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Commercial Fundraising

LCM Fund Attracts Investor Interest

The pandemic has made an unwitting impact on nearly every industry. Its impact on litigation funding was largely positive. Since the first COVID shutdowns began, funders around the world have been besieged with interest from investors, businesses, and clients hoping to launch individual or collective actions. Litigation Capital Management (LCM) has seen exceptional progress, even within the funding industry. Investors Chronicle details that LCM persisted even as COVID brought about huge court delays and disruptions to arbitration, depositions, vetting, and other facets of law usually conducted face-to-face. In last the 12 months ending in June of this year, LCM assessed nearly 600 funding applications and made investment commitments of more than AU $100 million. While that represents a small dip from the previous year—these numbers are impressive within the context of a pandemic. LCM is launching a new fund that’s expected to double profits this year. The $150 million fund currently has 88% commitments, including projects in the due diligence phase. The first close is expected before the end of 2021. LCM’s fund is supported by the cornerstone investors of the first fund. That may be because LCM maintains a portfolio return rate of 78%. LCM gets 25% profit on each fund investment, plus an outperformance return fee of 35% over an IRR of 20%. Choosing the right cases to fund is one of LCM’s strongest suits. A single case brought in a 300% return after a 30-month deployment of AU $6.2 million. With an average duration of 27 months per case, and more than a third (18 out of 44) past the 25-month mark—it appears that settlements or awards will be forthcoming sooner rather than later. LCM is poised to invest in new projects given their gross cash holdings (AU $49 million), along with another $20 million in credit. With insolvencies and disputes on the rise, LCM has a bright future ahead.
Commercial

Manolete Partners: Onward and Upward

Manolete Partners has been called the top insolvency litigation funder in the UK. In the midst of a major growth spurt, Manolete currently boasts greater than a 50% share of the insolvency funding sector. Vox Markets details that one of Manolete’s main strengths is its vertical expertise, which puts them in an ideal position to price risk. Insolvency cases tend to result in higher awards—with fewer than 5% going all the way to trial—so they reach completion sooner than complex litigation cases. Next week, the moratorium on medium and large company insolvencies will be lifted. This could mean a flood of new business for Manolete, and a dramatic reduction in case duration.
Announcements Commercial Fundraising

Longford Capital Raises $682 Million for New Investment Fund

Longford Capital Management, LP, a leader in commercial litigation finance, announced the final closing of its most recent fund (including a parallel fund, “Fund III”), at $682 million.  Longford’s assets under management now exceed $1.2 billion, placing it among the largest private equity firms focused on investments in legal assets.  Fund III is the third private investment fund Longford has closed since the firm began operating in 2013.

Fund III includes repeat investors from Funds I and II, as well as many new investors, attracting capital from state and municipal pension funds, university endowments, foundations, single and multi-family offices, and high-net-worth individuals.  Fund III will invest in the outcomes of commercial disputes, antitrust and trade regulation claims, and intellectual property claims that Longford believes to be highly meritorious and have a strong likelihood of success.  Fund III has already committed nearly $270 million to new investments.

“Litigation funding continues to gain acceptance among law firms, their clients, and investors alike,” said Timothy S. Farrell, co-founder and managing director of Longford Capital.  “We have seen significant growth in interest in litigation finance from leading institutional investors and high-net-worth individuals eager to put their money to work in an uncorrelated asset class.

“The significant capital we have raised gives us the latitude to be flexible and to innovate,” he added.  “Groundbreaking agreements with top law firms – like our arrangement with Willkie Farr & Gallagher – are hallmarks of our innovative approach and how we seek to generate returns for our investors.  We are grateful for our investors and our law firm and corporate partners.”

Since 2017, Longford has doubled the size of its underwriting team to manage the growing demand for its capital and added several talented business executives to scale its business.

“We’ve assembled an exceptional team of former first-chair litigators from leading law firms and experienced executives from great companies, and our team is the wellspring of our success,” said Farrell.  “Private practice litigators and corporate general counsel bring their matters to Longford because our team has walked in their shoes, and each member dedicates his and her thoughtful, diligent and individual attention throughout the lifespan of a matter.  This will remain a key element of our culture as we continue to scale our business.”

About Longford Capital

Longford Capital is a private investment company that provides capital to leading law firms, public and private companies, research universities, government agencies, and other entities involved in large-scale, commercial legal disputes.  Longford was one of the first litigation funds in the United States and is among the world’s largest litigation finance companies with more than $1.2 billion in assets under management.  Typically, Longford funds attorneys’ fees and other costs necessary to pursue meritorious legal claims in return for a share of a favorable settlement or award.  The firm manages a diversified portfolio and considers investments in subject matter areas where it has developed considerable expertise, including business-to-business contract claims, antitrust and trade regulation claims, intellectual property claims (including patent, trademark, copyright, and trade secret), fiduciary duty claims, fraud claims, claims in bankruptcy and liquidation, domestic and international arbitrations, claim monetization, insurance matters, and a variety of others.

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Case Developments Commercial

Contingency Fees vs Group Cost Orders in Victoria

The Supreme Court of Victoria declined to allow a 25% contingency fee. The decision represents the first time the court has used its power to make a Group Cost Order—which the court determined was preferable to a “no win, no fee” arrangement. Ashurst details that an exception to the prohibition against contingency fees, the power to make a Group Costs Order in class actions, was introduced in Victoria in June of 2020. Thus far, Victoria is the only jurisdiction in Australia to allow this.   A Group Costs Order is a type of contingency fee that requires approval from the court. It necessitates that claimants will pay a portion of the contingency fee out of an award or settlement. This new legislation came about to allow plaintiff law firms to compete on level ground with third-party legal funders. In the first application since Group Costs Orders became law, courts had to determine whether the lawyer’s request for a 25% contingency fee was in the best interests of group members and whether it would be an improvement for claimants over the funding agreement already in place. Lawyers for the plaintiffs compared the Group Costs Order to a TPF agreement, saying it would be better for claimants. The court determined that because of the ‘no win, no fee’ agreement, the comparison should be between the agreement versus the Group Costs Order. Ultimately, the court ruled that the plaintiffs would not be better off with a Group Costs Order. After the decision, the court allowed the parties to take time to reconsider and reapply if desired. While it’s unclear whether courts will grow more welcoming to Group Costs Orders in the future, it seems that plaintiff law firms still find these orders attractive.
Case Developments Commercial

Business Interruption Class Action Filed Against IAG

A class action has been launched against insurer IAG after it denied business interruption claims related to COVID-19. The case has been likened to a test case in Australia. Insurance News explains that Slater and Gordon launched the suit after recognizing that IAG has adopted a strategy to ‘divert, deny, and delay.’ Some businesses have been waiting a year or more for remuneration from their insurers. The action is being funded and managed by ICP, with the goal of having claims vetted and paid out quickly. IAG has stated that it stands by its decisions to hold back payouts, but will abide the court’s ruling. IAG further stated that this industry-wide test case is the best way to gain clarity into the expectations of insurers during a pandemic.
Commercial Deals

UK Legal Firms Join Forces with Litigation Funders

In the early days of litigation funding, legal firms and funders were separate entities. As the industry has grown more widely accepted, an increasing number of law firms are teaming up with funders to offer clients an array of new services. Now some are questioning whether this is really a positive development. Financial Times explains that while lawyers are known to be risk-averse, respected firms like Mishcon de Reya, Rosenblatt, and DLA Piper have their own agreements with funders, or have launched their own funding arms. The UK has experienced an expansion of the funding landscape—with Britain doubling its litigation funding assets within the last three years. As third-party funding is largely self-regulated, conflict of interest is a concern. Globally, TPF is a $39 billion industry, worldwide. Law firms like Mishcon and its upcoming stock market listing bring even more scrutiny. In the UK, damages-based agreements with lawyers have only been legal since 2013. Litigation funding takes this concept one step further, helping increase access to justice. Of course, for a DBA or funding agreement to work, there has to be enough profit potential to make the risk worthwhile. According to the law, and stated industry ethics, third-party funders are not permitted to control strategy or decision-making in the cases they fund. Recently, Rosenblatt decided to prohibit its LionFish Litigation Finance arm from funding its own cases to avoid the appearance of conflict. Elena Rey, partner at Brown Rudnick, suggests that standardized funding agreements would be better for transparency. She asserts that high standards should be the norm for the industry and that this will translate to increased confidence and fewer concerns about conflicts of interest. Therium’s Neil Purslow affirms that even though industry regulation is sparse, courts can invalidate a funding contract if it finds the contract unfair or contrary to the interests of justice. Meanwhile, demand for funding and interest from investors continues to increase.
Case Developments Consumer

Doctor & Consultant Plead Guilty in Pelvic Mesh Scheme

Two men charged with pressuring hundreds of female patients into removing pelvic mesh implants—ostensibly to raise the payout in personal injury claims against device manufacturers—pled guilty to violations of the Federal Travel Act. Eminetra details that Wesley Blake Barber is facing four years in federal prison, while Dr. Christopher Walker could see at least eight. The charges stem from the men’s actions in a mass tort case against Johnson & Johnson, Boston Scientific, and several other manufacturers of pelvic mesh implants. About 100,000 US women are potential claimants in the case, which is connected to an $8 billion settlement. The actions of Barber and Dr. Walker are particularly egregious as surgery to remove implanted mesh is fraught with risk. Many of the women who succumbed to pressure placed on them by the defendants were worse off than they were before the implants. Some women stated that they were not fully aware of what they had agreed to, and few had sought a second opinion. The case was provided with financial support by an unnamed third-party funder. An attorney for Dr. Walker called his behavior “unfortunate” and implied that he would still be providing care to patients. Meanwhile, civil proceedings are underway. About 20 defendants, including other doctors, could be held liable for monetary damages.
Announcements Commercial Fundraising

Litigation financing start-up LegalPay’s maiden fund oversubscribed

LegalPay, a start-up focused on third-party litigation finance, has announced the successful closure of its maiden litigation fund. The Arbitration Focused SPV I, a smaller ticket special purpose vehicle (SPV), designed for upper-retail investors, was launched last month, and has now been oversubscribed, a LegalPay statement said. The SPV I was launched to create a pool of 8-12 legal cases to ensure diversification of capital, while minimising risk for the smaller fraction of investment. The fund allows retail investors to invest as low as Rs 25,000 in a single legal matter. Meanwhile, the start-up has also launched its second SPV that will focus on commercial disputes. Interestingly, the investment opportunity comes with a pre-commit flat cashback of Rs 1,000 on each investment. The venture focuses on B2B commercial disputes that offer an opportunity of an exact monetary value. Matters related to breach of contract, recovery claims, partnership disputes, cross-border transaction disputes and taxation disputes are typically considered. Further, it focuses on financing medium and late-stage litigations in specialised forums. These SPVs help investors diversify by investing in a basket of commercial cases that typically generate a pre-tax IRR of over 20 per cent. Incidentally, the entire investment process is digital and seamless, including signing investor documents, KYC, tracking of the basket of claims, and portfolio monitoring and analytics. Founded by Kundan Shahi in 2020, the Delhi-based start-up is backed by venture capital firms such as 9Unicorns and LetsVenture.
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Commercial Legal Innovation

2021 Legal Finance Survey Shows Uptick in Relevance

For the last five years, Lake Whillans and Above The Law have joined forces on a survey detailing the awareness and favorability of third-party legal funding. This year represents the first finding since the onset of COVID as a global emergency. Overall, it found that the percentage of respondents who had first-hand experience with TPF remained about the same. Lake Whillans reports that the last year saw a huge uptick in the use of legal finance for claims monetization, law firm capital, and financing claim holders. This demonstrates the flexibility and capacity for innovation that has inspired the expanded acceptance and use of TPF. Among those survey respondents who had worked with a litigation finance firm, 86.4% stated that they would do so again. About 80% said they were likely to recommend litigation funding to others. The stats in the report show that funding is increasing in use and acceptance. In corporate settings, drivers of seeking litigation funding were split pretty evenly between law firms, GC’s, and businesses. As expected, financial need is still the strongest motivator for seeking TPF. Risk management is the next most popular reason, with corporate finance (using funding to follow up on cases without impacting operating expenses) and the quest for more affordable capital as the other motivators. Small private companies were the most likely clients to seek out TPF, with individuals and publicly traded companies being next.
Commercial Regulatory Issues

Law Commission Review Reveals Conflict Between Funders & Corporates

It stands to reason that litigation funders and big corporations would be at odds over class actions. After all, it’s often funding that makes pursuing these cases possible. Third-party funding provides the tools needed for people harmed by companies or governments to seek restitution. These large entities, and those who insure them, may not be used to this kind of accountability--and blame funders for increasing access to justice. Newsroom NZ details that the problem is that in some jurisdictions, the rich end of town may get their way. Ironic, since that only supports the need for accountability. It’s been suggested that caps on what funders can charge for their services would prevent funders from seizing the lion’s share of an award in a successful case. Funders counter by saying that they endure significant risks that are only worthwhile financially if the payout is large. Jonathan Woodhams, director of LPF, expressed alarm at the intensity of negative commentary against third-party funding. He went on to say that assertions of excessive funder profits at the expense of claimants and a glut of opportunistic litigation are both false and offensive. LPF’s numbers show that it made about 6% profit during the last ten years, with claimants receiving slightly less than 50% of awards and settlements. Adjacent to the call for fee caps is a suggestion that judges should vet and approve funding agreements before cases begin. This would likely require additional study for judges and additional time. The complexities of fee structures and funding agreements may warrant individual scrutiny on a case-by-case basis, but would make more sense if only applied in cases where there’s a potentially oppressive agreement in place. The Law Commission is expected to produce its final report along with recommendations in May 2022.
Commercial

Legal Funding in Australia: New Developments

Legal funding is an established and respected industry in Australia. It’s continually expanding and adapting to meet the needs of an increasing client pool. Leading funder Burford Capital has received and vetted more than 10,000 funding requests. Burford Capital explains that the funding industry predicted that the pandemic would lead to more companies being reticent or unable to spend on new litigation. During risk-averse times, it makes sense to be capital-conscious. But forgoing a valid legal case carries its own costs. Luckily, there are options. Obtaining non-recourse funding for fees and expenses allows cases to be pursued without an initial investment or financial risk. Award monetization can mitigate risk and speed up the timeline in which a payout is received. Portfolio finance involves funding for multiple cases—offering capital in exchange for a portion of awards or settlements as they occur. Legal funding can also be used for asset recovery and enforcement of judgments. This is especially valuable in international or cross-jurisdictional matters. Litigation funding is flexible enough to mitigate the very costly problem of unpursued judgments. About ¾ of very large companies in Australia report unenforced judgments amounting to millions. Funders can provide the capital, and often the expertise needed to enforce high-value judgments. Arbitration cases can also benefit from legal funding. Accelerating a payout in an arbitration matter can make a vital difference to a company—especially given that many arbitrations take years to reach completion. Ultimately, litigation funding has not experienced a strong negative impact from Australia’s recent regulations. The scope, use, and flexibility of funding continues to grow.
Commercial

Funding Innovators Keller Lenkner See Booming Business

Keller Lenkner is turning heads in the legal community of late. The boutique law firm has doubled in size since the start of the pandemic, and has also opened two new offices. The firm seeks out complex cases, often class actions, where it can make a big impact in the lives of people. Before founding Keller Lenkner, the founders launched Gerchen Keller Capital—a litigation finance firm later sold to Burford Capital. Law.com details that the founders of Keller Lenkner, and indeed ¾ of the firm, are former federal law or SCOTUS clerks. Keller explains that this is by design. He defines clerkship as an unparalleled source of legal understanding. Lenkner’s SCOTUS clerkship included sharing an office with associate Ashley Barriere. This level of hiring is uncommon in plaintiffs’ firms. Lenkner credits the firm’s growth to the assemblage of a world-class legal team, and the impact of the cases they take on. Nearly all of the firm’s clients are regular people who have been negatively impacted by corporate entities or products. Keller Lenkner routinely takes on corporates like 3M, Johnson & Johnson, and pharma and gig economy companies. Keller explains that boutique firms offer their team members more autonomy and freedom to exercise flexibility and creativity. This allows them to attract motivated and experienced talent, while forgoing the rigid seniority system of most Big Law firms. Lenkner recalls his early work in litigation funding—the most common form of which is the contingency fee. The skills learned in the legal funding field are still in use at Keller Lenkner, particularly with regard to class actions. Vetting cases with the scrutiny of a legal funder has obvious benefits to a legal firm. The team has new offices in Washington DC and Austin, Texas—with plans for further expansion to meet client demand.
Announcements Consumer

Joshua Victor Wins Tribeca Capital Group Scholarship

The 2021 Tribeca Capital Group Scholarship has concluded, with Joshua Victor declared the winner for his insightful essay on whether litigation finance expands access to justice. His conclusion is that the practice doesn’t always mean justice for those who would otherwise miss out on equitable representation. Victor’s essay highlights three main areas where he thinks lawsuit loans can be a hindrance: “because it causes bias among lawyers…, may lead to misjudged cases, and may lead to those who deserve justice not getting full justice.” Joshua Victor is in a unique position to assess the effects of litigation finance. On the pre-law track at the University of Pittsburgh, he plans to achieve a bachelor’s degree in economics before pursuing a law degree for international justice. “Eventually, I want to be an international lawyer,” he said in an interview with a Tribeca representative. “Maybe work at an international court.” Tribeca Capital Group designed the scholarship to raise awareness about the need for ethical, justice-driven lawsuit lending. The company offers pre-settlement funding to clients in need, using the best available simple interest rates, and never requires clients to pay back the loan if they lose their case. In this way, the company wants to encourage equal access to justice while avoiding the pitfalls Mr. Victor describes. Joshua Victor’s winning essay garnered him the $2,500 prize toward his continued education. Tribeca Capital Group wishes him all the best in his quest to protect human rights, fight for civil justice, and bring equity to those in need across the globe. At Tribeca Lawsuit Loans, we have experience helping clients get the money they need while they wait for their pending lawsuit to settle or resolve in court. Our company provides lawsuit loans, also known as legal funding or pre-settlement funding. This is a form of lawsuit cash advance that gives plaintiffs a portion of their eventual compensation package to spend on current expenses. Headquartered in Los Angeles, California, our team is spread across the United States. Whether you are located in Eastern, Western, Central, or Southern states, we can help you get your money as quickly as possible.
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Commercial Investor's Corner Slingshot Capital Special Features

Intellectual Property Private Credit (Part 2 of 2)

The following article is part of an ongoing column titled ‘Investor Insights.’  Brought to you by Ed Truant, founder and content manager of Slingshot Capital, ‘Investor Insights’ will provide thoughtful and engaging perspectives on all aspects of investing in litigation finance.  Executive Summary
  • Despite its size, the Intellectual property (“IP”) asset class has eluded the attention of most asset managers due to its underlying legal complexities
  • Litigation finance industry understands the opportunity, but it is solely focused on litigation involving IP
  • A void exists in the financing market, which IP-focused Private Credit managers have begun to fill via credit-oriented strategies designed to drive value maximization
Slingshot Insights:
  • Secular shifts in the economy have made IP assume an increasing share of corporate value
  • IP is an emerging asset class that has begun to garner the attention of asset managers and insurers
  • There are various IP-centric investment strategies that do not involve litigation.
  • IP-focused Private Credit funds approach IP in a holistic fashion, leveraging numerous ways that IP creates value
  • Investors need to be aware that investing in IP presents unique risks that warrant input from operational and legal IP specialists
  • IP Credit provides a different risk/reward profile for investors, as compared to commercial litigation finance which tends to have more quasi-binary risk
In the part 1 of this two-part series, the relatively nascent asset class of Intellectual Property Private Credit (“IP Credit”) was introduced.  That article explored the basic premise of the asset class, discussed some of the financiers in the space and reviewed some of the nuances inherent in the asset class.  In part two, we take all of the knowledge gained in part one and apply it to a specific example by exploring a publicly traded company, which used IP Credit on a couple of different occasions with great success. Case Study The details of most IP Private Credit transactions remain private.  An illustrative exception involves two prior financings of the once publicly traded cybersecurity company Finjan Holdings, Inc. (NASDAQ: FNJN) (“Finjan”), known for its technologies related to proactive cybersecurity.  At the time of the financings in 2016 and 2017, Finjan had focused significant effort on the licensing of its patent portfolio — to significant monetary success — in addition to other aspects of its business.  But because the licensing of intellectual property often requires costly litigation to complement the negotiation process, Finjan, through its bankers, ran a process to identify a strategic capital partner.  Potential proceed uses included litigation and general operating expenses, as well as stock repurchases. Series A Financing (May 20, 2016)
InvestmentSeries A Preferred StockInvestorsHalcyon/Soryn
Amount$10.2 millionTerms
  • Optional and mandatory redemptive provisions
  • Carry participation rights in revenue streams
  • Negative Events – Litigation and Treasury events
  • Consent to declare dividends
Source: https://www.sec.gov/Archives/edgar/data/0001366340/000136634016000051/0001366340-16-000051-index.htm
Series A1 Financing (June 19, 2017)
InvestmentSeries A Preferred StockInvestorsHalcyon/Soryn
Amount$15.3 millionTerms
  • Optional and mandatory redemptive provisions
  • Carry participation rights in revenue streams
  • Negative Events – Litigation and Treasury events
  • Consent to declare dividends
Redemption RightsCompany option to redeem at lesser of: 1.     2.8 X Original Purchase Price 2.     Purchase prices ranging from 1.2375X to 1.575+ times based on time elapsed from date of issuance 3.     Receipt of share of proceeds from litigation or licensing which varies based on time elapsed from date of issuance
Source: https://www.sec.gov/Archives/edgar/data/0001366340/000136634017000059/0001366340-17-000059-index.htm
Based on its prior patent licensing success, Finjan likely had numerous traditional, non-recourse litigation financing offers to choose from. But instead of pursuing the litigation finance route, Finjan pursued the IP Credit path.  Finjan secured almost $26mm in financing, via two highly-structured preferred equity transactions.  These transactions featured share redemptions tied to litigation and/or patent licensing revenue events, and also contained “Negative Event” features that entitled the capital partner to recover all of their shares upon the occurrence of certain, pre-agreed negative events.  As illustrated in the chart above, the capital partner’s potential returns were capped at multiples ranging from 1.25 to almost 3x the original purchase price of the shares, with the range depending mainly on the length of time the capital was outstanding. Finjan ultimately exited both deals.  While the exact motivations behind the deal cannot be known, it is easily theorized that the highly-structured and downside protected nature of the IP Credit Deal the company ultimately entered into was favorable in a number of respects compared to the higher cost of capital seen in traditional litigation finance arrangements.  Finjan was ultimately acquired by Fortress Investment Group in 2020. Interplay with IP litigation Of note, and particularly with respect to patents, enforcement litigation is often a necessary tool to resolve licensing disputes or negotiations between IP owners and potential licensees.   The reason is that without litigation, a patent owner has no means to force a party that it believes is infringing its IP to the negotiating table. Litigation scenarios thus remain part of the broader IP Private Credit strategy.  But such litigations can take different shapes and risk profiles.  On one end of the risk spectrum are single event litigations, involving a small number of patents, that represent unattractive and binary risk profiles.  On the other end of the spectrum are multi-venue disputes, involving a significant number of patents, brought by entities owning much larger patent portfolios than what is asserted in litigation. These types of situations (shown above to the right of the arrow) resemble business negotiations moreso than binary litigation, and can be modeled to resolve in a more predictable fashion.  By the nature of a credit-oriented investment strategy, an IP-focused Private Credit fund targets the latter opportunity set, whereas the litigation finance market has shown a willingness to fund what we characterize as the riskier, more binary type enforcement situations. Accordingly, while litigation is not necessarily an outcome that results from such an investment, a manager that invests in the sector does need to expect, plan and prepare for litigation as a potential outcome, or at the very least as a means to an end. The idea, as with most litigation, is that ‘saner heads will prevail’ and that a commercially reasonable settlement will be achieved by both parties prior to embarking on expensive litigation.  Of course, this means that the onus is on the investor to understand the merits of the case and the plaintiff’s strategic position, potential defenses, procedural activities that could frustrate or delay litigation, and the costs associated therewith.  The complexities associated with understanding the value of intellectual property assets, and the complexity of the litigation process, make the sector a highly specialized area for investors who are often best served by investing with or alongside specialist managers.  Slingshot Insights Secular shifts in the economy should be forcing investors to think about value in different ways.  It’s indisputable that intellectual property is clearly the basis for technology company valuations, and therefore value must be attributable to IP when considering financing alternatives.  While understanding the value inherent in intellectual property can be difficult, fund managers with specific expertise exist to allow investors to allocate capital in an appropriate risk adjusted manner. The fact that the insurance industry is now providing insurance products geared toward intellectual property is a testament to how far the industry has come and how significant the opportunity is, and perhaps much less risky than one would think, if approached prudently. I believe the IP Credit asset class has a bright future, as existing players have had great success producing consistent returns in a sector that one might otherwise believe to be volatile. As always, I welcome your comments and counter-points to those raised in this article.  Edward Truant is the founder of Slingshot Capital Inc. and an investor in the consumer and commercial litigation finance industry.  Slingshot Capital inc. is involved in the origination and design of unique opportunities in legal finance markets, globally, investing with and alongside institutional investors. Soryn IP Capital Management LLC (“Soryn”) is an investment management firm focused on providing flexible financing solutions to companies, law firms and universities that own and manage valuable intellectual property (“IP”) assets.  Soryn’s approach employs strategies, including private credit, legal finance, and specialty IP finance, which enable it to invest across a diversity of unique IP-centric opportunities via investments structured as debt, equity, derivatives, and other financial contracts.  The Soryn team is comprised of seasoned IP and investment professionals, allowing the firm to directly source opportunities less travelled by traditional alternative asset managers.
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Consumer

Covered Bridge Capital Named Best Consumer Litigation Funding Provider

Covered Bridge Capital has been a provider of plaintiff and medical funding since 2004. Recently, it was voted the number one consumer litigation funding provider, and is now listed in 2021 Best of Texas. Texas Lawyer details that Covered Bridge Capital has a 4.9-star rating on Google—based on 216 reviews from attorneys and clients. Notably, CBC provides one-page funding agreements with the goal of keeping contracts simple and accessible to laypeople. According to the company website, Covered Bridge Capital boasts a simple application process and a strong focus on helping plaintiffs involved in personal injury and similar cases. The team is led by Dean Lipson, Managing partner, and DJ Kepler, director of business development. They are supported by six relationship managers, three client fulfillment representatives, an underwriter, and a portfolio manager.
Commercial Deals

Pretium Partners Launches Litigation Funding Group

Pretium Partners LLC is an investment management firm specializing in corporate, residential, and structured credit. It has recently announced the formation of a new investment group focusing on third-party funding. Reuters reports that Pretium has around $26 billion in assets under management. It’s newly formed ‘legal opportunities team’ is expected to work with law firms and businesses to fund complex commercial disputes, IP and patent litigation, arbitrations, insolvency, and other common areas of focus. Matthew Cantor, previously GC for Lehman Brothers, will lead the six-person team. Cantor joined Pretium in June 2020. Chad (Charles) Schmerler has been announced as the head of litigation finance. Together, team members have experience in legal risk monetization, legal finance, IP, forensic accounting, and damages analysis.
Commercial Regulatory Issues

EU Parliament Considers Increased Litigation Funding Legislation

This past June, the European Parliament’s Legal Affairs Committee published recommendations for the European Commission. This draft report is being discussed and debated by the Economic Affairs Committee before being discussed in Parliament in November. If Parliament adopts the draft report, the next step would be for the European Commission to draft new legislative proposals. Pinsent Masons details that while the committee report acknowledges the value of third-party funding, it also cautions against funders profiting at the expense of claimants. The draft is reportedly intended to regulate third-party legal funding before it gains traction across the EU. Notably, the draft report describes third-party legal funding as a way to make a profit. Increased access to justice, the report claims, is merely a by-product of the practice. This cynical mindset could surely be countered by the many people who have obtained justice thanks to a funder that believed in their case. The main proposals of the draft report include issues already addressed by professional organizations like the IFLA. These include:
  • Ensuring that funders do not supersede the wishes of claimants
  • Employing safeguards against conflicts of interest
Other suggested regulations are less welcome by many funders, and have been debated in other jurisdictions. These include:
  • Licensing systems similar to what Australia has mandated
  • Requirements regarding capital minimums and security for costs
  • Fee caps
  • Disclosure
The German Federal Bar welcomed most of the suggestions in the draft report. BRAK stated its expectation that litigation funding will become increasingly influential in Germany, and should therefore be well-regulated. Upon receiving the draft report, BRAK suggested extending the rules to include proceedings that happen out-of-court. Class actions are of particular interest to those planning increased regulation. Collective actions are on the rise in many jurisdictions, which is not welcome news in the business world.
Case Developments Commercial

Costs Awarded to Volkswagen in Takata Airbag Action

A recent class action against Volkswagen Group Australia has been dismissed. Costs have been awarded to the car manufacturer and will be paid by the third-party litigation funder for the plaintiffs. Car Expert explains that the lead claimant, Professor Phillip Dwyer, was unable to establish damages resulting from the installation of a Takata airbag, nor could he demonstrate that the vehicle was of unacceptable quality at the time of purchase. As such, the case was dismissed. Buyers received recall notices requiring that airbags be replaced within six years. This led Dwyer to conclude that his car was unsafe and that he was owed compensation of about $15,000. Justice Stevenson determined that there were no financial losses and that the Dwyers continued to drive their car without incident. The airbags in question are currently installed in over 20 million cars around the world. The litigation funder for the plaintiffs is now on the hook for the costs award issued by the court. 
Case Developments Commercial

Seqwater Case Overturned as Omni Bridgeway Stock Takes Hit

Omni Bridgeway's share price fell subsequent to an appeals judgment against Seqwater. The ruling overturned a 2019 judgment against the dam management company. The original ruling determined that Seqwater was liable for half of the compensation claims from floods in early 2011. Stockhead details that another appeal could be imminent. In the meantime, the case in question amounted to 4% of the company’s litigation assets—not counting Seqwater’s costs, which are as yet uncalculated. Omni Bridgeway's share price fell by 8%, which represents an AU $90 million decrease in market capitalization. CEO Andrew Saker affirms that while not devastating, the outcome was certainly less than ideal.
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Case Developments Commercial

TikTok Again Accused of Violating Privacy Laws

A third Demark-based foundation has filed a case against TikTok media group over data they claim was harvested illegally. The suit impacted about 4.5 million Dutch users across all age demographics. Dutch News reports that the suit alleges that the TikTok app profits from detailed user information on a platform where user content and ads are virtually indistinguishable. The company is accused of seeking out countries with less rigorous standards for data protection—like the US or China. The case is being funded by IVO Capital, and led by Stichting, Massaschade & Consument—an independent non-profit legal organization.
Commercial Deals

Gately Announces GBP 20 Million Litigation Funding Facility

Gately, the first law firm to list publicly in the UK, recently announced a GBP 20 million litigation funding arm. Expected to begin in early 2022, the funding arm will specialize in claims related to insolvency, investor and shareholder disputes, fraud, and asset protection and recovery. Gately PLC has been a dominant force in insolvency litigation. It makes sense that their litigation funding facility will have a similar focus. Gately services domestic and international clients in a wide swath of jurisdictions including Russia and CIS, Gibraltar, Cyprus, BVI, and the Cayman Islands, among others. The firm's funding process will begin with a review of the case to determine its viability for funding. By providing non-recourse funding, Gately will enable companies to pursue meritorious litigation with no upfront cost to the company. Funders are paid from the results of a successful verdict or settlement. If the case is unsuccessful, funders may lose their investment, but the business does not suffer the loss.
Case Developments Commercial

Omni Bridgeway Files Appeal on Behalf of 1,000 Halifax Victims

Leading legal funder Omni Bridgeway recently announced that it is funding appeals over judgments against Halifax Investment services Pty Ltd, and another Halifax entity—both currently in liquidation. NZ Herald revealed that Danielle Funston, Maddocks Lawyers insolvency specialist, will be the lead attorney in the appeal. The result might impact more than 1,000 category 1 investors, which covers at least AU $82 million in investments, as of the time Halifax went into insolvency. The appeal will focus on whether the courts should have concluded that the liquidators were correct in valuing investor entitlements as of the administration date. 
Case Developments Commercial

UK Supreme Court Ruling Could Damage Enforceability of Follower Notice Penalties

Follower Notices have been in use since 2014, and refer to a notification given to someone who has used an “avoidance scheme” that was determined to be ineffective by a case against another user. This gives taxpayers an opportunity to adjust or amend their tax filings. Her Majesty’s Revenue and Customs (HMRC) issues these notices frequently, which is considered controversial for a variety of reasons. Field Fisher explains that Follower Notices are sometimes applied to situations wherein the link between the test case and the person being notified is highly tenuous. One case in particular, R Haworth v Revenue and Customs Comrs [2021] UKSC 25 could invalidate all Follower Notices issued by the HMRC since 2014. According to a Freedom of Information request, about 1.330 Follower Notices have been issued since this regime began in 2014, totaling about GBP 45 million. Not only that, but at least 13,000 people reportedly gave up on their tax appeal cases due to a Follower Notice that may not even be correctly applied, let alone legally enforceable. Ideally, anyone who has received a Follower Notice should contact their legal counsel. According to HMRC, a Follower Notice tells the subject that they may be liable for penalties of up to 50% of the tax dispute if their return isn’t amended or the dispute settled. If that seems threatening, it may be because it is. In the Haworth decision, courts specifically considered the word “would” as it pertains to the notices. HMRC asserted that by “would,” they meant “would likely.” Rather like the difference between “Yes,” and “Possibly,” which most people would agree is significant. This ruling calls the appropriateness of all issued Follower Notices into question. A group action is being assembled. Impacted parties are encouraged to contact Feldfisher attorneys George Gillham and Matthew Sharp for additional information.
Announcements Commercial Fundraising

Notice Of Investor Event Date

Burford Capital Limited, the leading global finance and asset management firm focused on law, today announces that it will hold an investor event on Tuesday November 2, 2021 at 10.00am-12.30pm EDT / 2.00-4.30pm GMT / 3.00-5.30pm CET. The investor event will be hosted by Christopher Bogart, Chief Executive Officer and Co-Founder, and Jonathan Molot, Chief Investment Officer and Co-Founder, as well as other members of the senior management team. For institutional investors and analysts, the event will take place in person at the New York Stock Exchange, followed by a reception. There will be a simultaneous online real-time video webcast, from which registered participants will have the functional capability to put questions to the management team. Further details, including registration and participation, will be announced in due course. 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. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any ordinary shares or other securities of Burford. This release does not constitute an offer of any Burford fund. Burford Capital Investment Management LLC ("BCIM"), which acts as the fund manager of all Burford funds, is registered as an investment adviser with the U.S. Securities and Exchange Commission. The information provided herein is for informational purposes only. Past performance is not indicative of future results. The information contained herein is not, and should not be construed as, an offer to sell or the solicitation of an offer to buy any securities (including, without limitation, interests or shares in the funds). Any such offer or solicitation may be made only by means of a final confidential Private Placement Memorandum and other offering documents. Forward-looking statements
This announcement contains "forward-looking statements" within the meaning of Section 21E of the US Securities Exchange Act of 1934 regarding assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as "forward-looking statements". In some cases, predictive, future-tense or forward-looking words such as "aim", "anticipate", "believe", "continue", "could", "estimate", "expect", "forecast", "guidance", "intend", "may", "plan", "potential", "predict", "projected", "should" or "will" or the negative of such terms or other comparable terminology are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. In addition, we and our representatives may from time to time make other oral or written statements which are forward-looking statements, including in our periodic reports that we file with the US Securities and Exchange Commission, other information sent to our security holders, and other written materials. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and are based on  numerous assumptions and that our actual results of operations, including our financial condition and liquidity and the development of the industry in which we operate, may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this announcement. Significant factors that may cause actual results to differ from those we expect include those discussed under "Risk Factors" in our Annual Report on Form 20-F filed with the US Securities and Exchange Commission on March 24, 2021. In addition, even if our results of operations, including our financial condition and liquidity and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Except as required by law, we undertake no obligation to update or revise the forward-looking statements contained in this announcement, whether as a result of new information, future events, a change in our views or expectations or otherwise. SOURCE: Burford Capital
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Announcements Commercial Legal Innovation

Liti Capital Launches Staking for Token Holders

Liti Capital SA, a Swiss-based litigation funding provider that has opened up private equity investing to the masses through blockchain technology, is launching staking for its wLITI token.

Starting on September 13, wLITI token holders will be able to stake their tokens and receive wLITI in return. “Staking is a crucial tool to be attractive in the DeFi space and to reward our community for supporting us long term,” says Jonas Rey, Liti Capital’s co-founder. Token holders can stake their tokens by heading to the Liti Capital app, on the Liti Capital website, connecting a compatible wallet and selecting staking. The product does not require holders to go through any know-your-customer (KYC) checks. At launch there will be three options for users to stake their wLITI tokens:
  • 4% APY for 30 days
  • 6% APY for 60 days
  • 9% APY for 90 days
Users will be able to withdraw their tokens whenever they need to. If a user decides they want to un-stake their tokens, instead of losing all the rewards, the system calculates how much interest the user has accumulated and issues the relevant amount back to the token holder. “The community is one of the most important factors in the success of blockchain projects,” says Jaime Delgado, Liti Capital’s chief technology officer. “The staking program is one of the mechanisms by which the community is rewarded for its fidelity to the project and at the same time reduces the market share of wLITI in circulation which is beneficial for both the holders of wLITI and the company,” Delgado continues. More information on the staking program can be found at: https://liticapital.medium.com/liti-capital-launches-staking-rewards-61fef8437317 Liti Capital is spearheading an arbitration lawsuit on behalf of a group of traders who lost millions of dollars of trades on 19 May 2021 when Binance inexplicably froze their accounts for approximately one hour. It is believed that this case — the first ever group action case in the crypto sector — will be a landmark event in defining how organisations operating in the industry behave and treat their customers. Since the company’s launch in early 2021, it has raised USD 19 million to secure assets of up to USD 200 million, which if successful, will pay out a dividend to token holders.

About Liti Capital Switzerland-based Liti Capital is a Swiss limited liability company specializing in litigation finance and fintech. Liti Capital buys litigation assets to fund lawsuits and provides a complete strategic solution along with connections to top law firms to help clients win their cases. Tokenized shares of the company lower the barrier of entry for retail investors and give token holders a vote in the company’s decision-making process. Dividends are distributed to LITI token holders upon the success of the plaintiff. Jonas Rey, co-founder of Liti Capital, also heads Athena Intelligence, one of the most successful intelligence agencies in Switzerland. His two co-founders, Andy Christen and Jaime Delgado, bring operational, innovation and technical skills to round out the leadership team.

Liti Capital recently onboarded seasoned industry leader David Kay as chief information officer and executive chairman. Boasting more than a decade of experience as funding partner and portfolio manager of a billion-dollar private equity fund in the litigation financing space, Kay successfully enforced what was at the time the largest international arbitration award in history, bringing in over $1 billion in cash and securities.

For project information, please read the Whitepaper. For token distribution, please read Tokenomics. Liti Capital Official Channels Liti Capital Website: https://liticapital.com Liti Capital Telegram: https://t.me/Liti_Capital_Official Liti Capital Telegram Announcements: https://t.me/Liti_Capital_Official_ANN Liti Capital LinkedIn: https://www.linkedin.com/company/liti-capital Liti Capital Twitter: https://twitter.com/liticapital Liti Capital Medium: https://medium.com/@liticapital Liti Capital Reddit: https://www.reddit.com/r/liticapital
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Announcements Commercial Deals

Pretium Launches Legal Investment Group

Pretium, a specialized investment management firm with more than $26 billion in assets, today announced that it has established a legal opportunities investment team. Pretium's legal opportunities team will work with corporations and law firms to identify and invest in legal and commercial opportunities where its team has deep knowledge and experience and that offer attractive return potential for investors.  Areas of investment will include high value complex disputes between businesses, arbitrations, antitrust, patent and intellectual property, bankruptcy, distressed debt and insolvency and monetization of judgments and awards.  Pretium will not be investing in consumer litigation finance. Don Mullen, founder and CEO of Pretium, commented, "We are thrilled to further expand Pretium's capabilities into this fast-growing area of the market, where we believe our combination of scale, an exceptional team, and financial sophistication meets a growing need.  As many of today's fastest growing companies and industries mature, there will be increased demand for experienced and well-resourced firms to assist them in managing their legal risks particularly in areas of intellectual property, patents and technology.  With the expertise of our legal strategies team, we are excited to offer investors a diversifying investment with attractive returns that are minimally correlated to the broader economic cycle." The strategy will be led by Matthew Cantor, a Senior Managing Director who joined Pretium in May 2020 and has more than two decades of experience of creating value for investors in complex legal situations. This experience includes his tenure leading the highly successful resolution of the Lehman Brothers estate and time spent as both an investor and as a practicing attorney at leading global law firms. Also joining Pretium as a Senior Managing Director is Charles (Chad) Schmerler, who will serve as the head of Litigation Finance. Prior to joining Pretium, he was the CEO of Yorkside Capital, a litigation finance firm he founded following his tenure as a litigation partner at Norton Rose Fulbright.  He has over a decade of experience representing funders and clients seeking funding and is a recognized expert in the field. Mr. Cantor and Mr. Schmerler are joined by several seasoned investment, legal and financial professionals who bring a unique and diverse set of subject matter expertise in litigation finance, legal risk monetization, intellectual property, and forensic accounting and damages analysis that will differentiate Pretium from others in the space. Mr. Cantor added, "We look forward to working with law firms, corporations, and other sophisticated parties to utilize our deep knowledge and substantial capital to provide them with bespoke financing solutions that help them efficiently and effectively manage their legal risks and pursue commercial claims that fit within our investment criteria." About Pretium Pretium was founded in 2012 to capitalize on secular investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium's platform has approximately $26 billion of assets under management as of June 30, 2021 and employs approximately 2,500 people across 29 offices. Please visit www.pretium.com for additional information.
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Announcements Commercial People Moves

Guido Demarco, new Director & Head of Legal Assets of Stonward Litigation Funding

Stonward Litgation Funding, boutique specialized in offering bespoke solutions to finance litigation both in Europe and the Americas, has a new director and Head of Legal Assets: Guido Demarco, a legal expert with extensive experience in debt restructuring (private and sovereign), NPL strategies and legal, banking and financial project management. Prior to joining Stonward, Guido worked for the European Bank for Reconstruction and Development as a legal advisor, where he had the opportunity to work closely with different governments and high-level stakeholders. Previously, he worked as an associate at Baker McKenzie, in the Buenos Aires office, where he worked on important cross-border operations and project transactions. Some projects that stand out in his track record include the design of a secondary market for trading NPLs in Kazakhstan, advising a large international fund on the acquisition of a majority share in a payment technology company (USD 724 million deal), and the development of a training program for judges and insolvency practitioners in Armenia. "This new opportunity is exciting. The work they have done at Stonward over the last year is fantastic and now it is our turn to continue growing along the same path. We plan to expand our team before the end of the year, deepen our focus on the Latin American and Spanish markets, where there is a lot of demand for financing, and strengthen ties with our strategic partners. In addition, we plan to expand our range of services to assist our clients in sales of non-performing loan portfolios," says Demarco about his incorporation. Stonward manages a $500 million claims portfolio and a $60 million NPL portfolio. Stonward, which has just been recognized in the Chambers & Partners directory in the Litigation Support Europe-Wide guide, has a clear vocation of service and assistance, it is a strategic ally that seeks funding to its clients and associates their demand or legal needs with the appropriate funder. With the arrival of Guido Demarco, Stonward strengthens its project, and seeks to expand its operations, with a clear focus on Spain and the Americas. Litigation funding is a legal tool whereby a third party outside the judicial or arbitration proceedings pays the costs in exchange for a portion of the recovery, previously agreed upon in a funding agreement. In the event that the claim or arbitration is unsuccessful, the funder does not recover the money invested. In addition to financially constrained claimants, litigation funding also allows companies to obtain off-balance sheet funding to monetize litigation, as well as law firms seeking to fund litigation portfolios or even the day-to-day operations of the firm. Litigation finance involves maximizing the value of legal assets - whether disputes, awards or judgments - of an individual, company or institution so that they can be monetized, while eliminating risk. Stonward, with offices in Paseo de la Castellana, Madrid, handles investment transactions in international commercial arbitration and litigation in multiple jurisdictions and before different arbitral institutions. The process at Stonward: Stonward receives a request from a client to access the litigation funding market to cover the costs related to a claim, the monetization of awards or judgements, a portfolio of cases, a practice at a law firm, etc. We talk about financing lawyers, attorney, expert witness, fees, costs and others. All exchange of information is done under the strictest confidentiality, and once all necessary information is gathered, Stonward reviews the merits and likelihood of success of the case. If the case has strong merits, a high probability of success and of being funded, a letter of engagement is signed that includes a success fee for the bespoke services. Then, depending on the characteristics of the case, appropriate litigation funds are contacted and the case is presented and explained to them. The funder proposes its financial conditions under which it would fund the case, always conditional upon the successful completion of the due diligence. The review of documentation is exhaustive to determine whether or not a case has sufficient merit. Once the parties have agreed, the Litigation Funding Agreement is signed and Stonward closely monitors everything that happens during the procedure. Once the case is successfully concluded, the Settlement Agreement is executed, bringing the claim to an end.
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Commercial Deals

Mishcon de Reya Launches LitFin Arm with Support from Harbour

London-based law firm Mishcon de Reya has announced the launch of MDR Solutions, a new litigation funding venture. The finance arm was established with support from Harbour Litigation Funding, which has promised $200 million to the fund. Reuters reports that Mishcon joins the ranks of several other law firms to begin partnerships with prominent litigation funders over the last year. Longford Capital joined forces with Willkie Farr & Gallagher in June, while LCM announced a partnership with DLA Piper in August. The fund is expected to conduct business as a separate entity. Mishcon said that MDR Solutions will work with its existing team of nearly 300 arbitrators and litigators—currently based in its Singapore and London offices. The fund has a swath of case types in its sights, including IP disputes, complex fraud cases, and asset recovery. Cases originating with Mishcon will get first priority. One Mishcon dispute resolution partner, Richard Leedham, explained that the new partnership is the result of a desire to take more financial risk—benefiting the firm and its clients. The advantages of litigation funding are obvious, particularly now that clients are flocking to funders for help. Kevin Gold, Mishcon’s executive chair, explained his hope that MDR Solutions will be the first of many comparable partnerships in the future.
Announcements Commercial People Moves

International Legal Finance Association appoints Executive Director and General Counsel

The International Legal Finance Association (ILFA) has appointed Gary Barnett as Executive Director and General Counsel.  Launched 12 months ago, ILFA (ilfa.com) is the first-ever global association devoted to the growing commercial legal finance industry.

Previously at the U.S. Department of Justice (DOJ), Barnett served in various roles since 2017, most recently as Senior Counselor to the Attorney General in the Office of the Attorney General. Barnett also served as the DOJ’s Acting Director in the Office of Victims of Crime and Acting Chief of Staff to the Attorney General. Prior to joining the DOJ, he was the Staff Director and Chief Counsel to the U.S. Senate Judiciary Committee’s Subcommittee on Privacy, Technology and the Law. Barnett received his J.D. from Georgetown University Law Center and his B.A. in History and Economics from Boston University.

Gary Barnett, Executive Director and General Counsel of ILFA said: “I am honored to have the opportunity to lead ILFA and to help shape the future of this important and exciting global industry that provides untold benefits to businesses, consumers, and societies across the world, by supporting a just legal system and the rule of law.”

Leslie Perrin, Chair of ILFA said: “We are thrilled that Gary is leading the charge on behalf of  ILFA’s members to foster the sustainable development of the legal finance industry.  His vast experience within the US Department of Justice, his global perspective and commitment to the rule of law are a huge asset to the Association and its members, as well as users of legal finance around the world.”

ILFA membership includes the world’s leading commercial legal finance firms, who are founding members—Burford Capital, Harbour Litigation Funding, Longford Capital, Omni Bridgeway, Therium and Woodsford Litigation Funding. ILFA is the global voice of the commercial legal finance industry, representing its interests before governmental bodies, international organizations and professional associations and serving as a clearinghouse of relevant information, research and data about the uses and applications of commercial legal finance. Incorporated in Washington, D.C., ILFA also has a significant presence in London, Brussels and Australia.

Since launching in September 2020, eight additional members have joined: Law Finance Group, Nivalion, Parabellum Capital, Innsworth Advisors, D.E. Shaw & Company, Fortress Investment Group, TRGP Capital and Validity Finance. Membership is open to any professional commercial legal finance firm that satisfies ILFA’s membership criteria.

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Commercial Regulatory Issues

Calls for Disclosure Requirements Accompany Legal Funding Acceptance

Litigation funding existed for more than a decade before anyone thought to question whether disclosure mandates were needed. After Gawker was driven into bankruptcy by a single lawsuit, legal professionals and even the media began discussing whether disclosure rules were needed. Claims Journal details that several federal court districts, notably in New Jersey and California, now maintain legislation requiring disclosure of third-party funding contracts for plaintiffs and defendants. Even in places where disclosure laws don’t exist, judges are increasingly asking for details about funders and funding agreements. In a recent Texas case, Judge Roy Payne ruled that the identity of third-party funders was not relevant—thus refusing to hear testimony about the funding. In contrast, an Arizona judge required plaintiffs to offer defendants a list of everyone with a financial interest in the case’s outcome. If anything, this illustrates a need for uniformity in legislation regarding disclosure. In 2012, the US Chamber of Commerce's Institute for Legal Reform published a paper warning about the dangers of litigation funding. One oft-repeated “danger” is the possibility of “abusive litigation.” The idea is that lawyers will give deference to funders/investors rather than claimants—despite that being counter to established legal ethics. Another scare tactic about funding is that funders will push cases lacking in merit. This assertion makes little sense, since there’s no financial incentive in funding a case that’s destined to lose. Will disclosure requirements impede the growth of the legal funding industry? Probably not. In fact, given the fervent outsider distrust of the industry, expanding disclosure requirements add transparency, and therefore facilitate trust. Courts appear to be leaning toward increased disclosure requirements, while funders continue to argue against them. If that happens, steps should be taken to ensure that lawyers don’t inadvertently waive privilege by disclosing information to a funder—ostensibly a third party.