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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.
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.  
Commercial Regulatory Issues

Singapore’s Ministry of Law Embraces TPF

Singapore began the year with an extended approach to the interpretation of third party funding frameworks (TPF). The Singapore International Commercial Court (SICC) now allows TPF coverage for some cases, and now domestic arbitration proceedings may be financed via TPF.  Singapore’s Ministry of Law issued guidance last year that further expands the government's interpretation of TPF. Singapore’s marketplace continues to respond favorably to TPF, with interest increasing exponentially. Approved categories for TPF agreements are expected to increase over the near term. 
  • Understanding advancement through quality professional conduct, attorneys in Singapore are employed by the “Legal Profession (Professional Conduct) Rules 2015.” TPF agreements fall under these rules that aim to eliminate unnecessary conflicts of interest. 
  • Foreign attorneys involved in SICC litigation are managed by the “Legal Profession (Representation in Singapore International Commercial Court) Rules 2014.” Singapore notes that SICC rules will soon be updated for foreign TPF arrangements.  
With an uptick of legal disputes post-pandemic, many firms are now insolvent. Legal rights are protected, but financing those rights has traditionally been challenging. Singapore expects TPF to afford broader access justice.
Commercial Deals

Video: Funding Offshore Litigation

A new video exploring offshore litigation investment is a must see. The joint Brick Court and Hereford Litigation seminar with Vernon Flynn QC, Benjamin Woolgar and Ben Mays profiles thoughts, ideas and trends driving offshore litigation funding innovation.  Here are some key takeaways from the film on Brick Court's YouTube Channel: 
  • Litigation funding as a tool is still being digested by the broader public. Such public awareness campaigns have yet to be groundbreaking. Over the lifetime of the industry, key historic moments will be linked to developments in public exposure. 
  • In theory, there is no limit to the amount of litigation investment dollars associated with large scale offshore litigation portfolio assets. 
  • Litigation finance is more than a finance tool. Some are embarrassed by the outdated view of the litigation finance industry. 
  • Sophisticated relationships and trusted partners are the core of offshore litigation investment. It is a long term relationship. 
  • Offshore - onshore ligation partnerships are smart. Cross border litigation funding is less developed than onshore practice. 
  • There is a spectrum reflected between offshore and onshore litigation innovation.
  • Cultural change is an international movement. Yet, issues of principles are still evolving. 
  • Enforcement of offshore litigation claims is emerging. Some argue case litigation costs should be recoverable assets. 
  • Fraud and asset recovery is earning new offshore investment. 
  • Case analytics powered by data seem important, but fundability is still heavily subjective. 
Watch the entire seminar on YouTube. 
Commercial Regulatory Issues

Australia Debates Litigation Payout Cap 

Class action reforms are being assessed across Australia. Concern has been raised over a proposed 30% cap on litigation funding payouts. Critics say that the cap would seriously hamper access to justice for the most disadvantaged Australians.  The Australian Financial Review reports that Western Australia’s Attorney General has asked Canberra for good governance in striking down the proposed litigation payout cap. So far, the Commonwealth’s litigation finance amendments are held up in Parliamentary debate. A blanket litigation agreement payout cap stands as an imposition to many established litigation finance operations across Australian states and territories.  Resistance to the litigation payout cap stretches into the regional Australian Outback. Proponents argue that indigenous Australians historically have benefited from litigation finance as a class action facility. And funders say that it is not always feasible to adhere to a ‘cookie cutter’ payout provision, given individual case dynamics.  The ethical and moral question of litigation funders manipulating claimant returns is at the heart of the debate. We will have to wait and see how Australia will rule on the proposed 30% litigation payout cap. 
Commercial

The Booming Litigation Finance Market

According to Advanced Market Analytics, the world-wide litigation finance market is expected to continue its acceleration. The company's research explores litigation finance’s evolving trends, opportunities, drivers and red flags across international markets. Expert research suggests that the dawn of global litigation finance is a product of strong research and development budgets. 

Akshay Mishra recently previewed Advanced Market Analytics’ research on litigation finance. Opportunities continue to emerge as global public awareness of the sector continues to mature. Key advantages of litigation finance agreements seems to be fueling cross-continental growth in Europe, North America, Africa and the Middle East. 

However, with all the promise of a prosperous litigation finance market economy, challenges loom for the industry. For example, cyber security and data privacy are compliance concerns still begging to be flushed out through innovation.   

We contacted Advanced Market Analytics to learn more about their research findings. They shared a sample of their new report here.  

Commercial Legal Innovation

The History of Litigation Finance

The emergence of litigation finance in mainstream society over the last decade is built upon a rich history. With the invention of legal systems and processes, third party investment of issues related to law span centuries, and range across all continents.  ValidityFinance.com profiled the history of ligation finance. Here are some highlights:
  • Contingency litigation agreements have been the foundation of the industry. More or less, attorneys bear the responsibility of funding litigation with hope of winning and sharing rewards with the claimant. 
  • Pro-bono third party financing is a donor-based facility that is considered a highly respectable practice 
  • Informal solutions such as friends, family and/or associates serving as benefactors to fund litigation is the historical bread and butter of the industry. Paving the way for pro-bono and contingency marketplaces.   
Validity suggests that litigation finance is not a revolution, but rather a steady legacy of evolution. Check out their insights to learn more about the industry’s history. 
Commercial

NYSBA Seminar, Litigation Finance In 2022

On Thursday February 3, 2022 the New York State Bar Association (NYSBA) will host a seminar titled, “Litigation Finance In 2022: Ethical Considerations For Attorneys And Current Marketplace Trends.” The discussion will be hosted by Lexshare’s CEO Cayse Llorens and Vice President of Business Development and Investments Matt Oxman. Both will explore ethics behind litigation finance business innovation. The discussion aims to correlate maxim client value with attorney ethical decorum. The seminar will survey developments to New York’s rapidly evolving litigation finance community.  NSBA will be issuing 0.5 Ethical and Professionalism credits for attendance. Tuition assistance is available for those in need.
Commercial

Video: Third Party Funding Enforcement

Olivia de Patoul, Senior Legal Counsel for the Asia-Pacific region at third-party funder Deminor, recently discussed enforcement issues with third party funders.  In a new video, De Patoul shares some background since opening her Hong Kong office in 2018. Deminor saw opportunities in Asia, specifically, Hong Kong and Singapore, which have both been a focus of Deminor’s as third party funding investment opportunities expand.  De Patoul notes that the market still needs to familiarize itself with new ways of pursuing third party claims; she expects third party investment to be more commonly pursued over the coming years.  The video comments are part of an update to Conventus Leadership’s essay on drivers to Asia’s adoption of third party funding.
Commercial Regulatory Issues

What is Federal Rule 26? And Why Does it Matter?

Federal Rule 26 serves as general guidance to the duty of disclosure during discovery proceedings. The question is, should litigation finance agreements fall under Federal Rule 26’s purview? Significant effort has been invested in various proposals requiring litigation funding information to be made available under Federal Rule Rule 26.  AboveTheLaw.com reports that a recent effort to amend Federal Rule 26 with a “one size fits all” provision requirement for litigation finance agreements has failed. The Federal Rules Advisory Committee on Civil Rules has upheld the notion that the decision to disclose litigation agreements resides with the litigant.  Proponents of amending Federal Rule 26 have petitioned for a Third Party Litigation Finance pilot project through an amendment to Fed. R. 26(a)(1)(A). Federal Rules Advisory Committee members signal no intent to approve any such measure, anytime soon.  Check out AboveTheLaw.com’s full deep dive into the latest news on Federal Rule 26. 
Commercial Regulatory Issues

Fifth Circuit Rejects LitFin Challenge for Lack of Standing

Anyone seeking to challenge a litigation funding agreement got a severe message from the Fifth Circuit court in December. The message is: You’d better have standing. An opinion by Judge Jacques L Weiner Jr. explained that the appellant-debtor in In re Dean did not have standing to challenge a funding agreement that had already been approved by a Texas bankruptcy court. Omni Bridgeway explains that the Fifth Circuit ruled that the debtor would not be impacted, either directly, financially, or adversely, by the funding agreement. This means that the court utilized the ‘person-aggrieved’ test to determine if the creditor was legally able to appeal an order from a bankruptcy court. The Fifth Circuit opinion was unanimous, and was joined by Judge James C Ho and Judge James E Graves Jr. The Texas case began with a voluntary Chapter 7 filing in US Bankruptcy Court for the Northern District of Texas. Scott Seidel was appointed trustee, and saw that he did not have the funds to pursue claims on behalf of creditors. He then entered a litigation funding agreement with Reticulum Management LLC. When Dean challenged the funding agreement, Seidel explained that funding was the best alternative since he couldn’t find a law firm who would take the case on contingency. Dean’s challenge centered around the idea that the agreement would disrupt the legal order of payment to creditors—putting the funders first in line. Ultimately, the ruling is good news for funders in the bankruptcy space, and good news for anyone pursing avoidance actions, breach of duty matters, tax recoveries, and insurance disputes.
Commercial Legal Innovation

Burford Capital’s Chris Bogart: Litigation Funding Innovator

After a notable career with Time Warner, Chris Bogart co-founded Burford Capital, now the global leader in litigation finance. It began with a simple idea: develop a third-party funding company that finances firms and individual claimants in exchange for a share in any settlement or award. As a moneymaker for investors and a way to increase access to justice—it’s a win-win. Carrier Management details that Bogart’s time with media giant Time Warner gave him considerable insight into the challenges of corporate legal departments. While the company had ample funds, spending on a legal budget seemed counterproductive. After drafting a contingency fee agreement for the Time Warner / AOL merger, Bogart realized there had to be a better alternative to paying lawyers by the hour. Burford Capital debuted on the London Stock Exchange in 2009. In October 2020, Burford became the first legal funder to be listed on the New York Stock Exchange. Since Burford’s formation, the insurance industry has leveled endless criticism at the funding industry. It’s no wonder, since keeping insurers honest is a common focus of funded cases. Insurers have asserted that funded cases take longer to litigate, lead to higher awards and greater expenses—all of which become ‘social inflation.’ This is what insurers cite as a reason to raise premium prices, negatively impacting policyholders. Bogart responds to this kind of criticism with a reminder that both funders and insurers are equally interested in fairness and efficiency, since they both work in the same litigation ecosystem. Litigation Finance has come a long way from its humble beginnings in feudal France. Today, funding alleviates the disparity between haves and have-nots in litigation. No longer can big businesses drag out funded cases to drain their opponents' resources. Gone are the days when class action plaintiffs are forced into accepting lowball offers because they lack the funds to move forward.
Commercial Fundraising

Crowdfunded Litigation Catches on in Scotland

Nearly 78,000 people have donated in an effort to crowdfund cases in the Scottish courts. A study published in Edinburgh Law Review details that The People’s Action on Section 30 has raised the most money of any crowdfunding campaign in Scottish legal history. Dr. Andrew Tickell led the analysis. Scottish Legal News explains that Martin Keatings, a pro-independence activist, secured over GBP 68,000 from nearly ten thousand people for his case centered on a hypothetical independence referendum bill, and whether such a bill would be under the purview of Holyrood. This is not the first successful legal crowdfunding venture. In 2019, a fund of more than GBP 207,000 was amassed in an effort to challenge Boris Johnson on the lawfulness of his prorogation of Parliament. Dr. Tickell affirms that legal crowdfunding is a viable and accepted form of legal finance.
Consumer

How Litigation Funding Benefits a Personal Injury Plaintiff

Litigation funding for personal injury plaintiffs is increasingly common, due to the myriad benefits it affords those heading into a costly legal battle. However, funding isn’t just about the money. Legal Scoops details the main benefits of pursuing legal funding for personal injury plaintiffs:
  • Justice. One of the most valuable aspects of third-party legal funding is that it increases access to justice. Funders allow more people to access the legal system in a fairer and more equitable manner.
  • Protection for the public good. The credible threat of lawsuits for illegal or unethical behavior is bound to keep businesses and insurers honest. Without backing from funders, even plaintiffs with strong cases may fall victim to lowball settlements.
  • Managing Risk. Experienced funders can advise on legal strategy and tend to have more experience when it comes to litigation, insurers, experts, and may be better equipped to navigate your case type. At the same time, funders have no decision-making power in the cases they fund—so the plaintiff makes the calls.
  • Efficiency. Funders know how to reduce the time duration of cases and how to best minimize costs.
Third-party legal funding is an innovative way to pursue a personal injury matter, and may have even more benefits than pure financing.
Commercial Deals

L&F Acquisition Corp Defies Expectation with Acquisition Target

All eyes are on L&F Acquisition Corp, launched by former chair of Kirkland & Ellis, Jeff Hammes, and CEO of Keller Lenker, Adam Gerchen. It was assumed that the SPAC would focus on acquiring a legal tech firm, however, the pool of potential targets expanded to include companies focused on Governance, Risk, and Compliance. Law.com details that it was then that Gerchen and Hammes reached an agreement with ZeroFox to take the company public. The expected valuation is about $1.4 billion. The complex and ambitious deal will also include acquiring IDX—a data breach response and digital privacy protection firm. This will enable the company to offer solutions for privacy and protection from cyber-attacks. It’s been suggested that time is a key factor in this deal. A SPAC has only two years from inception to securing a deal—otherwise, it can face liquidation. Since no one wants to risk that, it makes sense to expand the options for acquisition. According to Scott Mozarsky, formerly of Bloomberg Law and Vannin Capital, getting a good deal done requires a willing buyer and seller—plus impeccable timing. Mozarsky suggests that Hammes and Gerchen could have focused solely on the legal market and come up with a deal—but seem to have stumbled into the existing deal instead.
Case Developments Commercial

Billionaire Leon Black Accuses Co-Founder of Malicious Smear Campaign

Is Josh Harris, co-founder of Apollo Global Management, engaged in a plot to take down his former partner? Leon Black thinks so. He’s currently fighting a civil claim from his former mistress, Guzel Ganieva, who has accused him of sexual assault. Black is adamant that she is extorting him and that the years-long affair was consensual. Fortune explains that Black has filed a countersuit against his former lover, saying that an unnamed litigation funder and an as-yet-unidentified public relations team have joined forces, specifically to malign him publicly. Allegations against Harris assert that he used a PR firm to spread misleading information about Black’s business relationship with criminal sexual predator Jeffrey Epstein. Black was cleared of wrongdoing by a review commissioned initiated by Apollo, and appointed Marc Rowan as CEO last year. This effectively left Harris in the cold, possibly spurring his alleged campaign of harassment. How likely is it that a litigation funder would engage in a coordinated effort to smear someone? Surely such a gamble could reflect poorly on everyone involved, regardless of the outcome. We will keep an eye on any further developments.