigation without risking their existing capital. Funders investigate cases thoroughly, evaluating them for merit before offering a funding agreement. This ensures that the case is a strong investment while signaling to the opposition that the case is supported and believed to be meritorious. This alone may be enough to convince a defendant to put a reasonable settlement offer on the table. Some data suggests that as many as 80% of cases settle before trial. Hundreds of years ago, it was alleged that champerty and the concept of non-participants funding a legal action were not in the public interest. Modern rule of law disputes this. Gradually, countries around the globe have abolished champerty and maintenance prohibitions, and continue to introduce laws that recognize the value and necessity of legal funding. It’s well established that a society of laws that restrict runaway governments, offer basic civil rights, and punish criminals performs more optimally than societies that don’t. With that in mind, increasing the chances that wrongdoers will face appropriate consequences is a net gain for society. By allowing meritorious cases to proceed regardless of the finances of the plaintiff, litigation funding does exactly that.
Commercial

New Burford Q1/22 Quarterly

Buford’s new quarterly for the first quarter of 2022 has been published. Flush with global uncertainty from the evolving pandemic, Burford’s quarterly aims to explore litigation finance growth opportunities.   Downloading a copy of the quarterly will provide concept blueprints that explore value generations powering 2022 litigation finance. The quarterly expands upon enterprise building techniques, and expert contributors digest upcoming challenges which many will face across the global industry. Here are some topics that Burford’s Q1/22 Quarterly Covers: 
  • Best practices for delivering effective diversity campaigns in litigation finance.
  • Worldwide antitrust competition insights.
  • Asset recovery trends. 
  • International arbitration trends. 
  • Patent and IP litigation trends. 
  • Insolvency and bankruptcy trends. 
Burford issued 30 highlights to the quarterly, containing some interesting points that stand out.
Commercial Regulatory Issues

Aussie Funders Want to “Save Class Actions”

There is a third party funding battle playing out in Australia. The argument Omni Bridgeway, Vannin Capital, ICP, Litigation Lending and Balance Legal Capital are making Is that the Australian government’s proposed 30% cap on litigation investment compensation is egregious.  SaveClassActions.com.au is the fund created to “Save Class Actions” in Australia. The 30% litigation funding cap has yet to receive a robust review by the Australian Parliament. Proponents of the cap tease a design to give courts more power to oversee class action award distribution.  Save Class Actions has an entirely different outlook. SaveClassActions.com.au is a modern, media rich campaign to safeguard Australian litigation finance innovation, according to the site.  As this ongoing debate develops, we will continue reporting on the unfolding ligation finance developments out of Australia. 
Commercial

Is Litigation Funding the Cause of Social Inflation?

In 2020, an estimated $17 billion was invested in litigation funding globally. More than half of that was in the United States. According to some, like Swiss Re, this is the cause of higher insurance premiums and availability, as well as social inflation. But is that accurate? And if it is, is that necessarily a negative? Risk and Insurance details that a report from Swiss RE suggests that third-party legal funding incentivizes claimants to begin and even prolong lawsuits. The assertion is that higher awards drive insurance costs and reduce coverage—leading to more uninsured people and businesses.   The accusation that third-party funding causes social inflation is missing one important detail: No funder wants to financially back a losing case—in other words, one without merit. The impetus for third-party legal funding involves expanding access to justice, funding cases that impact the environment, social justice, and governance issues—and, ultimately, turning a healthy profit. Let’s look at some figures and what they might mean:
  • Judgement size has grown by 26% between 2010-2019 for general liability cases. That doesn’t seem like an inappropriate amount of growth for a ten-year period—especially considering corporate profits during that same time.
  • Plaintiff costs have grown from 26% to 38%, ostensibly because of the share that goes to funders. Of course, without funding, these cases may never see the inside of a courtroom.
  • Last year, 38% of legal funding deployments went to mass tort, 25% to personal injury cases, and 37% to commercial litigation. Is that a negative? Or is it a natural outcome of increasing access to justice for those who were once grossly lacking the means to bring claims forward?
Is TPLF the cause of social inflation, or a natural outcome of leveling the legal playing field? Perhaps the answer depends on which side of the legal claim you happen to be on. 
Commercial Legal Innovation

Is Litigation Finance Really so New?

Third parties funding legal cases is certainly not new. In fact, the practice has existed since the middle ages. Once called ‘champerty and maintenance,’ third party funding of claims was banished by much of the globe until just a few decades ago. Comparatively, legal funding isn’t that different than the types of third-party financing used by individuals and businesses to meet normal business needs. Validity Finance details that third-party legal funding can take many forms, including pro-bono litigation. Insurance subrogation is another form of funding that assists claimants and increases access to justice. Notice that neither pro-bono litigation nor insurance subrogation are considered flaws or bugs in the legal system, but rather, necessary and helpful features. Corporate claim holders make use of litigation funding, even though they have enjoyed access to capital markets for some time. Even fledgling companies may be able to raise funds by selling litigation assets—such as patent cases. While not every company has a need for third-party legal claims, most could benefit from the practice if they so choose. Looking at the available evidence, it’s clear that third-party legal finance levels the playing field to a great extent. Big businesses have less of an advantage over smaller ones, and even less over individuals or a class of claimants with a meritorious case. Limiting or banning litigation finance would widen the chasm between the haves and have-nots. In the legal landscape, that leads to rampant injustice for those who can afford it least. The fact remains, third-party legal funding has been part of the legal system for almost as long as legal systems have existed. Modern litigation funding is a natural evolution that now includes monetizing claims and awards, enforcing judgements, and getting collective actions off the ground. In the end, anything that increases access to justice is a net gain for society.
Commercial Fundraising

Calumet Capital Expands with $300 Million from Alternative Investment Firm

Calumet Capital, known for investing private capital into contingent fee law firms, recently announced a $300 million commitment from a global alternative investment firm. This is coupled with already ongoing expansion plans. Reported Times explains that Calumet’s expansion began after company headquarters moved to Miami in 2020. It retains resources in Charlotte, Cincinnati, and Chicago as well. Calumet also boasts a new Senior Director overseeing sales and marketing—Matt Rimmer. Calumet founder, Dan Carroll, states that these expansions will allow the company to meet the rising demands of the market.
Commercial Legal Innovation

Data Security Damages Paid in Advance?

NYCCoin and New York-based Stacks pose a billion dollar question: Are Hong Kong data rules the same as China data rules?  We recently reported that former Communist China has not been known for access to justice. In fact, recent protests in Hong Kong sprung up due to China’s Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation. Yet Communist China is experiencing a Social Spring (a transformation from Communism to Socialism). What role will China’s Communist roots play in future access to justice?  The Cyberspace Administration of China (and Hong Kong) issued new guidance on third-party products and services that cause damage to users. According to the Cyberspace Administration’s guidance, users can request Internet platform operators to pay compensation in advance for data violations.  Hong Kong is the data hub for Stacks, where internet platform operators shall assume data security management responsibilities for third-party products and services connected to their platforms. Hong Kong mandates clarity of data security responsibilities for third parties through contracts and other forms, and urges third parties to strengthen data security management, and adopt the necessary data security protection measures.
  • Stacks’ strong third-party presence in Hong Kong extends to China. One of Stacks’ board members has served as a leader of a Shanghai based incubator. 
  • Stacks maintains a legacy of top investors based in China. With a Hong Kong data warehouse, it is safe to say that NYCCoin powered by Stacks raises a few cybersecurity concerns. 
  • The looming question is if Proof of Transfer (PoX) Stacks’ extension to Proof of Burn (PoB), where miners compete by 'burning' (destroying) a Proof of Work (PoW) from an established blockchain, is allegedly illegal in Hong Kong, under the Cyberspace Administration’s new guidance. 
PoX, when used for participation rewards (Such as with MIA Coin, NYCCoin and STX), could lead to miner consolidation. Because miners that also participate as holders could gain an advantage over miners who do not participate as holders, miners would be strongly incentivized to buy the new cryptocurrency and use it to crowd out other miners. In an extreme case, this consolidation could lead to a centralization of mining, which would undermine the decentralization goals of the public blockchain.  China, along with Hong Kong, has outlawed various forms of threats to international peace and security. Hence, Hong Kong likely will support all reasonable TPF ligations up for consideration.