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Commercial

Mainstreaming Legal Funding: Good News or Bad?

Third-party legal funding is on the rise, both in terms of major players and client requests. Money is pouring in from investors, and some hedge funds are even funding litigation without input from established litigation funders. But is mainstreaming litigation funding a good thing for industry professionals who already appreciated it before it was cool? Therium suggests that while mainstreaming can make some things less unique or special, that doesn’t have to be the case with Litigation Finance. Competition between funders is robust, and new funding entities are being launched regularly. That’s actually good news for plaintiffs looking for funding. An influx of smaller, boutique funders with a specialized focus are even more beneficial to those in need of bespoke solutions. A constant inpouring of capital means more people who need funding will get it. The main reasons legal funding is catching on have more to do with investment considerations than with general economics. Investors love investing in litigation for a few key reasons:
  • Possibility for large rewards—20% annually is not uncommon
  • Returns are uncorrelated to the stock market.
  • Alternative asset classes are a smart way to diversify one’s portfolio
What about the impact on law firms? Most analysts believe the mainstreaming of legal funding will offer greater opportunity. It will likely also lead to firms building relationships with funders, incorporating more sharing of risk into their existing business models. This may also lead to solidifying a hierarchy of funding classes—from large corporate funders to small boutique firms. Educating the public has long been a goal of the funding industry. When the public has a solid understanding of how funding works, the process of pitching funders becomes more streamlined with less wasted effort. In short, there’s no reason to fear the mainstreaming of third-party litigation funding. There’s room, and deployable cash, enough for all.
Commercial Regulatory Issues

Crypto Litigation Finance – Regulated Bitcoin is a Game Changer

What’s the connection between Litigation Finance and cryptocurrency? David Kay, CIO of crypto litigation finance entity, Liti Capital, says that the overlap between these two topics is an increasingly popular discussion in the digital assets theatre. News Nation USA explains that bringing cryptocurrency transactions into the Litigation Finance space is a way of leveling the playing field. Like traditional funders, crypto-focused legal funders provide funds that people can use to finance a meritorious legal case. Investors can use blockchain tokens (LITI, wLITI) to buy equity. Liti Capital finances appeals for crypto investors. Currently, over a thousand investors who lost money during the Binance outage are seeking more than $20 million in damages. Kay is expecting an epic battle once charges are brought against the world’s largest crypto exchange. Now that the SEC has approved a Bitcoin ETF, many suggest it’s bad news for so-called meme coins like Dogecoin and other fly by night cryptocurrencies. As new legislation is passed over the next few years, major industry adaptations are sure to follow. Coins with no real-world utility may fall by the wayside. Kay offered tips for building a portfolio of cryptocurrency. Diversification is necessary, as it is in most types of investing. Bitcoin is relatively stable—but still saw huge swings in the last year. Scams and fraud are also common in the crypto space. Knowing what you’re up against can make all the difference. Ultimately, careful study is the key to smart investing in the crypto space.
Consumer

Is There a Need for Tort Reform? Some Say Yes

October is known by some as “Lawsuit Abuse Awareness Month,” referring to an alleged scourge of abuse of the legal system. One purported example is a recent $80 million judgement against Monsanto, a subsidy of Bayer. After a jury determined in 2018 that the pesticide Roundup caused cancer, ATRA President Tiger Joyce claimed it was based on “junk science.” Inside Sources explains that the purported carcinogen, glyphosate, was declared safe by some organizations, but dangerous by others. This, combined with allegations of a “polluted jury pool” have led groups like ATRA to express a desire to see the Monsanto case reach SCOTUS. But should it? And is this indicative of a need for tort reform? Also under fire is a tendency for major class actions to advertise to potential claimants. On the surface, this may appear to treat a class action as a product to be hawked. But realistically, advertising is a reasonable and necessary way to inform the public about information that impacts them. Another allegation is that advertising for claimants prejudices juries. But of course, there are already safeguards in place, voir dire for example, to weed out biased jurors. Joyce asserts that juries can be swayed by the number of claimants in a class action, referencing a survey by Trial Partners Inc. Is that a bias, or simply a natural and reasonable conclusion? Ultimately, these calls for tort reform stem from the idea that legal funding makes it possible for people of modest means to have their day in court against large companies. Holding companies accountable and increasing access to justice is obviously something that should be encouraged, rather than reformed.
Consumer

Anonymous Aussie Solicitor Investigated Over Missing Funds

Solicitor XY, so named because her mental health could be damaged if her name is revealed, has been charged with doctoring invoices to steal funds. Her client, Hanadi Rafraf, sustained injuries in a car accident and was later awarded more than $450,000. Yet her lawyer gave her documents signed by a claims assessor explaining that she would receive $132,000 less than her stated award. Sydney Morning Herald details that the claims assessor, Hugh Macken, has told police that the signature on the fraudulent document was a forgery. Solicitor XY was charged in January of this year for creating a false document to obtain a financial advantage. In addition to this, XY declined to inform the Legal Services Commissioner that she had been charged with a serious crime. She has since claimed that the charges resulted from a dispute over costs, rather than a deliberate attempt to commit fraud. Before the LSC could rule on XY’s request to preserve her practicing certificate, it was discovered that she had fraudulently altered several more invoices in order to obtain funds to which she was not entitled.
Case Developments Commercial

Semiconductor Claim Against Apple Uses Third-Party Funding

Patent filings are on the rise, as 38 Patent Trial and Appeal Board petitions and 71 district court filings occurred last week alone. There have also been a spate of dismissals, settlements, and district court terminations. IP Watchdog explains that some cases are being voluntarily dismissed and refiled due to recent rulings and precedents. Courts have also seen an uptick in new non-practicing entity campaigns. Continental Circuits LLC has successfully sued several tech giants like Samsung, Intel, AMD, and MediaTek—collecting awards. Now, with the support of third-party legal funding,Continental Circuits is suing Apple and TSMC (Taiwan Semiconductor Manufacturing Company) over a set of expired circuit board patents. These originally came from a Florida circuit board company that is now bankrupt. In the case against Intel, the judge ordered disclosure regarding the legal funding in place. After this, the case closed after arbitration.
Announcements Consumer

USClaims Completes Its Seventh Securitization and Continues U.S Growth

USClaims (USClaims.com), the longest continuously operating pre-settlement funding firm in the U.S., today announced its $77.5MM 144A litigation finance securitization. This marks the company's seventh securitization transaction involving this asset class.  It primes USClaims to continue its run of impressive growth across the United States.

USClaims CEO, Steve Bashmakov, commented, "We are excited with the market's response to this continuously growing asset class." He continued, "This positions USClaims for amazing growth and further energizes our pursuit to make Litigation Funding Simplified®. We are changing the perspective about the pre-settlement funding industry by being a major asset to trial attorneys and their clients."

Scott Shey, USClaims CFO, added, "We were delighted to see the level of interest we had in this deal.  Stifel (the arranger) continues to be a key partner and really helped us achieve a great result on pricing and syndicating to a diverse investor mix.  This deal continues to highlight the growing acceptance and adoption of the asset class. "

USClaims was established in 1996 and has been consistently voted among the best in the nation within the pre-settlement funding category. In 2021 alone, USClaims earned first place rankings by the audiences of national legal publications in several categories, including "Best Consumer Litigation Funding Provider," "Best Law Firm Funding Provider," and the coveted "Hall of Fame" award from the New York Law Journal.

About USClaims: For 25 years, USClaims has been one of America's largest providers of non-recourse financial support to personal injury victims, some of whom may have suffered catastrophic injuries from defective products, unsafe premises, motor vehicle accidents, and other types of accidents. This financial support provides the injured plaintiff with the means to pay bills and endure the often long and arduous litigation process. USClaims is here to help plaintiffs and their attorneys stay in the fight. For additional information on USClaims pre-settlement funding, please call (877) 872-5246 or visit USClaims.com.

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Commercial Deals

LegalPay Closes Interim Financing Transaction with Yashomati Hospitals

India-based tech-focused startup LegalPay announced that the company has closed an interim finance transaction with Yashomati Hospitals Private Ltd—currently insolvent. Economic Times details that this type of finance is short-term lending, typically 6-12 months. The amount of financing being deployed to Yashomati Hospitals is undisclosed, but is expected to be used for operational costs, payroll, and keeping the company running until the Insolvency and Bankruptcy Code provisions kick in. LegalPay is planning a dozen or more such interim financing agreements. Interim financing is most often used by large corporates. LegalPay focuses on mid-level companies that are undergoing insolvencies. The interim financing trend is expected to grow as an investment opportunity, largely due to the potential for high profits, and the provisions under the IBC which work to the advantage of lenders.
Consumer

Litigation Funder Arrested in Slip-and-Fall Fraud Scheme

A fifth member of a slip-and-fall fraud ring was arrested and charged in a Manhattan Federal Court. The scheme, which amounts to more than $30 million, appears to have begun in 2013. Adrian Alexander, age 75, has been charged with mail fraud, wire fraud, and conspiracy to commit mail and wire fraud for his alleged attempts to gain fraudulent insurance reimbursements. The case will be heard by US District Judge Sidney H Stein. Justice.gov details that Alexander, a litigation funder, allegedly deployed funding for the fraudulent lawsuits. He is accused of knowingly financing multiple cases and profiting from the desperation of others. Lawyers and doctors have already been charged as part of the massive scheme. According to the indictment, the allegations include:
  • Staged or false claims of accidents involving 400+ recruits
  • Referrals to specific lawyers who were involved in the scheme
  • Fraudulent lawsuits filed
  • Referrals to specific chiropractors who were involved in the scheme
  • Recruits paid to have unnecessary surgery
Many of the hundreds of people recruited to partake in the scheme were homeless, very poor, substance addicted, or otherwise financially vulnerable. Some were recruited directly from shelters or rehab facilities. Medical and legal bills were paid by legal funders, including Alexander. This is true even in cases where the patient had insurance coverage or was on a government medical program. The scheme was successful in terms of financial success. Alexander reported annual returns of at least 30%. Meanwhile, he owned an MRI facility that was used in the fraud. After charging excessive interest rates to patients, proceeds from the scheme went almost entirely to the lawyers, doctors, and funders, rather than the patients. The maximum sentence for crimes like this is 20 years in prison. However, sentencing, in the event of conviction or a guilty plea, is determined by the judge.
Commercial

Cross Border Patent Dispute? Legal Funding Can Help

Cross-border patent cases are becoming increasingly common. We all watched as the Apple v. Samsung battle raged. It’s not unusual to see cases spanning multiple jurisdictions in the US, Europe, Asia, and elsewhere. Sounds expensive, right? Omni Bridgeway explains that while the US is noted as the largest global venue for patent disputes, some litigants are seeking global strategies. Different markets lead to different rulings and different theories on injunctive relief. These can dramatically impact the probability of success and the size of potential awards. Patent cases can result in massive recoveries in the hundreds of millions. The cost of pursuing such a case, however, can also be very high. That’s why legal finance is an increasingly popular service for those looking to pursue, or even defend, patent litigation. Finding a funder with a global presence and a solid understanding of a variety of jurisdictions can make a significant difference in the success of a case. Having the funds needed to pursue a case is a great start, but combining that with global expertise is a game-changer.
Commercial Regulatory Issues

Regulations are Coming for Litigation Funders

Despite evidence to the contrary, some still insist that third-party litigation funding is a greed-fest for the already wealthy. In reality, the practice allows increased access to justice for those who can afford it least. But all that non-recourse funding comes at a steep price. The Australian reports on funding reforms, using caustic terms like “honey pot for crooks and profiteers.” A proposed law promises to cap funder shares in awards and settlements—providing a larger share to claimants. While this makes sense in the abstract, it discounts two important factors:
  1. Third-party funders take 100% of the financial risk
  2. Claimants often cannot bring actions without funding in place
Why all the acrimony? It may have started about a decade ago when funders were exempted from rules governing banks and other financial services. This was viewed by some as an invitation to overcharge consumers. But was it? The move kicked off a spate of class action filings that led to consumer payouts. Surely that benefits consumers and funders alike? Despite a constant flow of evidence that third-party legal funding benefits claimants and increases access to justice—further regulations are en route. The debate about opt-in vs opt-out class actions may lead to laws requiring that all claimants opt-in to be considered part of a class. Talk of “speculative” class actions and “astronomical” rates of return fuel the fires that lead to demands for more oversight and regulations to keep funders in check. Current proposals state that as much as 70% of awards or settlements should go to plaintiffs directly. Regardless of the verifiable facts, funders will always be viewed by some as greedy, opportunistic, and even predatory. Luckily, professional organizations are committed to educating the public on the realities of what funding can do, how it helps people—and how funders making sizable returns actually benefits everyone.
Commercial Regulatory Issues

Litigation Funding in Global Jurisdictions

As Litigation Finance makes its way around the world, some jurisdictions struggle with the finer points. Typically businesses in places like Singapore and Hong Kong have a corporate structure that encompasses entities incorporated in their own jurisdiction, as well as offshore locales like BVI, Cayman Islands, or Bermuda. ICLG details that an array of funding options are available for claims. In these jurisdictions, funding is offered on a non-recourse basis. This means funders are repaid only if the cases they fund are successful. Similarly, contingency fee agreements are increasingly common. In these agreements, lawyers aren’t paid until or unless an award or settlement is reached. Champerty and maintenance laws have been watered down or abolished in places where legal funding is welcome. Common law exceptions also exist to allow funding where needed. These exceptions include providing access to justice, the furtherance of the common good, and insolvent companies in liquidation. Still, norms vary depending on the jurisdiction. In Hong Kong, maintenance and champerty laws are in effect—so common law exceptions are vital. Contingency fees are not allowed, so the use of litigation funding is highly limited. The Cayman Islands enjoy liberal access to legal funding from third parties. Still, legislation is being reviewed to impose new regulations for third-party funders. In a move funders are already skeptical about, a proposed regulation would place maximum limits on the percentages paid to funders and attorneys working on contingency. The British Virgin Islands no longer has maintenance and champerty laws on the books. Still, it remains unclear whether funded litigations have to meet common law exceptions. Bermuda has a similar liberal attitude about funding, with impending legislation looming on the horizon. The precedent set in 2012 and affirmed in 2014 held that there is a constitutionally protected right to access the court. Ergo, third-party funding is necessary to ensure that citizens’ rights are not violated. Ultimately, funding options are growing—which is great news for funders, law firms and claimants alike.
Announcements Case Developments Commercial

Rail Passengers Cleared to Make £93m Legal Claim for ‘Boundary Fares’

London’s specialist competition court, the Competition Appeal Tribunal (the “Tribunal”) has given the green light to rail passengers to seek compensation for overcharging by the Southeastern and South Western rail franchises by not making ‘boundary fares’ sufficiently available to consumers.  In a judgment delivered today, the Tribunal has ordered that the claims, issued on behalf of millions of rail passengers, can now proceed to trial.  The standalone claim was the first of its kind to be filed in the UK and is estimated to be worth around £93m in damages for rail users.

In its judgment, which can be accessed here, the Tribunal said: ”we authorise the Applicant to act as the class representative in both these  proceedings; and we find that the claims in each action raise common issues and are      suitable to be brought in collective proceedings.”

The Tribunal has authorised the claims to continue as collective proceedings meaning that millions of passengers who have paid twice for part of their journey on Southeastern and South Western routes because they were not sold a boundary fare, will now automatically be represented at court, unless they choose to leave – or opt out – of the claim.  The Tribunal confirmed that Mr Justin Gutmann, formerly of Citizens Advice, will act as the Class Representative.

The claim was launched in the UK’s specialist competition court on 27 February 2019 by Mr Gutmann.  The application for a Collective Proceedings Application Order was heard remotely between 9 – 12 March 2021, leading to today’s decision.

The Class Representative, Mr Gutmann said: “This is a great step forward in my legal campaign to achieve justice for millions of rail passengers who have been overpaying as a result of the train operating companies not offering ‘boundary fares’. It means that we can now hold Southeastern and South Western to account by going to court. “

He added: “I am grateful to everyone involved Charles Lyndon Ltd, Hausfeld & Co LLP, Philip Moser QC, Stefan Kuppen, Alexandra Littlewood of Monckton Chambers, Woodsford and AlixPartnersfor their hard work and dedication to the claims and look forward to the next milestone in the Boundary Fares campaign for justice.”

What is the claim about? What are boundary fares?

Southeastern and South Western are alleged to have not made ‘boundary fares’ sufficiently available for Travelcard holders to purchase, nor making passengers aware of their existence. Boundary fares allow passengers who own a TfL travelcard to travel beyond the zones covered by their travelcard without doubling up on payment. Instead, the rail companies’ failures have left customers with little option but to buy a higher fare than they would have needed to because their travelcard already entitled them to travel for part of their journey. Many passengers have effectively paid twice to travel sections of their journeys.

Independent research has shown that boundary fares are not readily available through online platforms or over the telephone from South Western or Southeastern and are rarely offered at ticket counters unless expressly requested by passengers. This imposition of an unfair price for fares is an abuse of the companies’ dominant position and in breach of UK competition laws.

Mr Gutmann has been successful at first instance with the Tribunal certifying Mr Gutmann’s claims against the rail companies. Southeastern and South Western continue to refuse to compensate passengers who have been overcharged, and the claims will now proceed to trial for the Tribunal to assess liability and damages.

Comments from the legal team and funder:

Rodger Burnett, Director of Charles Lyndon, said: “This is an important victory for rail passengers and citizens’ rights more generally.  Charles Lyndon is delighted to have represented Mr Gutmann in these claims and is pleased the Tribunal recognises the position that Charles Lyndon have long held: that dominant companies have duties to make pricing transparent, especially when dealing with consumers. We look forward to preparing for the next stage of the claims with Mr Gutmann.”

Anthony Maton, Managing Partner at Hausfeld & Co LLP said: “Millions of train passengers, often commuting daily on South Western and South Eastern, can now claim for the double charging that saw them pay twice for many journeys – once through their travel cards and once through their ticket journeys. Today the court agreed to allow the claims to proceed so that rail passengers are a step closer to obtaining restitution from the rail franchises for these long running malpractices.”

Woodsford’s Chief Investment Officer, Charlie Morris, said: “This is an important milestone in the promotion of collective redress in this country, which allows consumers and small businesses to achieve compensation for the wrongs committed by big business. With Woodsford’s support, Mr. Gutmann is now much closer to obtaining compensation for the many thousands of consumers who have been overcharged by train operators and we look forward to continuing to help those consumers achieve access to justice.”

What next?

Class members who live in the UK will be automatically included in the claim without having to take any steps, although they can choose to opt-out by sending confirmation of this to the following email address: info@charleslyndon.com or by post to: Charles Lyndon Ltd, 22 Eastcheap, London, EC3M 1EU.

Affected passengers who do not live in the UK will also be eligible to join the claim but must proactively opt-in to participate. If you are not domiciled in the UK and you wish to opt-in to join the claim, you must do so by sending confirmation of this to the following email address: info@charleslyndon.com or by post to: Charles Lyndon Ltd, 22 Eastcheap, London, EC3M 1EU.

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Commercial

Former SDNY Judge Shira Scheindlin Discusses Litigation Funding

Retired justice Hon. Shira Scheindlin has a lot to say about litigation funding, as we learned in the first half of her recent interview. She is now Of Counsel at Stroock & Stroock & Lavan, in addition to being a leading neutral at CPR, FedArb, and AAA. Above the Law details the rest of her interview here, with commentary from interviewer Gaston Kroub. Kroub points out that a former trial judge might be in huge demand as part of a due diligence process for funders. At present, Judge Scheindlin has not been invited to participate in due diligence by any funders. She has, however, been asked to lend her expertise to review due diligence reports compiled by funders to determine their veracity and the probability of a win. Certainly, judges and experienced lawyers have the tools and skills needed to offer opinions on funding for specific cases. It’s noteworthy though, that Scheindlin is clear in saying that she offers an opinion—but does not have a vote in whether or not a case will receive a funding offer. Mediation and arbitration are both hot issues at present, because of court delays caused by COVID and the ready availability of legal funding. Experienced neutrals are a vital part of this process, which can bring new perspective to the facts of the case at hand. In many instances, arbitration can bring about a fast resolution that is cost-efficient. Scheindlin explains what she views as a vital misconception about legal funding—that far too many people regard funders as opportunistic and greedy. The focus of litigation funding has always been increasing access to justice. The fact that a return on investment is needed to sustain the business model is hardly evidence of wrongdoing, or even greed. Legal fees are expensive—which is why legal funding is in such high demand.
Consumer

Did Girardi Keese’s Creditors Know About the Fraud?

Legal troubles for Tom Girardi and his wife, reality star Erika Jayne of The Real Housewives of Beverly Hills, are still mounting. Now there’s word that a bankruptcy trustee will be hiring a firm to investigate an allegation that attorney Tom Girardi’s lenders were aware of fraudulent cash transfers in the millions. Law.com reports that a new legal filing is targeting at least three legal funders that were given access to bank and tax statements, along with other financial details, case lists, plaintiff data, and even online banking information. Elissa Miller, one trustee for Girardi Keese's bankruptcy, has sued Girardi’s estranged wife, and remains adamant that lenders may have extensive information about Girardi’s improper use of funds—including an alleged $25 million “loan” given to Erika Girardi. Girard Sharp, special counsel to the trustee, is expected to assist with evaluating and investigating claims against the lenders. This includes plans to retain founding partner Daniel Girard at a rate of $975 per hour, plus a partner ($750 / hour) and an associate ($425 / hour). Meanwhile, claims and actions against Girardi Keese are piling up. Hundreds of claims are currently pending against the defunct legal firm from other law firms, consultants, medical companies, clients, vendors, and former employees all seeking remuneration. Several entities have multimillion dollar claims against the firm, such as Virage SPV, Stillwell Madison, and California Attorney Lending. Liens currently stand on several specific cases, and some on all assets of the firm. Erika Girardi continues to extricate herself from the proceedings, despite mounting evidence that she received millions in unearned capital that should have gone to clients, staff, or creditors. Before filing for divorce from her husband, Girardi stated that she was advised by counsel to leave The Real Housewives of Beverly Hills. However, she declined to do so, even returning for a reunion special.
Commercial Legal Innovation

What You Need to Know About Litigation Risk Insurance

As any legal professional can tell you, predicting an outcome with certainty is rarely an option. Ethical guidelines prohibit lawyers from promising or guaranteeing a positive outcome, even when a case looks like a clear winner. If lawyers can’t promise skittish litigants a win, what can a lawyer say to reassure clients? AON suggests that litigation risk insurance can assuage many relevant concerns. There are different types of litigation risk insurance—but the product typically takes one of two forms: judgement preservation insurance (plaintiff side), and adverse judgement insurance (defense side). Such insurance can help clients by determining at the outset how much, if any, financial risk they are taking on. Adverse judgement insurance protects current and future defendants in litigation against large judgements against them. Such policies are crafted on a case-by-case basis, leading to bespoke solutions. Consider a company being sued for hefty damages. It can buy insurance coverage for most of the amount of the potential award, not counting a small percentage for ‘retention.’ If the company loses the judgement, they pay only the retention fee, and insurance covers the rest. Defendants can use a similar strategy to leverage a better settlement using adverse judgement insurance. Letting an overreaching plaintiff know that defendants can’t be manipulated by financial worries can be a game changer. Adverse judgement insurance isn’t just a cost-saving product. When pending litigation is turning off investors, a company can regain its financial certainty with this type of insurance. Essentially, any party wishing to reduce its exposure to astronomical legal judgements stands to benefit from this type of insurance. Judgement preservation insurance can be helpful when appeals are likely. Even in situations where plaintiffs don’t need an immediate payout, this type of insurance guarantees plaintiffs will receive their full award—or as much of it as they chose to insure.
Case Developments Commercial

Class Action Against Priceline Has Been Filed

Several franchisees that have agreements with Priceline, a leading HBA retailer in Australia, have opted into a class action to obtain a new, fair, franchise agreement with the company. The suit alleges that current agreements may be illegal under the current legislative framework. Class PR details that Priceline uses specific mechanisms to exert control. These include the use of an Auto-Replenishment System, restrictions on ordering, compliance with Priceline’s plan for Brand Alignment, and retaining control over pricing. This is an opt-in proceeding, but lead plaintiffs have already been established. Those who wish to become potential claimants in the action must complete opt-in paperwork—which includes signing a funding agreement. Claimants are not required to make an upfront monetary contribution to opt-in. If the action is unsuccessful, no payment is required. Galactic Litigation Partners is funding the action. Galactic affirms that they do not exercise control over the cases they fund—so legal decisions are never overshadowed by financial concerns. If the action is successful, funders will receive 30% of the payout, and the remaining 70% of net earnings will be split among claimants on a pro rata basis. Potential claimants are encouraged to seek legal advice regarding the funding agreement terms. Solicitors at Levitt Robinson—who are handling the case--are available to anyone seeking clarification or details on the case or the funding agreement. Those who opt-in are legally protected from retribution by Priceline, who are still bound by good faith obligations. This includes a duty to behave with honesty and fairness, and by consistently providing franchisees the benefits to which they are entitled. Those who sign on to the case will receive updates about the case as it progresses, as well as legal advice should a dispute arise between Priceline and any claimant.
Announcements Deals

HFW Partners With LCM To Secure Singapore’s First Domestic Arbitration Funding

Global, sector-focused law firm HFW has partnered with Litigation Capital Management Limited (LCM) to secure the first funding for a domestic arbitration in Singapore, which is now permissible following changes in Singaporean regulations. On 28 June 2021, Singapore's Ministry of Law announced an expansion of third-party funding (TPF) to domestic arbitration, certain proceedings in the Singapore International Commercial Court and related mediation proceedings. HFW's leading Asia Pacific construction arbitration team is advising the claimant in the arbitration, Craft Façade Pte Ltd. The agreement between Craft and LCM covers two separate arbitrations: one in Singapore and one in Hong Kong. HFW partner, Nick Longley, who is leading the Singapore arbitration, said: "HFW is pleased to be partnering with LCM, one of the world's most reputable litigation finance companies. Being a leader in international arbitration disputes across the region, we are delighted that our clients now have an alternative avenue to fund their claims." Roger Milburn, Investment Manager at LCM Singapore, added: "We are delighted to partner again with HFW for this project, which is the first time a domestic arbitration has been funded under Singapore's expanded disputes financing framework. It's also another funding arrangement for HFW and LCM that covers more than one case for an Asia-based client, demonstrating that our portfolio funding strategy is working well in this region and provides a flexible financing solution for clients and law firms".
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Commercial Regulatory Issues Special Features

Select Ethical Issues Present in Litigation Funding

The following article was contributed by John J. Hanley, Partner at Rimon Law.  Litigation financing is on the rise in the United States and provides some claimants a valuable means for paying the costs of pursuing a legal claim. Lawyer involvement in litigation financing transactions raises many ethical issues for a lawyer such as competence, duty of loyalty, the potential waiver of privilege and interference by a third party, to name a few. Competence The first rule for lawyers under the New York Rules of Professional Conduct (the “NY RPC”) is competence.[1]  Lawyers and law firms should tread carefully when considering undertaking client engagements in a subject area in which they do not have the requisite knowledge and skill to provide competent representation of their clients. Official Comment 1 to Rule 1.1 provides in part that factors relevant to determining whether a lawyer has the requisite knowledge and skill in a matter include the relative complexity and specialized nature of the matter, the lawyer’s general experience, the lawyer’s training and experience in the filed in question, and the preparation the lawyer is able to give the matter.[2] This does not mean that lawyers cannot deal with matters in which they are initially unfamiliar.  Indeed, the American Bar Association points out in comments to Rule 1.1 that “[a] lawyer need not necessarily have special training or prior experience to handle legal problems of a type with which the lawyer is unfamiliar. The analysis of precedent  . . . and legal drafting are required in all legal problems. Perhaps the most fundamental legal skill consists of determining what kind of legal problems a situation may involve, a skill that necessarily transcends any particular specialized knowledge. A lawyer can provide adequate representation in a wholly novel field through necessary study.”[3] According to the New York City Bar Report to the President by the New York City Bar Association Working Group on Litigation Funding: “[a] lawyer whose client seeks third party funding should determine at the outset whether he or she has the transactional experience and sophistication required to negotiate a beneficial agreement with the funder or whether a specialist in the field should be involved.”[4] Competence in litigation finance includes familiarity with various litigation financing structures and privileges against disclosure, among others.[5]  For example, the structure may involve different types of collateral, different means of financing legal fees and expenses, the manner in which funding is disbursed and the return structure of the financing.  A lawyer concentrating her or his practice on litigation funding may also be better able to determine “market” terms of the financing. Duty of Loyalty and the Lawyer’s Financial Interests Of course, the lawyer is the client’s fiduciary and agent who owes his or her client undivided loyalty and is forbidden from putting her interest above that of the client. The New York State Bar Association, Committee on Professional Ethics reminds lawyers that their financial interests must not interfere with the representation of the client.[6] Ordinarily, there is nothing adverse to a client about a lawyer getting paid for legal services[7] but in a litigation funding transaction the lawyer could have a personal interest in respect of the transaction. For example, the litigation funding agreement may facilitate payment of a portion of the lawyer’s fees or ensure certain expenses borne by the lawyer will be repaid.[8] The American Bar Association posits that if a lawyer has a relationship with a litigation funder that creates a financial interest for the lawyer . . . it may interfere with the lawyer’s obligation to provide impartial, unbiased advice to the client (the “ABA Report”)[9]. The ABA Report goes on to say that a lawyer with a long-term history of working with a particular funder may have an interest in keeping the funder content which would create a conflict even in the absence of an explicit agreement. The NY RPC, specifically Rule 1.7(a)(2), like the Model Rules of Professional Conduct, prohibits a lawyer from representing a client if “there is significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, property or other interest.” Additionally, Rule 5.4 of the NY RPC, and its analogous provisions in other jurisdictions, requires that a lawyer maintain independence[10].  Consequently, such lawyer, representing a client in a matter for which litigation funding is sought, in general may be able to represent the client with respect to the litigation funding agreement but should disclose the lawyer’s relationship with the funder and receive the client’s informed written consent. Communication and Confidentiality Rule 1.4 of the NYRP Conduct requires a lawyer to communicate promptly, and provide complete information, to the client regarding the matter, and to reasonably consult with the client about the means to achieve the client’s objectives.[11] Reputable litigation funders are usually careful to provide in the litigation finance documents that the funder will not be involved in discussions between the lawyer and client regarding the matter, and that the funder will not direct or control the litigation. In certain circumstances an inexperienced lawyer may consider involving the funder in discussions about case strategy, but caution is in order. If a party other than client and the attorney is involved in communications involving legal issues or the case, the attorney-client privilege and confidentiality of communications is likely breached and the attorney may be guilty of legal malpractice. Indeed, Rule 1.6 of the NYRPC requires that a lawyer not knowingly reveal confidential information, or use that information to the disadvantage of the client or advantage of the lawyer or a third person, subject to certain exceptions.[12] Conclusion An attorney who represents a client in a matter that is to be funded pursuant to a litigation funding agreement should consider the ethical implications discussed in this Insight, among others, before representing the client in the funding agreement. Counsel would avoid all of the ethical considerations that may arise by referring the client to an outside attorney experienced in litigation finance.
[1] N.Y. Rules of Prof’l Conduct R.1.1.  The California Rules of Professional conduct and the American Bar Association Model Rules of Professional Conduct (“MRPC”) also make this the number one rule.  Indeed, all fifty states and the District of Columbia have adopted legal ethics rules based at least in part on the MRPC. [2] N.Y. Rules of Prof’l Conduct R.1.1, Comment [1]. [3] Available here ABA Comment to Rule 1.1 [4] Report to the President by the New York City Bar Association Working Group on Litigation Funding (February 28, 2020). [5] Others includes, without limitation champerty, maintenance, barratry, usury and required disclosures. [6] N.Y. Comm. on Prof’l Ethics, Formal Op. 769 (November 4, 2003). [7] The State Bar of California Standing Committee on Professional Responsibility and Conduct Formal Opinion No. 2020-204. [8] Id. At 3. [9] American Bar Association, Informational Report to the House of Delegates Commission on Ethics 20/20. [10] N.Y. Rules of Prof’l Conduct R.5.4. [11] N.Y. Rules of Prof’l Conduct R.1.4(a). [12] N.Y. Rules of Prof’l Conduct R.1.6(a). See also the American Bar Association’s Model Rule 1.6.
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Consumer

Pre-Settlement Funding Conditions

It’s not unusual for plaintiffs to need extra money before their case is adjudicated. An accident victim, for example, can’t wait years to pay medical bills or replace their car. Pre-settlement funding can help those who find themselves needing an influx of cash as they await the outcome of their lawsuit.

Legal Desire explains the conditions that must be met in order to secure pre-settlement funding, and how repayment works. If your case is successful, you’ll pay a portion of the settlement or award plus attorney fees. If your case is not successful—the non-recourse structure of the funding means you don’t have to repay the funded money.

In order to get pre-settlement funding, you need a meritorious case. The lawsuit must be filed with the court and be in progress. Personal injury claims are the most common case to qualify for pre-settlement funding.

You must also have legal representation in place to get pre-settlement funding. Funders will often work with lawyers when crafting a funding agreement. However, not all case types are eligible for pre-settlement funding. But many, mostly relating to personal injury issues, are. These include:

  • Auto collisions and accidents
  • Pet-related injuries
  • Defective products, including medical equipment
  • Medical malpractice and nursing negligence
  • Slip and falls

Once approved for pre-settlement funding, money can be deployed as quickly as one business day. Anyone interested in pre-settlement funding should discuss it with their attorney before approaching a funder.

Announcements Consumer

Legal-Bay Lawsuit Funding Announces Renewed Focus on Wrongful Termination Cases

Legal-Bay, the Pre-Settlement Funding Company, reports increased funding for victims of wrongful termination. In light of a recent lawsuit brought against popular gaming company Activision Blizzard, Legal-Bay is expanding their underwriting department to handle the increase in applications being filed by women. California Department of Fair Employment and Housing (DFEH) has filed suit against Activision Blizzard, alleging sexual harassment and gender discrimination against female employees. Activision is certainly not the first gaming company to be accused of fostering a "frat boy culture" among its employees; a mostly masculine atmosphere that's been excused considering most products are developed for their main consumer base of male gamers. However, the demographic is no longer solely male. More than 4-in-10 gamers in the United States are female, a stat one would think would be reflected in gaming companies' hiring practices. But in 2020, women comprised only 16% of all executive positions within the industry, a likely contributor to several recent examples of discriminatory behavior against women. Chris Janish, CEO, commented on the situation, "The face of gaming has undergone a massive shift in recent years. Almost half of all gamers are now female, yet it's been an uphill climb for women who want to make a career within the industry. Plaintiffs who have lost their jobs due to gender-related discrimination can reach out now for monetary assistance in order to compensate lost pay, emotional stress, punitive damages, and legal fees." If you're a plaintiff in an ongoing lawsuit and require an immediate cash advance from your anticipated settlement, please visit our website HERE or call 877.571.0405. Legal-Bay's settlement loan programs can offer immediate cash in advance of a plaintiff's anticipated monetary award. The non-recourse lawsuit loans are risk-free, as the money does not need to be repaid should the recipient lose their case. Therefore, the law suit loans aren't really a loan, but rather a cash advance. If you require an immediate cash advance loan settlement from your wrongful termination, whistleblower, or gender discrimination lawsuit, please visit the company's website HERE or call 877.571.0405 where skilled agents are standing by to hear about your case.
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Announcements Commercial People Moves

Augusta Ventures brings in SYZ Capital’s Uncorrelated Strategies lead as new Chief Investment Officer following earlier £250m fund raising

Augusta Ventures, a specialist asset manager focussed on the litigation and disputes funding sector, has appointed SYZ Capital’s current Uncorrelated Strategies lead – Gian Kull – as its new Chief Investment Officer. The move follows Augusta’s closure of its third pool of funding in June 2021 which brought the firm’s AuM to £585m.  This enabled the firm to continue to fund an unprecedented pipeline of opportunities in high value litigation and dispute scenarios. Gian Kull, currently based in Switzerland, managed Legal Assets platforms as a part of SYZ Capital’s Uncorrelated Strategies. He began his career at Merrill Lynch and has since focussed on investing in complex special situations and legal assets on behalf of firms including Multiplicity Partners, Brigade Capital and JANA Partners.  Gian will be based in Augusta’s London office and will report to Chief Executive Louis Young and Board Chairman Hitesh Patel. Louis Young, Chief Executive Officer of Augusta Ventures, said: “We are delighted to attract someone with Gian’s experience to Augusta Ventures.  This comes on the back of our new £250m capital raising earlier this year as Augusta builds on its expansion in capital resources to meet the increased demand for legal related finance across all sectors and geographies. We have never seen so many strong opportunities. Gian’s investing background and wide skillset will make him a huge asset to the firm as our Chief Investment Officer.” Gian Kull, upon welcoming his appointment to Augusta Ventures, said: “Augusta has deep expertise in the litigation funding market, and I am excited about working with the talented team at Augusta and its institutional investors to offer creative funding and risk solutions to Claimants seeking access to justice.”
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Announcements Commercial Legal Innovation

Burford Capital earmarks $100 million in expansion of award-winning economic incentive to promote diversity in law, now to include racial diversity

Burford Capital, the leading global finance and asset management firm focused on law, today announces the launch of phase two of The Equity Project, its groundbreaking initiative designed to increase diversity in the business of law.

As part of this expansion, Burford is earmarking a further $100 million to The Equity Project and broadening its mission to address both female and racially diverse lawyers who have been historically underrepresented in the business of law, especially in leadership and partnership positions. In earmarking capital through The Equity Project, Burford provides these lawyers an edge as they pursue leadership positions in significant commercial litigations and arbitrations and eases pathways towards origination and client relationship credit. Legal departments committed to diversity can use Equity Project funding to further incentivize their firms to appoint diverse teams to represent them, and law firms and companies alike can use The Equity Project as part of their ongoing ESG efforts.

In a further expansion of its commitment to providing an economic incentive for change, when Equity Project-funded matters resolve and generate their expected returns, Burford will contribute on its client’s behalf a portion of its profits to organizations that promote lawyer development for female and racially diverse lawyers.

Burford first launched The Equity Project in October 2018 with $50 million in legal finance capital earmarked for matters led by women. Having committed well in excess of that amount to Equity Project matters as of December 31, 2020, Burford has now broadened the initiative to include racial diversity and thus address a deficit in representation that is even more acute than the gender gap. Burford has already made a multi-million commitment under the newly expanded Equity Project to a matter led by a female in-house lawyer and a racially diverse outside litigation team for a Fortune 100 company.

In the last few years, many general counsel have publicly called on their law firms to appoint more diverse teams to represent them, including 170 GCs who in 2019 signed an open letter advising law firms that diversity will influence which firms they hire. According to independent research commissioned by Burford in 2020:

  • 52% of GCs say they are entirely unaware of how origination credit is awarded when they hire a law firm
  • 48% of GCs and senior in-house lawyers say their companies have asked a firm to put a woman on a litigation or arbitration team
  • 55% of GCs say knowing about The Equity Project will change how they think about future affirmative litigation

The Equity Project is a global initiative led by Burford’s Aviva Will, co-COO and formerly a senior litigation manager and Assistant General Counsel at Time Warner Inc. and a senior litigator at Cravath, Swaine & Moore.

Ms. Will states: “We review thousands of commercial disputes annually and vanishingly few are led by female and racially diverse lawyers. We at Burford are providing tangible means to change this so that these groups can have easier pathways to generate additional business.

There is no question that diversity is good for business. The question is, how can we promote and incentivize faster change in commercial litigation and arbitration, both of which have been particularly resistant to it? Our goal is not just to work to bridge these gaps but to do so quickly. To achieve this, we must change the economics.”

Christopher Bogart, CEO of Burford, states: “The diversity problem in law desperately needs innovative economic levers to solve the problem and The Equity Project is an example of Burford Capital putting this plan into action. Burford’s work will not only help to increase diversity at law firms but will also augment companies’ and law firms’ existing ESG initiatives. We are eager to continue our work with our law firm and corporate clients to bolster their progress in their own diversity initiatives.”

The earmarked pool of capital will be reserved for commercial litigation and arbitration in which female or racially diverse lawyers are first or second chair; a female or racially diverse lawyer earns origination credit or is the client relationship manager; clients are represented by firms that are owned by women or racially diverse lawyers; or a female or racially diverse lawyer serves as plaintiffs’ lead counsel or chairs the plaintiffs’ steering committee.

Burford has also expanded its cadre of Equity Project Champions, corporate and law firm leaders who will support and spread awareness of the initiative. The expanded list, which is currently in formation, includes the following returning and new* Champions:

  • Alexandra Rose, Partner, Clayton Utz
  • Amy Frey, Partner, King & Spalding
  • Brenda Horrigan, International Arbitrator
  • Caren Ulrich Stacy, Founder & CEO, Diversity Lab
  • Carolyn Lamm, Partner, White & Case
  • *Daniel Winterfeldt MBE QC (Hon), Founder & Chair Interlaw Diversity Forum, Managing Director & General Counsel – EMEA And Asia, Jefferies
  • Faith Gay, Founding Partner, Selendy & Gay
  • Jonathan E. Goldin, Chief Operating Officer and General Counsel, Teneo Capital
  • The Honorable Katherine B. Forrest, Partner, Cravath, Swaine & Moore
  • *Keith J. Harrison, Partner and Co-Chair, Litigation, Crowell & Moring
  • Maria Ginzburg, Partner, Selendy & Gay
  • *Maria Eugenia Ramirez, Partner, Hogan Lovells
  • Megan E. Jones, Partner, Hausfeld
  • Mylan Denerstein, Co-Chair, Public Policy Practice Group, Gibson Dunn & Crutcher
  • Dr. Nadine Herrmann, Managing Partner and Chair, EU and German Competition Law Practice, Quinn Emanuel
  • Nicole D. Galli, Founder, Women Owned Law; Managing Member, ND Galli Law LLC
  • Noradèle Radjai, Partner, Lalive
  • Roberta D. Liebenberg, Senior Partner, Fine, Kaplan & Black
  • *Rufus Caine III, Co-Founder & Partner, DEI Strategic Advisory Firm
  • Sophie Nappert, International Arbitrator; Co-Founder, ArbTech
  • Stephanie l. Carman, Shareholder, GrayRobinson
  • Sue Prevezer QC, International Arbitrator, Mediator and Consultant, Brick Court Chambers
  • Tara Lee, Partner, White & Case
  • *Veta T. Richardson, President & CEO, Association of Corporate Counsel
  • Wendy J. Miles QC, Barrister, Twenty Essex

In addition to committing capital, The Equity Project will continue to organize events and generate thought leadership that draw attention to diversity in law. Since first announced, Burford has organized 16 events, ranging from business development bootcamps for emerging female litigators to panels with leading in-house lawyers. Burford has also partnered with organizations such as the InterLaw Diversity Forum and Equal Representation in Arbitration, and sponsored events devoted to changing outcomes for female and racially diverse lawyers. Burford will continue this work, aimed at bringing together in-house lawyers, law firm leaders, rainmakers and emerging legal industry leaders in furtherance of this cause. Burford will also continue to study outcomes and efficiencies in matters financed through The Equity Project. 

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, Singapore and Sydney.

For more information, please visit www.burfordcapital.com.

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Commercial Regulatory Issues

Multiple Class Action Lawyers Face Allegations of Fraud

Two barristers and two solicitors are under fire for allegedly misappropriating at least $19 million in fees relating to the Banksia class action. Barristers Norman O’Bryan and Michael Symons will be permanently banned from practicing law. Solicitors Anthony Zita and Alex Elliot will be required to show cause for why they too should not be banned from the practice of law. Financial Review reports that the judgement against the men finalizes a lengthy class action into Banksia’s collapse in 2012. Investors lost at least $660 million in the collapse. The case settled in 2018 for $64 million—but the Victorian Court of Appeal declined to allow legal and funder fees of over $18 million, after a claimant challenged what it deemed ‘excessive’ costs. Increasingly, judges are speaking out against funders and legal firms for taking what they claim are inappropriately large cuts of settlements and awards. AG Michaelia Cash applauded the judgement, affirming it as a step toward stopping lawyers from “gouging” class action claimants. While reasonable people can disagree on percentages, the behavior of these lawyers allegedly included gross acts of deception—including intimidating a group member, backdating invoices, and intentionally misleading a costs consultant. Elderly investors, at least 16,000 of them, endured significant financial losses. But does the Banksia judgement, as some suggest, reflect a need for increased regulation? Surely the misdeeds of some don’t impact the honesty of others?  Assistant Minister to the AG, Amanda Stoker, takes a profoundly negative view of funders—accusing them of “gambling” via the legal system. Suggested reforms include a 30% cap on payouts for funders and lawyers, using an opt-in model for class actions, and giving judges the power to accept or reject funding agreements. Not surprisingly, funders and many lawyers responded negatively to these proposed reforms—stating that they aren’t taking the realities of funding into consideration.
Case Developments Commercial

Business Interruption Payouts Still in Question as Appeal Looms

As thousands of small businesses await COVID-related insurance payouts, insurers maintain that their policies were never meant to cover global pandemics. Whether or not claimants get their due will depend on an upcoming appeal. Sydney Morning Herald explains that an upcoming second round in the case will focus on specific policy wording and intent. The outcome here will be an essential part of determining payouts. In eight of nine recent test cases, Justice Jayne Jagot ruled in favor of insurers, affirming key aspects of their arguments. The judgement caused IAG shares to go up 4.2%. However, lawyers on behalf of business owners are set to appeal, which is expected to begin next month. Law firms involved in the case, Gordon Legal, and Berrill & Watson, stated that there are still questions to be answered—such as whether some claimants had a legitimate claim for losses caused by the government’s efforts to contain the virus. A final decision is, one lawyer explained, a long way off. The class actions are expected to resume in February 2022. Omni Bridgeway is funding several class actions against insurers accused of holding back business interruption payouts. Multiple insurers have disputed business interruption claims on a large scale—including IAG, Suncorp, QBE, and Insurance Australia Group.
Commercial Legal Innovation

Delhi Startup LegalPay Offers Opportunity for Claimants and Investors

Bringing a legal case in India is expensive, and can take years from start to finish. This often means the pursuit of justice is out of reach for citizens of average means. Kundan Shahi, who worked in insurance, knew there was a solution. Your Story details that Shahi saw a connection between what insurers did and how legal cases could be funded by third-parties. His initial idea was to set up Advok8—an insurance company dedicated to funding cases. But the legal setup required to start an insurance company was expensive, complicated, and full of regulatory hoops to leap through. In 2019, Shahi set up LegalPay as a legal services company. Cases being considered for funding are vetted by in-house lawyers using a variety of criteria. Cases are run through software that measures and calculates to determine the merits and probability of winning. LegalPay also considers precedence in similar cases, assessing the defendants' ability to pay an award, as well as other factors. Ultimately, LegalPay agrees to fund about 5% of the cases they consider. In addition to litigation funding, LegalPay also offers interim financing for insolvent companies. This practice is welcome by creditors and debtors alike. Investors provide the monies used to fund cases. Shahi estimates that investors can expect an IRR of 25-30%. Because third-party litigation funding is so new to India, regulation of the industry is practically non-existent. The hope is that regulatory oversight is forthcoming. The industry is sure to grow in India.
Case Developments Commercial

Mercedes Faces Lawsuit Over Alleged Emissions Falsification

Three men from Chorley and one from Leyland are suing auto giant Mercedes over its role in “dieselgate.” Dieselgate impacted multiple car manufacturers, accusing them of using defeat devices to illegally skirt emission standards. National consumer rights firm Slater and Gordon are bringing the claim. The Guardian details that the case is expected to expand into a collective action. At present, Slater and Gordon are also joint lead attorneys in a class action against Volkswagen—also related to ‘dieselgate.’ It has been estimated that 600,000 Mercedes cars in the UK could have been impacted. As many as a million people could be eligible to make claims of up to GBP 10,000 each—as the payouts apply to cars bought new or second hand. The case is being funded by third-party litigation funder Asertis. This funding allows all impacted Mercedes buyers to become claimants without any upfront payment. Claimants are understandably outraged that a luxury car company could engage in such alleged deceit. Eric Kos of Chorley, who has owned multiple Mercedes cars, explained that his trust in the company was destroyed when he realized they’d used illegal means to “dupe” customers like him into thinking they were paying for high quality cars.  Defeat devices were found installed in Mercedes cars in June 2018. The German Federal Motor Transport Authority findings necessitated a recall of more than 750,000 vehicles from across Europe. Later, Mercedes was required to recall about 90,000 more cars in England and Wales. Still, Mercedes intends to fight the claims, making a trial inevitable.
Commercial Legal Innovation Special Features

Key Takeaways from LFJ’s Digital Event on The Evolution of Corporate Portfolio Funding

Last week, Litigation Finance Journal held a special digital event on the evolution of corporate portfolio funding. How has portfolio funding evolved over the years? Why have corporates been slow to adopt the practice? How is COVID impacting that adoption rate? And what can funders do to convince corporates that the benefits of portfolio funding outweigh any perceived drawbacks? A panel discussion led by Ed Truant, founder of Slingshot Capital, addressed these and other questions. The panel consisted of Neil Purslow, Co-Founder of Therium Capital Management, Greg McPolin, Managing Director of Burford Capital, Patrick Molony, CEO of Litigation Capital Management, and Rebecca Berrebi, Founder and CEO of Avenue 33, LLC. Below are some key takeaways from the discussion: Ed: Patrick, can you provide a brief description of the corporate portfolio financing market? Patrick: Sure. This is a part of the market where the litigation financier approaches a large sophisticated and potentially well-capitalized corporate entity, either directly or through another channel—and provides to that corporate a facility in relation to a number of disputes that corporate might have. The capital that’s applied to funding that portfolio of disputes is typically collaterally secured against the outcome of a number of disputes. And through that process, it’s provided to that corporate at a reduced price reflecting the reduced risk of capital. And as you say, it is a part of the market that hasn’t seen a lot of attention from litigation finance, and is something I think the industry is starting to have a close look at now. It’s certainly one of the investment strategy that LCM—the company that I manage—is looking at and focusing on very closely. Greg: The two things I’ll add are that Patrick was right in that the market for corporate portfolio financing is certainly a newer evolution of the Litigation Finance market. For Burford it’s really come into focus over the past 18 months or so. For fiscal year 2020, we noted that about 57% of the capital we committed across our portfolio went to corporations. Not that that all happened in the context of portfolios, but certainly corporates were the majority recipients of the capital that Burford committed in 2020. That’s consistent with what I see in the market, certainly here in the US. That is an increased uptake by corporates of litigation finance, and corporate legal departments and finance professionals coming to realize, after people like Rebecca and Patrick and Neil and I have been out in the market explaining that litigation finance is just another form of corporate finance. Corporates should be looking at their legal assets, those affirmative arbitration and litigation claims as having value—as assets that can be monetized and financed. Ed: Rebecca, through your advisory business you must come across corporations all the time who are looking for some perspective on the litigation finance market. Why do you think corporations haven’t adopted litigation finance sooner? Rebecca: It’s a good question. I think it follows along what Greg said which is—first of all, this market in general, litigation finance, remains relatively new as compared to other types of corporate finance in the world. So I think everybody in this industry recognizes that it’s not a new industry, but still becoming more well-known. I think a large part of it is just education, right? I think a large part of it is that corporates are just beginning to recognize that this type of financing is available to them. So there is a big hurdle in terms of education, but as Greg said, Burford for sure is funding a lot of corporates. I think and expect that that trend will probably continue as more and more corporates become more and more comfortable with the idea of Litigation Finance. Ed: Greg, in terms of those corporates who are looking at litigation funding, what are some typical objections you might hear from corporates? Greg: I think Rebecca made this point, which I think is massively important and that is—this is so much about education, and a mind-shift within corporate legal departments and the CFO suite to think about Litigation Finance as just another form of corporate finance. The number one objection is sort of an unseen one, just lack of awareness...status quo. Treating legal assets the way they were treated years and years ago without thinking about how to bring in Litigation Finance to begin to shift the legal department from a cost center to a profit center. Once you get past that...you come up with the typical objections like...some companies believe, wrongly, that commercial litigation funders are behind many of the litigations that they have to defend. So they don’t feel about using capital from a litigation funder on the affirmative side. Rebecca: I think Greg covered the bulk of what I’ve seen—the emphasis being on ‘we don’t like litigation funders because they fund the people who sue us.’ So I do think there’s a bit of a PR campaign that we as an industry should be working on. That this money is legitimate money that is compliant with all types of rules and regulations. We need to bolster the opinion of what Litigation Finance is, and the legitimacy of what it is. We in the industry know that it’s legitimate, and it’s very real and there are a lot of lawyers now who practice specifically in Litigation Finance law. I also see one thing Greg may have alluded to, it’s hard still to learn about Litigation Funding unless you dig deep and listen to panels like this one. It’s not as mainstream as other types of financing are. So while of course we all know there’s a lot about Litigation Finance in the NYT or Wall Street Journal, it’s definitely not front page news consistently. Ed: Neil, can you comment on the role that law firms play in the decision-making process for corporates. Are they absent or behind the scenes or front and center? Neil: They’ll essentially play the same role litigators would in in originating single case fundings, that’s certainly true. But we’ve certainly seen law firms play a very substantial role in some of these deals. But they won’t necessary litigate because it may well be the corporate folks and the key is going to be people with senior contacts in companies that want to deliver a sort of commercial benefit to the company, and go beyond narrow legal advice. Certainly law firms do play roles, and they can play an important role in bridging the gap between the GC and CFO. Ed: In terms of how corporates approach finding the right litigation funder, Rebecca what’s your experience—are they hiring advisors? Or relying on their law firms to run a process? Can you give us some perspective? Rebecca: I will tell you that I think the way that I’ve heard from corporates historically have been through law firms or people reaching out to me because they are interested in taking on Litigation Finance. But just as a corporate wouldn’t make a big investment in something without having some expertise in house or going outside to find it. I find this is the same thing. I’ve been talking to people who find me to learn how the industry works—‘who do I talk to,’ ‘how do I learn about this.’ On a less frequent basis I get calls from corporates that say ‘I’ve been approached by a funder, what do I do? Is this a good deal? What do these deals look like?’ Sometimes it’s a proactive thing, or they get approached.
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Announcements Commercial Deals

Nivalion expands in Latin America

Nivalion, Europe´s leading provider of legal finance solutions, announced today that it will acquire the portfolio and know-how of Carpentum Capital Ltd., a Swiss company that has been at the forefront of the development of litigation funding in Latin America, with lawyers on the ground in Argentina, Brazil and Chile. Marcel Wegmüller, Nivalion’s Co-CEO, said: ”Having supported Carpentum over the last years, we are pleased to be stepping into their shoes in offering funding to companies and law firms doing business in Latin America. This transaction is a logical step after having decided to proactively pursue business in the Americas. Litigation funding is growing rapidly in Latin American jurisdictions. With the assistance of the experienced team at Carpentum in these markets, as well as Nivalion’s long-standing and substantial expertise with litigation funding in different markets, we will be perfectly placed to successfully expand our business in that part of the world.” Managing Director of Carpentum, Detlef Huber, comments: ”We are pleased and proud to have helped bring litigation funding to Latin America, and we look forward to supporting Nivalion with its progress in this exciting market.” About Nivalion Nivalion is a Swiss litigation finance provider with offices in Zug, Munich, Frankfurt and Vienna. We focus on funding complex litigation and arbitration disputes in Europe, the Americas and Asia-Pacific, including direct and secondary funding of individual cases, case portfolios and law firms. Our team includes 25 professionals with substantial experience in dispute financing and private practice in leading financial institutions and law firms, offering the financial strength of its Swiss core investors. Nivalion is a member of the International Legal Finance Association (ILFA) and is committed to and compliant with the ICCA Queen Mary Task Force Best Practices, the ILFA Best Practices and the SIArb Third Party Funding Guidelines.
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Commercial Regulatory Issues

Legal Funding in Jersey Matures Since Valetta Decision

Over the last decade, third-party litigation funding has been increasingly popular as a means of increasing access to justice. At its core, TPF is a way to put investor money toward meritorious legal cases (often, but not always, class actions) in exchange for a share of the award or settlement it generates. As the cost of litigation increases, the need for legal funding grows. Lexology explains that funders have adapted to the needs of clients since outdated concepts like champerty and maintenance were stricken from the law in 1967. It’s thanks to the popularity and acceptance of funding that countless potential claimants have been able to see their day in court—when they would not otherwise have been able to afford to do so. Many funded cases are so-called “David v Goliath” situations involving well-monied defendants that average individuals or small companies are trying to hold accountable. Courts have become increasingly likely to approve funding in these situations, and some even encourage it. Funders can enter into a case at any time, even after a verdict or settlement is reached. Typically though, funders tend to enter cases after the case is filed—so after the pre-action communication state. The landmark Valetta decision of 2012 affirmed that, according to Jersey courts, funding improves access to justice under specific conditions. These include:
  • Control of the case strategy and decisions be left to plaintiffs and lawyers—not funders.
  • Claimants retain a significant share of the award (staving off concern that funders see the lion’s share of the eventual payout).
  • The funding agreement contains provisions for potential adverse costs orders.
The Valetta decision has led to the widespread use of legal funding in Jersey, despite England having more permissive laws that also include DBAs and CFAs as options. Increasingly, the types of cases that can be funded is expanding to include family law cases like divorce, construction, and personal injury litigation.
Commercial

Vltava Fund Comments on Burford Capital in Investor Letter

Investment management firm Vltava Fund recently published Q3 2021 earnings. Of particular interest is Vltava’s mention of Burford Capital Ltd—a New York-based third-party legal funder with a market capitalization of about $2.4 billion. Yahoo! Finance details that Burford’s stock price has been reason to celebrate. Since the beginning of 2021, Burford has maintained a 12.31% return rate. Its 12-month returns are up by 20%. As of October 5th, Burford shares stood at $11. Vltava’s Q3 investor letter has glowing commentary for the funder. The letter explains that it’s a rare company that can call itself a pioneer and leader in a field they themselves helped to create. But this is undoubtedly true about lawyer/investment banker, and CEO of Burford, Christopher Bogart. As a leader in Litigation Finance, the team at Burford appreciates the focus on increased access to justice. But there’s also the matter of risk. Finding the sweet spot between limiting risk and pursuing high awards or settlements is an art form—one Bogart and Burford Capital have vividly brought to life. While many new entities have flooded the litigation funding space, few are capable of doing what Burford does. The strong competitive advantages Burford has are apparent in the size and breadth of its client base, the company's strong cash reserves that allow for large deployments, and its results to date. Burford’s total closed investments show an ROIC of 95%--which means that investments have roughly doubled. What’s more, Burford accomplishes this feat without the use of AI or computer algorithms. Its reliance on human experience and intelligence may be its strongest selling point. While Burford did not make Insider Monkey’s list of 30 most popular stocks among hedge funds, it did deliver a more than 7% return over the last 90 days.