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Commercial

Mining Industry Insights

Mining companies are especially susceptible to disputes arising from the impact of COVID. Tax issues, regulatory changes, politics, and supply chain failures can all lead to large-scale disputes. In fact, mining disputes made up the majority of investor-state arbitration cases last year. Burford Capital explains that while mining cases are complex and can span multiple jurisdictions—the potential awards can be in the billions. For those in the mining sector, the ability to maximize the earning potential of legal assets is essential. How can mining entities extract more value from these claims? Nearly half of CFOs reported forgoing unenforced judgments—some valued at $20 million or more. This is all the more impactful for the mining industry, given how vulnerable the industry is to a host of external variables, such as COVID lockdowns, supply chain issues and commodities prices, all of which led to a significant drop in net profit margin—to a low of 11% last year. One way to mitigate these risks is to create a quantitative financial model of existing legal assets, and leverage legal finance to provide funding on a predictable schedule. For most companies, this will involve a closer relationship between financial and legal departments. This relationship may take time to nurture, but will generate dividends down the road in the form of legal settlements or awards that would otherwise go unrealized. 
Announcements Commercial People Moves

Pretium Expands Senior Team with Addition of Two Managing Directors

Pretium, a specialized investment management firm with approximately $30 billion in assets, today announced that Tatiana Gutierrez and Jeannette Arazi have joined the firm as Managing Directors on its Affordable Housing and Real Estate Capital Markets teams, respectively.

These appointments underscore Pretium's continued commitment to increasing access to quality, affordable rental housing for households of all price points. The additions of Ms. Gutierrez and Ms. Arazi enhance the depth of expertise, insight, and support Pretium provides for residents, investors, and community stakeholders across its platform. These appointments follow the announcement of the firm's $1 billion build-to-rent investment in partnership with Crescent Communities.

"Welcoming two talented professionals with long track records of success and innovation is an exciting milestone as we grow our team," said Don Mullen, CEO and Founder of Pretium. "Tatiana and Jeannette have made an incredible impact in their respective focus areas, and the experience they bring to Pretium will play a pivotal role as we continue to grow our real estate investment platform, building on the success of our single-family and build-to-rent strategies. We are confident that their additions will further strengthen our leading efforts to set the standard for professional single-family rental ownership. We look forward to their contributions as we continue to invest in our communities and expand our capabilities to bring the benefits of professionally managed single-family rental housing to more American households."

Based in New York, Ms. Gutierrez will be integral to advancing Pretium's social impact goals, including instituting an array of supportive services for residents of all price points and adding to and preserving low-income rental housing stock. Over the course of her nearly 20-year career, Ms. Gutierrez has built a reputation as a leading practitioner focused on the development and preservation of affordable housing across the United States. As a real estate attorney at Nixon Peabody LLP for more than 15 years – including the past eight years as a partner – she represented a wide range of leading for profit and nonprofit developers, syndicators, asset managers, housing authorities and tenant organizations on affordable housing transactions and regulatory issues across the United States. Ms. Gutierrez also has extensive experience in HUD assisted housing programs and has advised on numerous affordable housing and social impact real estate transactions. Ms. Gutierrez currently serves on the board of Women in Housing and Finance, on the Advisory Board to the Real Estate Association for LatinX Professionals, and on the Advisory Council to the National Housing Conference.

"Affordability and social impact continue to play an increasingly important role in today's housing market, particularly in the wake of the pandemic and the important social issues that have been brought to the forefront, as a result," said Ms. Gutierrez. "With almost 20 years of industry experience and recent experience working with the Pretium team, it is clear they are at the forefront of providing quality, affordable housing in neighborhoods of opportunity with a housing product that serves vulnerable populations like large families with children. Having the opportunity to bring my distinct affordable housing experience to Pretium's world class residential real estate platform, I believe I can help bring the benefits of Pretium's professional ownership and management model to those who will benefit from it the most."

Based in Chicago, Ms. Arazi joins Pretium from Sidley Austin LLP, where she worked for the past 22 years, including the last 14 as a partner. Widely known as a leading capital markets advisor and one of the earliest advisors for financing single-family rental housing, Ms. Arazi has extensive experience representing financial institutions in a wide range of transaction types and creating financing solutions tailored to the nuances of unique asset types. She will focus on structuring and executing transactions and strategic financial initiatives firm-wide across Pretium's residential real estate platform and portfolios.

"Having worked closely with Pretium and a number of its team members for almost a decade, I have long admired the firm's vision and commitment to creating a unique residential platform that encompasses both real estate and finance," said Ms. Arazi. "It is a privilege to join the team that serves the evolving needs of today's rental market participants—from renters to communities to investors—and I am excited to contribute to their incredible momentum."

About Pretium

Pretium is a specialized alternative investment management firm focused on U.S. residential real estate, residential credit, and corporate credit. 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 $30 billion of assets under management as of October 1, 2021 and employs approximately 2,500 people across 29 offices. Please visit www.pretium.com for additional information.

Commercial

Judge Shira Scheindlin Speaks About Litigation Finance

On the topic of third-party legal funding, trial judges past and present have much to say. Hearing them out can tell us a lot about how the industry is perceived by the courts and how that may impact its future. A recent interview with Judge Shira Scheindlin includes three questions that shed light on how courts view the practice of litigation funding.

Above the Law presents the interview with a legendary SDNY judge, with additional commentary by Gaston Kroub. The first question involves the recent Litigation Finance Dealmakers Forum.

When asked why she wanted to participate, Scheindlin's answer was twofold. First, giving a keynote address always leads to increased knowledge and perspective. Second, she was drawn to the conference for the enthusiastic interest in the practice of TPLF and its impact on social justice.

With specific regard to IP litigation, funding can be crucial because there’s so often a large financial disparity between IP owners and defendants. It’s been suggested that third-party funding can make IP cases more difficult to settle. This may make sense in that funded parties cannot easily be pushed into a settlement as their funds run low.

Scheindlin disagrees with this sentiment, however. She refers to her own experiences when she says that she’s seen many plaintiffs with unrealistic expectations for the value of their case and its potential award. Because funders (especially during the vetting process) offer an unbiased opinion—they can lend clarity to the case and help set reasonable goals.

Funders and legal experts alike are torn on the subject of disclosure of funding agreements. Scheindlin states unequivocally that disclosure is not important in the majority of cases. A funder’s involvement in a case suggests that the case itself has merit—this could serve to affirm the merits of the case as opposed to a frivolous or punitive action.

Consumer

SCOTUS Declines to Hear CFPB Challenge

In 2017, RD Legal Funding was sued by the New York attorney general. It was accused of deceptive business practices with regard to 9/11 victim advance compensation, as well as NFL concussion settlements. Reuters explains that RD Legal Funding challenged the Consumer Financial Protection Bureau’s standing to bring the case. This has been a source of debate in several other cases, with one court eventually ruling that the protections given to a CFPB director were unconstitutional. Now that SCOTUS has declined to hear this challenge, similar cases will return to lower courts.
Case Developments Commercial

Class Action Against British Telecommunications Gains Court Approval

The Competition Appeals Tribunal has granted permission for a class action against British Telecommunications to move forward. The action could be worth as much as GBP 600 million, and asserts rampant overcharging of landline customers. The action is being funded by third-party funder Harbour Litigation Funding. Harbour Litigation Funding explains that Justin Le Patourel, founder of a group called Collective Action on Land Lines (CALL), has launched the case, which could represent as many as 2.3 million customers. Noted law firm Mishcon de Reya will be advising on the case. Many of these customers are land-line only or purchased phone plans and broadband services without bundling them into a single package. Claimants could be entitled to as much as GBP 500 each. This is significant, as many impacted claimants are on fixed incomes. Harbour CIO Ellora MacPherson stated that the case may serve as a reminder of the importance of litigation funding in the pursuit of justice—especially for those, like these BT customers, who could not otherwise afford to see their day in court. Claimants not wishing to participate may opt out.
Announcements Commercial Deals

Fortress Announces Integration of Vannin Capital into Fortress Legal Assets Business

Fortress Investment Group LLC (“Fortress”) today announced that following the acquisition of Vannin Capital by funds managed by Fortress in 2019, the operations of Vannin Capital are now being restructured into the Fortress Legal Assets business.
As part of the restructuring, a number of Vannin Capital employees will transfer to Fortress. This change will have no impact on Vannin Capital’s existing investments, and Vannin Capital will remain the counterparty to its various litigation funding agreements. The restructuring is taking effect immediately. “We are confident that this combination will further strengthen our leadership position in the litigation finance market, broadening our sourcing capabilities and bringing counterparties the benefits of a deeply experienced, fully-integrated, global Legal Assets team,” said Jack Neumark, Managing Director and head of the Fortress Legal Assets business. “We believe this represents a logical next step for our Legal Assets business and managed funds as a whole, which will now receive the full benefit of the expertise and relationships that the Vannin Capital employees have built over the last decade.”
About Fortress
Founded in 1998, Fortress manages $53.9 billion of assets under management as of June 30, 2021, on behalf of approximately 1,800 institutional clients and private investors worldwide across a range of credit and real estate, private equity and permanent capital investment strategies.
Announcements Commercial People Moves

Omni Bridgeway expands its team of US-based investment professionals

Omni Bridgeway (formerly known in the US as Bentham IMF) is pleased to announce a significant expansion of its US investment team to accommodate its growth in the world’s hottest legal finance market. In addition to adding four brand new investment professionals, we are thrilled to announce the promotion of four team members who have been key players on our US team. In New York, former Kirkland & Ellis LLP partner Ian Spain has joined Omni Bridgeway as an Investment Manager and Legal Counsel, bringing with him over a decade of complex litigation experience. Chris Citro, also formerly of Kirkland, has joined the team as a Legal Counsel with specialized experience in patent litigation (including ITC matters) and other intellectual property disputes. In Los Angeles, former Pillsbury Winthrop Shaw Pitman Counsel Justin Brossier comes aboard as an Associate Investment Manager and Legal Counsel, where his diverse prior litigation experience will enable him to identify strong investment opportunities as well as provide sound strategic advice to Omni Bridgeway’s internal Investment Committee and to external stakeholders alike. And in Houston, Raj Duvvuri joins as an Investment Manager and Legal Counsel. A graduate of Harvard Law School with deep ties in the Houston market, Raj began his career at top-tier law firms such as Baker Botts. Most recently, Raj served as the General Counsel for Atlas Operating LLC and Affiliates, a privately held energy and real estate conglomerate known for operation of oil and gas assets and commercial properties in U.S. and Canada. His unique combination of law firm and in-house skills and expertise will be key as the company’s corporate and law firm portfolio financing opportunities continue to grow in size and number. “Omni Bridgeway is the gold standard in this industry, and I am honored and excited to join the organization,” observed Justin. Similarly, Raj remarked that "Omni Bridgeway has an unmatched reputation in the funding space and is at an exciting moment in its development. I'm thrilled to be joining the team." In addition, Omni Bridgeway is delighted to announce the promotion of the following investment professionals, all of whom have displayed excellent judgment and counsel on potential opportunities and funded investments. They have expertly navigated several funded matters through their life cycle and have assisted Omni Bridgeway with its growth and expansion into new legal finance areas, from private equity to insolvency and international arbitration. Advancing to Investment Manager and Legal Counsel are Amy Geise in Houston and John Harabedian in Los Angeles. Both Sarah Jacobson in New York and Nilufar Hossain in San Francisco are being promoted to Associate Investment Manager and Legal Counsel. “All of these team members have proven themselves to be great assets. Moving them up the ranks is not only recognition of all their hard work and dedication to maintaining Omni Bridgeway as the go-to funder in the US, it also demonstrates our commitment to promote well-deserving folks from within,” says US Chief Investment Officer Allison Chock. On the recent hires and promotions, Andrew Saker, Omni Bridgeway’s Managing Director & CEO and Chief Strategy Officer, notes that “the expansion of the US investment group is a direct result of the demand we are seeing in the market for legal finance products and also displays our advancement of, and execution on, our US growth strategy to remain a top dispute finance funder regionally, as well as globally. Keep an eye on this space; we’re just getting started.”
ABOUT OMNI BRIDGEWAY
Omni Bridgeway is a global leader in financing and managing legal risks, with expertise in civil and common law legal and recovery systems, and with operations around the world. Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery. Since 1986, it has established a record of financing disputes and enforcement proceedings.
Commercial

Litigation Funding Experiences Maturity and Growth

As more investors discover the benefits of Litigation Finance, funders have had to become more proactive about funding cases. Collective action cases are particularly attractive to funders due to large class sizes and the potential for high payouts. As the industry becomes larger and more influential, innovations abound. Law Gazette details that competition between funders is becoming more pronounced—as courts must now parse disagreements between separate claimant groups for the same matter. Meanwhile, a push for standardized funding agreements and other types of standard documentation is underway. This advancement is expected to help new investors to understand how litigation funding works to better inform their investment strategies. COVID-19 has spurred the industry forward in several key ways. Perhaps most impactful is the embrace of high-end investors who are increasingly seeking non-correlated investment opportunities. That, combined with the promise of impressively high returns, has investors flocking toward the industry. This past summer, Augusta Ventures’ new GBP 250 million fund brought its total assets under management to a staggering GBP 585 million. Once the funds are in hand, funders have an obligation to make that money work for investors. As funders seek to proactively find new cases to bankroll, collective actions are frequently on their radar. Neil Purslow of Therium Capital Management explains that funding is more common than ever in large group actions—leading to a symbiotic relationship between funders and cases. The Consumer Rights Act of 2015 has also impacted third-party litigation funding. The opt-out provision of the law means that a case with a huge class size—even in the millions—can be represented by a single person. However, in the case of multiple claimant groups, legal teams, or funders—only one group will be certified to represent the entire claimant class. There is a Competition Appeal Tribunal that makes these decisions. Largely though, litigation funding is self-regulated.
Commercial Deals

Virage Capital Management Inks Deal for Insurance Lawsuit Revenue

Miami company MSP Recovery, along with its new partner—Lionheart Acquisition Corp II—announced a deal with Virage Capital Management for a 50% share of all future awards against property and casualty insurers.   Claims Journal reports that software used by MSP assessed that as much as $50 billion in Medicare claims should legally have been paid by insurers. That number could expand to as much as $263 billion. CEO of MSP, John Ruiz, explains that while the company expects revenue from their efforts to recoup these payments, no revenue is projected to accrue until after 2022. MSP’s business software is the cornerstone of its business plan. It examines Medicare payouts to determine if they should have been paid by another payer—usually a private insurer. Because of the Medicare Secondary Payer Act, private claimants are eligible for double damages from insurers that failed to reimburse Medicare. On average, MSP collects just over two times the value of the bills paid by Medicare—because insurers who fail to pay endure interest payments as well as double damages. In addition, insurers will have to pay the market rate for care instead of the typical discounted rate for Medicare patients. So far, Ruiz’s plan appears to be working. A recent whistleblower lawsuit filed in a Michigan court is seeking billions from more than 300 auto insurers who allegedly filed false reports to Medicare. Ruiz expressed disdain for insurers who would turn a blind eye to their obligations.
Announcements Commercial Fundraising

Litigation Funder Validity Finance Raises New Managed Fund of $70 Million to Commit Alongside Permanent Capital Base

With demand for litigation finance continuing to grow among businesses of all sizes, leading dispute funder Validity Finance reports it has raised a new managed fund of $70 million in capital commitments. The newly raised “sidecar” fund further diversifies Validity’s business and advances its experience as an alternative asset manager.  To date, Validity’s third-party managed funds total nearly $150 million of assets under management, in addition to its permanent capital base.

Validity’s latest fund investors include its original private equity investors, as well as previously committed third-party investors and a prominent family office. Since its launch in mid-2018, Validity has committed nearly $300 million towards clients in more than 40 separate investments, helping clients in scores of commercial disputes, backing law firms as well as businesses, individuals and institutions. In the past 18 months, the firm has evaluated hundreds of potential investments and committed approximately $150 million toward a wide span of cases, including contract disputes, antitrust claims, trade secret and misappropriation claims, insurance coverage cases and intellectual property matters. The firm has also supported civil rights cases. Validity CEO Ralph Sutton commented: “The pandemic created enormous challenges for pending cases, with trial dockets slowed and financial pressures weighing on many claimants. We’re fortunate to have maintained a strong pipeline of capital and a circle of investors who support our approach to fairness and client needs. We’re especially pleased to welcome some prominent new investors into the fold.” Mr. Sutton noted the high demand from law firms seeking funding – for individual matters as well as portfolios.  “We can finally say that Big Law understands our business, and even many of the biggest, most profitable firms understand the value of non-recourse funding to help their clients and their own profitability, especially as time horizons for financial outcomes have stretched.” He also noted a pronounced uptick in funding requests from larger corporate clients seeking alternatives to conventional lenders or commercial finance companies.  “Corporates have come to appreciate the sophistication and focus of high-quality dispute funders. Even well-capitalized businesses understand the economic advantages of lit funding to move risk off their balance sheets.” Since its founding, Validity has reviewed over 1,500 investment opportunities, reflecting the firm’s exacting due diligence process. That process also reflects the caliber of Validity’s team of portfolio advisers, consisting of experienced trial lawyers from the country’s preeminent litigation firms, many of whom served as federal law clerks. The firm has backed commercial matters across federal and state courts, as well as domestic and international arbitrations. For the months ahead, Validity plans to continue expansion plans that were put on hold during the pandemic, with more growth anticipated before the end of 2021.  Validity has two U.S. offices (New York and Houston) and recently marked the one-year anniversary of launching its Tel Aviv office.

About Validity Validity is a commercial litigation finance company that provides non-recourse investments for a wide variety of commercial disputes. Validity’s mission is to make a meaningful difference in our clients’ experience of the legal system. We focus on fairness, innovation, and clarity. For more, visit www.validityfinance.com

Commercial Special Features

Day Two Recap of the LF Dealmakers Conference

Day two of of the two-day event saw a trio of panels that covered topics such as investment strategy and risk management, the interplay between fund types, and litigation finance as a tool for ESG. The first panel of the day was titles "CIO Roundtable: Focus on Investment Strategy & Risk Management," and was moderated by Steven Molo, Founding Partner of MoloLamken. Panelists included:
  • Patrick Dempsey, Chief Investment Officer, US, Therium Capital
  • Sarah Johnson, Co-Head Litigation Finance, The D. E. Shaw Group
  • Aaron Katz, Chief Investment Officer, Parabellum Capital
  • David Kerstein, Chief Risk Officer & Senior Investment Manager, Validity Finance
The conversation began with the rise of business interruption claims. Patrick Dempsey of Therium hasn’t seen much in the way of business interruption claims that have been successful yet.  There was an initial interest in this case type, but then a lot of negative decisions came out of federal courts, and so interest waned. That said, you can build a portfolio of these claims and hedge your risk going forward. Aaron Katz of Parabellum noted how his firm hasn’t been active in the business interruption space, though the pace of all other claim types is picking up, with interesting new product areas being developed, including credit-like structures, different stages of cases being presented, lower risk investment types, and even partial recourse feature investment. Sarah Johnson of D.E. Shaw commented on the emergence of new entrants into the litigation funding space. Competition does affect pricing, and this has more of an impact in creative structuring—with new tranches of risk being created. David Kerstein of Validity jumped in to parse this out. He has seen more competition in pricing in larger size deals, however not so much in the more modestly-sized deals. There is still competition there, as claimants are approaching a lot of funders, just not as much price pressure in these types of claims. The conversation then turned to bankruptcy. This was a very quick distressed cycle—given that there was a lot of sophisticated money chasing these deals, there wasn’t as much of a need for litigation funding. However, we may soon begin to see bankruptcies driven by litigation, which could prompt claimants to approach funders for partnership or monetization. And smaller cases might be a place for funders, given that these bankruptcy claims are typically underfunded. As David Kerstein of Validity noted, “When there are bankruptcies that are based on litigation assets or issues, litigation funders are well placed to come in and provide value.” And on the issue of insurance, Aaron Katz noted that judgments are being protected with insurance, products are out there to preserve capital or even back some of the profit in a deal. That said, Parabellum hasn’t seen it as part of the bread and butter of their work. Yet Katz feels it’s only a matter of time before insurance permeates the space, but we’re not there yet. Patrick Dempsey chimed in on his experience with insurance in UK-based claims. Adverse costs insurance is inherent in the jurisdiction there, and so insurance on a portfolio basis was being considered very early on. That was ultimately deemed unnecessary, but that discussion is starting to return, and will likely come back in full force. Therium only uses insurance for judgment protection in the U.S. On the issue of regrets, Sarah Johnson noted how she wishes she had been more aggressive at the outset—doing more deals, and being less price sensitive. Having worked previously in distressed investments, she was used to price sensitivity being an issue, but she found that the industry grew a lot faster and provided much better returns than perhaps even she expected. This speaks well to the industry’s continued growth potential. Later in the day, a pair of panels tackled topics such as fund types, deal structures and costs of capital, as well as ESG and impact investing. One interesting takeaway from the former discussion came from Sarah Lieber, Managing Director and Co-Head of the Finance Group at Stifel. Lieber commented on the large commercial bank syndication model that her firm is structured with. What Stifel does is essentially a merchant banking model—they use their own balance sheet and originate their own transactions. When they approach a partner, whether that is a litigation funder, insurance company, private equity or multi-strategy firm, they choose their partner based on the return profile. And they can syndicate their partnerships within a larger deal construct. Stifel generally operates in the $50MM+ range, and can take on multiple co-investors with various tranches. So Stifel operates in cooperation with many other in the space, in a syndicated investment model. Stifel's very presence in the market is emblematic of how prominent the funding industry has grown, and how much it has matured over the past few years. Doubtless there will be further maturation ahead, and likely more funding entities which enact a similar merchant banking model. As Tets Ishikawa Managing Director of LionFish noted (on the same panel discussion): “When the market started in the last 15-20 years, it really started as a litigation funding industry—as one single entity. But I believe this market will become like the commercial real estate market. There are many different types of real estate, just as there are many different types of litigation, so in the end there will be many different types of litigation finance investors.”
Case Developments Commercial

Plan to Sue Mercedes Over Role in Dieselgate Moves Forward

Three Warrington men are bringing a claim against German carmaker Mercedes, relating to its role in the recent dieselgate scandal. Working with lawyers from consumer rights firm Slater and Gordon, the trio expects the case to become a collective action. Slater and Gordon is also a joint lead attorney in the dieselgate action against Volkswagen. Warrington Guardian explains that the action against Mercedes is funded by third-party legal funder Asertis. This funding will allow potential claimants to join the case without an upfront fee. The action involves the aftermath of an emissions scandal that necessitated a recall of diesel Mercedes cars, after which a software update was made. About 25% of car owners who had this fix experienced issues with their car’s reliability. More than 30% of respondents stated that they lost confidence in the reliability of their car, and 81% said they felt Mercedes was not forthcoming about potential problems that the fix could cause. About 600,000 vehicles are believed to be affected. The allegations against Mercedes include the use of ‘defeat’ technology that allowed cars to provide inaccurate emissions data during testing. It’s also alleged that the carmaker colluded with other manufacturers to thwart tech that could have better protected the environment from car emissions. Mercedes representatives have stated that the claims are ‘unfounded,’ along with their intention to defend themselves.
Commercial Deals

Litigation Finance in China’s Belt and Road Initiative

Even among other large-scale infrastructure projects around the world, China’s Belt and Road Initiative (BRI) is impressive. Its plan is to expand and fortify the Silk Road in an international effort that involves stakeholders from around the globe. In any venture of this size, legal disputes cannot be avoided. LCM's Nick Rowles-Davies, Roger Milburn, William Panlilio and Joe Durkin explain that international arbitration is often the most effective means to resolve disputes. But this can be costly and time-consuming. That’s why anyone involved in BRI disputes would do well to seek out third-party litigation funding. The scale and scope of the BRI means that a large and complicated network of stakeholders, contractors, governments, investors, and project companies will be involved. Many, but not all, will be Chinese. The various BRI projects are vulnerable to risks involving politics or even military action. Regulations may be inconsistent or non-existent, and the further impact of COVID is still unpredictable. The potential for international, multi-party disputes can be largely mitigated with a partnership with an experienced litigation funder. Because there is no established forum for BRI legal disputes, parties will have their own ideas about where, when, and how to address conflict. With that in mind, those involved should be ready for anything. Litigation finance doesn’t just help with managing legal costs (though it certainly does that too). When project budgets are developed, room isn’t always left for surprise legal disputes. Legal finance can provide funding for claimant side or defense side legal action—usually on a non-recourse basis. Not all BRI-impacted jurisdictions will allow the use of third-party legal funding. Many do, including Hong Kong, Singapore, and India, with China not specifically prohibiting the practice. Shifting risk to a litigation funder is a savvy business move and may be a necessary one as the BRI gets underway. After all, modern projects call for modern legal solutions.
Case Developments Commercial

ANZ Stock Price Dips After Class Action Complaint Filed

Nearly 150,000 customers have allegedly been impacted by unscrupulous practices by Australia New Zealand Banking Group. A class action alleges that the banking behemoth failed to refund fees and pay out interest. The Motley Fool reports that as claimants seek compensation from the bank, ANZ stocks have plummeted into the red. As of this writing, shares are trading at $27.39. The class action is being co-funded by Australian LitFin firm CASL, and New Zealand funder LPF Group. The bank agreed last year to pay out about NZ $30 million to about 100,000 customers after a purported coding error. Scott Russell, a former Commerce Commission Lawyer, called the bank’s actions a serious breach of CCCFA provisions. After rising over 20% in the last 12 months, ANZ share prices have dipped 3% in just the last month.
Commercial

After Rough 2020, AxiaFunder Optimistic About 2022 Profits

AxiaFunder has announced that the company remains confident of its ability to turn a profit in 2022. In 2020, the platform—which focuses on crowdfunding for legal actions—reported a loss of nearly GBP 400,000. P2P Finance News details that Cormac Leech, AxiaFunder founder and CEO, is optimistic that the firm will become profitable in 2022. He stated that it’s not uncommon for a business to invest in itself in the beginning, with profitability being achieved much later. AxiaFunder has also announced a new partnership solution for investors, and a secondary market for litigation-related investments. Its investor base has grown by about 70% per year. Leech explains that his business has funded about GBP 2 million in cases, all told. Five cases have already been successful, with a sixth win expected to be announced soon. This speaks highly of AxiaFunder’s vetting process for cases.
Consumer

Cash4Cases Founder Pleads Guilty in Securities Fraud Case

Jaeson Birnbaum has pled guilty to securities fraud related to activities surrounding the Litigation Finance firm he founded: Cash4Cases. According to Audrey Strauss, US District Attorney for the Southern District of New York, Birnbaum affirmed the assertions that he used investor funds for personal expenses. The US Department of Justice details that Birnbaum also admitted to double-pledging case recoveries as collateral to gain further investments. Between 2017-2019, Birnbaum amassed over $3 million from investors based on blatant misrepresentations. He also demanded that one of his employees falsify company records in order to secure more fraudulent investments. At one point, Birnbaum used a $1 million influx of cash for deployment to litigants—but instead used more than half of the money to purchase a New Jersey home. The USPIS Inspector-in-Charge, Philip R Bartlett, reminds investors to beware of investment offers promising returns that seem too lucrative. Birnbaum could face up to 20 years in prison for his crimes. His sentencing will take place on January 6 of next year. The case is being run by the Securities and Commodities Fraud Task Force, with Assistant US Attorney Daniel Loss leading the prosecution.
Commercial Deals Special Features

Day One of LF Dealmakers Concludes

Day one of the two-day 2021 LF Dealmakers conference has officially concluded. The day included a keynote address from Judge Shira A. Scheindlin, six panel discussions, and a host of networking opportunities. The initial panel discussion was titled "State of the Litigation Finance Industry: Innovations & Outlook." The panel was moderated by Annie Pavia, Senior Legal Analyst at Bloomberg Law, and featured the following panelists:
  • Brandon Baer, Founder & CIO, Contingency Capital
  • Fred Fabricant, Managing Partner, Fabricant
  • Michael Nicolas, Co-Founder & Managing Director, Longford Capital
  • Andrew Woltman, Principal & Co-Founder, Statera Capital
The discussion began with big picture trends regarding the economic downturn, which a lot of people posited would result in a boost to Legal Services and the Litigation Funding industry. The panelists all weighed in: Brandon Baer explained that the case pipeline has been extremely robust. There is strong origination, and a lot of need from law firms for capital. Fred Fabricant explained that from law firm side, it’s been the busiest time in his career in terms of case load. More opportunities have come to his attention in last year and a half than ever before, with things being very active in the Eastern and Western Districts of Texas. And the quality of the opportunities is higher. New players are in the market, and existing players have raised more money than ever before. Michael Nicolas added that he’s seen an increase across all different sectors – law firms (both those who have used funding previously and those who have never used funding before), and clients (facing extreme demands stemming from COVID-related issues). Longford manages over $1Bn in AUM, so they have a lot of flexibility in terms of investment potential. Andrew Woltman ended the discussion by noting how comfortable law firms and clients are becoming with litigation finance. Structurally they are being more proactive about approaching fund managers than ever before. The panel all agreed that demand is strong across the board when it comes to case types. Capital deployment is not a problem here, and the panelists expressed hope that this trend would continue, and that clients will continue to recognize the value that funders bring to the table. In terms of current challenges the industry is facing, duration and collectability are obvious issues, but these are leading to certain efficiencies–like courts learning to be more efficient in order to address duration risk. So there is a silver lining here. At this point, Annie Pavia, the moderator, switched gears and asked Michael Nicolas about Longford’s $50MM funding deal with Willkie Farr. Nicolas acknowledged the longstanding relationship between the two firms, and how that developed into a $50MM financing arrangement. Willkie also brings a lot of commercial matters to the table, which helps Longford diversify away from its core focus on IP matters. Nicolas also mentioned that they went public with the deal in order to be fully transparent to Willkie’s clients, and make them aware that Longford’s funding is possible for their claims. The question of disclosure then popped up.  Will the disclosure of the funding relationship lead to unnecessary discovery sideshows in Willkie claims?  Nicolas does not believe the publicity of the relationship will hamper any Willkie claims, and that the trend line favors courts finding discovery irrelevant, where litigation funding is concerned (in most cases). While he understands this may prompt some questions, Longford isn’t particularly worried about the consequences here. Of course, most funds still keep their partnerships private, so Longford’s decision to publicize its relationship with Willkie may perhaps be a turning point for the industry—could less opacity be around the corner? Nicolas believes we will see more transparency as the asset class continues to grow. The rest of the day featured panels across a range of topics, including legal and regulatory challenges in the U.S., and changes in law firm and contingency fee models. One discussion on "How CFOs View Legal Assets: Data & Insights from a Recent Survey," featured Kelly Daley, Director at Burford Capital, and Bruce MacEwen, President of Adam Smith, Esq. MacEwen asked an interesting question regarding law firms’ attitudes–law departments and finance departments typically don’t talk to each other. So how do conversations with law firms go, compared with conservations with corporate CFOs. Daley explained that conversations with law firms are different than those with corporations, because the assets at law firms are human labor, so it can be harder for law firms to leverage that than it is for corporations to leverage abstract assets. Law firms take their time more personally, so the conversation with law firms is more about risk shifting than with cash flows. Legal finance does both of these, but there is different value applied to each depending on what specific assets you value. MacEwen agreed, and followed up with the note that it can be tough for clients to define the value they get from a law firm, and therefore they are always looking for ways to get discounted rates. Litigation funding can play a part in that… in ameliorating the concerns clients have about overpaying for legal services. All in all, there was a lot of ground covered in the first day of the LF Dealmakers conference. And with the plethora of networking opportunities (both digitally and in-person), the event surely struck a powerful chord with all those in attendance.
Commercial Regulatory Issues Special Features

Judge Shira A. Scheindlin Delivers the Keynote Address at LF Dealmakers

The LF Dealmakers conference kicked off this morning with a keynote address from Judge Shira A. Scheindlin. The address was titled "Litigation Finance: Survey of a Shifting Landscape," and covered four main issues: ethics, fee sharing, disclosure regulations and privileged communications between funder and attorneys. Judge Scheindlin began on the topic of ethical issues, the three most common of which boil down to competence, confidentiality and truthfulness. She explained the common pitfalls that funders need to be aware of, including how different states treat confidentiality issues, for example. Scheindlin asserted that the ethical concerns most have about the industry do not pose any serious threat to its future growth potential. In terms of fee sharing, Scheindlin pointed out how bar associations play a critical role in drafting and interpreting codes of conduct, which are then adopted by the states. She noted the New York bar's opinion on Rule 5.4, which found that litigation funding violates the fee sharing restriction. This was a controversial opinion, for obvious reasons. In fact, there was such an outcry, that the city bar created a working group around litigation funding, to make recommendations around ethics and principles. The working group addressed the realities of litigation funding, and whether disclosure of funding should be required in litigation and arbitration. In the end, the working group offered two proposals. The first being that the funder can share fees with the client, provided that the funder remains independent and does not influence case decisions by participating in the claim. The second being that the funder can participate in the claim, if it benefits the client. And the client can provide informed consent to disclose confidential information to the funder (Scheindlin noted that she favors the second proposal). Neither proposal has yet been adopted, though Judge Scheindlin believes Rule 5.4 regarding fee sharing will be modified in NY, based on these recommendations. It remains to be seen which proposal will win out. On the issue of control, which is related to fee sharing, Scheindlin explained that many funding agreements give the funder the right to approve the selection of counsel.  Some may view this as control, but really the funders just want to ensure the counsel is adequate to handle the claim. In terms of disclosure, Scheindlin pointed out how 12 states have passed legislation on litigation funding, with another 11 proposing legislation. Most involve consumer funding. Only Wisconsin specifically includes financing of commercial claims. So it's clear the focus is on consumer cases, but no one knows where this will go.  There is a robust debate on the subject of disclosure, with many industry opponents pushing to reveal the identity of the funder, as well as the terms of the funding agreement. There is a lot of disagreement on the various avenues that can be taken regarding the issue of disclosure, so it will be interesting to see how this issue will develop. On privilege, Scheindlin noted the common interest exception in regard to sharing privileged information, and how courts are split as to whether this applies to litigation funders. Is a shared commercial interest the same as a common legal interest? This is the question at hand.  However, most courts have found that privileged documents are protected by work product, where a funder is concerned. Ultimately, though, an NDA or confidentiality agreement is likely needed here to ensure that work product applies. So while there are plenty of minefields, in terms of issues that could upend TPLF, Judge Scheindlin feels confident that funding will prevail in the end. To quote Judge Scheindlin: "There are always those who will oppose new ways of doing things.  Those who seek to restrict TPLF… are in my opinion, merely afraid of the level playing field that such funding creates. I don’t think they will succeed. TPLF is now an accepted part of the legal landscape, and is here to stay."
Commercial Fundraising

LegalPay’s First LitFin SPV Oversubscribed—Second SPV Announced

New-Delhi based start-up LegalPay has announced the closing of its first special purpose vehicle. The arbitration-focused SPV, which involved a pool of 8-12 cases that would diversify investment risk, was oversubscribed in record time, according to a recent statement from the company. Live Mint details that LegalPay went on to announce a second SPV that will focus on commercial disputes. LegalPay, founded in 2020 by Kundan Shahi, maintains a focus on B2B disputes with the potential for high payouts. The LegalPay SPV structure involves investors putting money into a pool of cases, which generates a pre-tax IRR of as much as 25%. An entirely digital investment process also offers claims tracking along with portfolio monitoring. Within this framework of taking on mid and late-stage cases, investors realize returns as the pool of cases are resolved. These SPVs represent new opportunities to upper-retail category investors who were previously shut out. Many more such SPVs are expected.
Announcements Commercial Legal Innovation

Liti Capital Launches Scambusters to tackle Crypto Fraud

Liti Capital SA, the Swiss-based litigation funding provider disrupting private equity investing with blockchain technology, is launching Scambusters (https://liticapital.com/scambuster/), a revolutionary new tool that allows users to vote for which crypto-focused cases the company should pursue next. 
Fraud within cryptocurrency and blockchain is rife. This year will be a record for investment fraud: 14,079 investment scams were reported to the FTC in the first quarter of 2021, and victims lost $215 million in this quarter alone. Liti Capital is bringing its expertise in picking, funding and winning court cases and inviting consumers to vote on which scams it should pursue in court next.
“The idea that scammers can freely operate in the crypto sphere without facing the consequences of their actions must end to bring trust and change the perception blockchain and crypto projects have in our society”, says Andy Christen, CVO/COO at Liti Capital.
Liti Capital commits to allocate between 5% and 10% of its yearly investment budget to finance cases that have affected its community members. Any LITI or wLITI token holder can report a purported fraud to the company.
Scambusters is a community voting event to select crypto scam cases going to be sued by Liti Capital. LITI and wLITI token holders can use their tokens without spending them to vote for the case(s) they think have the most merit. The more tokens they have the more voting power they can exercise. Voters of the winning case will share an award up to 250,000 wLITI, distributed pro-rata to their votes.
Once members of the community have submitted cases on the Scambusters website, Liti Capital instructs its team of legal experts based in 140 countries across the world to explore details of the case.
A selection of cases are then presented back to community members, with the case collecting the highest number of votes being added to Liti Capital’s portfolio. Community voting begins on 23 September 2021, with the winning case announced on 15 October 2021.
“If cryptocurrency is going to become the defacto way people take part in the Web3 world, trust, regulation and a robust legal system are all parts of that puzzle,” says Jonas Rey, CEO at Liti Capital.
About Liti Capital 
Liti Capital is bringing the litigation asset class to everyone through Blockchain technology with LITI tokens, an equity token that is a share of stock in Liti Capital SA. The launch of LITI and wLITI tokens allows any investor to engage in the high-performing litigation finance market previously only available to elite investors.
Announcements Commercial Deals

GetSwift Discloses Details of Proposed Settlement of Australian Class Action

GetSwift Technologies Limited (NEO:GSW) ("GetSwift" or the "Company"), a leading provider of last mile SaaS logistics technology, today as a result of market regulatory requirements announced that has disclosed details of its previously announced Heads of Agreement (HOA) for a settlement with law firm Phi Finney McDonald and Therium Capital Management (Australia) Pty Ltd. and Mr. Raffaele Webb (the "Applicant") in connection with the class action proceedings before the Federal Court of Australia (the "Court"). GetSwift’s Board of Directors, including each independent director, believe the terms of the proposed settlement under the HOA are in the best interests of The Company and its shareholders. The HOA contains no admission of liability or wrongdoing by GetSwift Limited or Mr. Joel Macdonald, a President and Director of The Company, and neither GetSwift Limited nor Mr. Macdonald or any of its executives acknowledges any liability or wrongdoing by entering into the HOA. GetSwift expects that the HOA and the final settlement will enable The Company and its current management to focus on growth, innovation, product launches, and market capture. The terms of the proposed settlement are expected to eliminate uncertainty and expense associated with this litigation matter and ideally realize an appropriate market capitalization for The Company, enabling it to use resources that would otherwise have been devoted to litigation for continued expansion, benefitting all stakeholders including shareholders, clients, partners, the class and employees. Terms of the settlement are as follows: The Settlement Sum to be paid by The Company is the aggregate amount derived from the following Settlement Formula, with each component amount ("settlement payment"), if payable, to be paid at or by the dates and times set out below. A reference in this Schedule to an event occurring on or by a particular date means on or by 5pm in New York, New York, United States of America, on that day.
  1. A first settlement payment of AU$1.5m, to be paid in instalments as follows:
    1. AU$500,000 within 7 days of the date of execution of the Deed;
    2. AU$500,000 due by 7 October 2021; and
    3. AU$500,000 due by 7 January 2022.
  2. During the term of 3 years from the date of the parties executing a Deed of Settlement ("Fundraising Term"), settlement payments equaling 8% of any funds raised by The Company by way of capital raising, with each such amount to be paid within 6 weeks of the amount being collected by The Company.
  3. During the Fundraising Term, The Company is to raise capital equivalent to 10% to 20% of its pre-raising market capitalisation at the point in time that:
    1. it first hits any of the following market capitalisation levels (in CAD):
      1. $100m;
      2. $250m;
      3. $400m; and
    2. the market capitalisation remains at the level in 3.a.i – iii (as applicable) on average for 4 weeks following the date it first hit that market capitalization.
  4. In any of the three 12-month periods comprising the Fundraising Term, if no funds are raised by capital raising:
    1. the Respondents and/or The Company will be required to make a settlement payment equal to 5% of The Company Group’s revenue from contracts with customers ("revenue") during the 12- month period ending on the most recent quarterly reporting date prior to the conclusion of the relevant 12-month period ("revenue percentage") within 4 weeks of expiry of the period; however
    2. if 4(a) applies in respect of the first year of the Fundraising Term, the required settlement payment under 4(a) will be not be payable until the conclusion of the second year of the Fundraising Term.
  5. Subject to clause 6 below, during any of the three 12-month periods comprising the Fundraising Term, for any capital raising undertaken by The Company where the amount of funds raised is less than 20% of The Company’s pre-raising market capitalisation, then:
    1. the Respondents and/or The Company will be required to make a settlement payment calculated on the same revenue percentage basis as clause 4 above within 4 weeks of expiry of the relevant 12-month period; however
    2. the amount payable will be discounted based on the amount of funds raised applying the following formula:
      1. the revenue percentage payable will be the percentage equivalent to 25% of the percentage amount by which the relevant capital raising is less than 20% of The Company’s market capitalisation; such that (by way of example);
      2. if the capital raising is 10% of The Company’s market capitalisation, the revenue percentage payable is 2.5%; whereas
      3. if the capital raising is 15% of The Company’s market capitalisation, the revenue percentage payable is 1.25%.
  6. If The Company conducts more than one capital raising during any of the 3 twelve-month periods comprising the Fundraising Term, then for the purpose of the calculation of any revenue percentage settlement payment for that period, the two or more capital raisings will be treated as one capital raising. For instance, if:
    1. The Company conducted two capital raisings during a single 12-month period for amounts of 5% and 10% of The Company’s market capitalisation at the relevant times;
    2. The Company’s market capitalisation was CAD200m at the time of the first capital raising and CAD250m at the time of the second capital raising; and
    3. this resulted in raisings of CAD10m and CAD25m respectively; then
    4. the weighted average revenue payment would be calculated premised on the extent to which CAD35m (the combined amount raised) fell short of being 20% of CAD225m (the weighted average market capitalisation); and
    5. the relevant percentage per (d) would be about 15.5%, such that the revenue percentage payment for that 12-month period would be a single payment of about 1.11% of annual revenue.
  7. All payments are to be made in Australian dollars. The rate of exchange to be used in calculating the amount of currency equivalent in Australian dollars is the closing exchange rate reported in The Australian Financial Review on the preceding Business Day before payment is made.
Forward-Looking Statements Certain statements contained in this news release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to matters disclosed in this news release and to other matters identified in public filings relating to the Corporation, to the future outlook of the Corporation and anticipated events or results and may include statements regarding the future financial performance of the Corporation. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking Statements in this press release include statements related to the process of obtaining Court approval of the terms of the Settlement, the likelihood of entering into the Deed on terms acceptable to the parties, and the impact of the proposed settlement on the Corporation. Forward-looking Statements involve various risks and uncertainties and are based on certain factors and assumptions. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Corporation's expectations include, without limitation, the availability of the Court to approve the terms of the settlement, the determination by the Court or any party to the HOA that the terms of the settlement are not acceptable, the ability of the Corporation to negotiate the final terms of the settlement with the parties to the HOA, and certain other risk factors set forth in the Prospectus under the heading "Risk Factors". The Corporation undertakes no obligation to update or revise any Forward-looking Statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Corporation to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any Forward-looking Statement. Any Forward-looking Statements contained in this press release are expressly qualified in their entirety by this cautionary statement. About GetSwift Technologies Limited Technology to Optimize Global Delivery Logistics GetSwift is a technology and services company that offers a suite of software products and services focused on business and logistics automation, data management and analysis, communications, information security, and infrastructure optimization and also includes ecommerce and marketplace ordering, workforce management, data analytics and augmentation, business intelligence, route optimization, cash management, task management shift management, asset tracking, real-time alerts, cloud communications, and communications infrastructure (collectively, the "GetSwift Offering"). The GetSwift Offering is used by public and private sector clients across industries and jurisdictions for their respective logistics, communications, information security, and infrastructure projects and operations. GSW is headquartered in New York and its common shares are listed for trading on the NEO Exchange under the symbol "GSW". For further background, please visit www.getswift.co.
Commercial Regulatory Issues

Update on Australia’s AFSL Requirement for Litigation Funders

Australia’s requirement for third-party legal funders to hold an Australian Financial Services License took effect in August of last year. From that point forward, funders were subject to rules regarding managed investment schemes under the Corporations Act. HFW explains that of the ten leading funders in the country, only six have obtained the AFSL. This may indicate that funders are joining forces to form joint ventures, or that some have left the space altogether. No conclusions can be drawn about the impact of MIS laws, as none have yet been brought to court. In the meantime, several relief instruments are in place to help funders transition to the new regime. This includes relief from some product disclosure requirements and the release of a consulting paper implying that further relief is coming. One significant impact of the new requirements is a sharp reduction in the number of class actions supported by third-party funding. In 2019, nearly 60% of collective actions received some funding. Last year, less than a third of cases did. The decrease in funded class actions may be offset by funded cases in Victoria—where contingency fees are legal. It’s safe to say that Australian legal requirements for funders are still in a state of flux.
Commercial Deals

Boutique Firm Kaye Spiegler Breaks Out from Big Law

Two of the most prominent art lawyers are departing their New York law firm to open a boutique firm. The founders of the new firm, Larry Kaye and Howard Spiegler, announced their intent to focus solely on matters involving art law. Those involved have called the split “friendly,” and say it’s largely about Kaye Spiegler embracing higher levels of risk. The Art Newspaper details that the firm plans to utilize litigation funding to take on more contingency cases. The founders’ previous NY firm, Herrick Feinstein, was more reticent to take cases on contingency---still a common attitude among many larger firms. Howard Spiegler explains that he and his new partner are far less risk-averse than their previous firm. The expertise he and Larry Kaye have developed over the last 30 years has given the men unparalleled insights into matters involving art law. Art restitution is a newer forum for third-party litigation funders. Like many funded cases, art restitution claims are complex and can take years to resolve. Herrick Feinstein has led several high-profile art cases, including a 2010 case involving art stolen by Nazis during WWII. The case eventually reached a settlement with the Rudolph Leopold Foundation after more than 10 years of litigation.   Competition will be one focus of Kaye Spiegler, as art lawyers are already plentiful in New York. The firm will continue its focus on the recovery of art looted by Nazis. Spiegler asserts, based on experts, that there are at least 100,000 unrecovered artworks from that era. Larry Kaye stated that he routinely gets calls from possessors of questionably sourced art, wanting legal advice.
Commercial Legal Innovation

Litigation Funding Matures as an Industry

The litigation funding landscape is expanding to accommodate an ever-increasing number of players. Increased regulation, professional organizations, and a push for standardized funding agreements indicate a maturing industry that’s become an integral part of the legal world. Law Gazette details how capital is rushing into litigation funding. This has prompted funders to become more proactive in instigating new litigation—class action cases in particular. Funders are in stiff competition with each other for valuable claimant groups and actions against deep pockets. Legal funding is an attractive investment due to its reputation for high payouts and a lack of correlation with larger economic conditions. Investment funds that once focused on real estate or other more tangible investments are now moving their money to legal funding. Augusta Ventures raised GBP 250 million in its new fund—and now has assets under management totaling GBP 585 million. Opt-out class action regimes are a key factor in many funded collective cases. A case with millions of potential claimants can be represented by a single individual. Claimants and funders form a symbiotic relationship—this according to Neil Purslow, CIO of Therium Capital Management. Still, collective actions are expensive, often complex, and take years to reach a conclusion. If successful, they can mean a big payday for funders, and justice for those impacted. If not, losses to funders and investors can be significant. Addleshaw Goddard partner Richard Wise explains a new tactic picking up steam among funders. It regards issues-based cases and involves highlighting a legal trend and then seeking out clients who are impacted by it. This could be an investor action related to share prices, environmental or sustainability issues, or other ESG matters.
Commercial Regulatory Issues

Enforcement in Maritime Cases: There are Options

Last year, London saw an unprecedented 1,775 maritime arbitration cases. As the city is the accepted center for this type of dispute, that number indicates that maritime arbitration is on the rise around the globe. Arbitration can take years to resolve—allowing time for debtors to move assets around and make eventual enforcement more difficult. With arbitration funding and the expertise that accompanies it, arbitration can be the best option. Burford Capital explains that maritime vessels often prove to be an essential part of enforcement strategy in maritime cases. Understanding the options and moving quickly can reduce the risk of debtors selling off assets before a judgment can be made. Having an enforcement specialist on your side can also make a profound difference in the outcome of recovery. A ship arrest can sometimes be used by those with an existing claim in their favor in a pending case. The arrest secures a vessel and its contents pending action by the court. However, ship arrests can only be made when the vessel is currently in the jurisdiction where the case was initiated—which is limiting. Conversely, a flag injunction disallows a vessel from being sold, gifted, deregistered, or transferred. This offers security to claimants and avoids draining funds from the debtor. Only a few jurisdictions allow flag injunctions, including Malta, the Bahamas, Cyprus, and Panama—which is currently the number one flag register on the globe. Are there benefits to using legal financing in maritime arbitration? Yes! In many instances, arbitration offers a simpler process than going through the courts. But the time and risks involved may not be tenable in every case type. The use of arbitration finance comes with expertise that significantly reduces the odds of a negative outcome. Funders provide capital that mitigates claimant risk so that pursuing a maritime claim becomes more reasonable for non-wealthy claimants.
Case Developments Commercial

Shavelogic Topples Gillette Complaint with Burford Capital Funding

When a few Gillette executives left the company to set up shop on their own, Gillette was quick to file multiple complaints against the new company, Shavelogic.   Exaltip reports on a claim from a while back, which involves litigation that impeded the launch of Shavelogic, yet didn’t stop it entirely. After numerous claims from Gillette, Shavelogic filed a counterclaim asserting that Gillette sought to sabotage their business with a spate of lawsuits. The various suits alleged misappropriation of trade secrets, unfair competition, and breach of NDAs. The good news? Shavelogic obtained funding from Burford Capital. This enabled the startup to have Gillette’s claims dismissed without merit. Ten years later, Shavelogic has become a major player in the razor game. Shavelogic has also taken advantage of IP financing via Aon’s Intellectual Property Solutions. The company provides a stellar example of how legal and IP funding offers startups a fighting chance.
Commercial Special Features

Cesar Bello of Corbin Capital Discusses Litigation Funding as an Investment

On the most recent episode of the Litigation Finance Podcast, Cesar Bello, Partner and Deputy General Counsel of Corbin Capital, explained how he evaluates litigation finance investments, what his ROI expectations are, and how funders can mitigate risk. Below are some key takeaways from the discussion. What about the funding industry drew your attention and your interest? The stock answer here is that it’s non-correlated compared to a lot of other alternative assets. What else can you say about this asset class that really draws your interest—especially when compared to other alternative assets. Obviously that’s a big part of it. It’s differentiated—it’s particularly attractive in times of market volatility. When you expect more fat tails, we think there’s a good chance that that type of environment will persist in the near term. We’ve seen over the last year those kinds of spikes with meme stocks, heightened government intervention, obviously the pandemic, political climate, etc. So it was nice for us, we had some good outcomes last March and April when everything else was not working so great. So it really helps the portfolio. Beyond the uncorrelated nature of it, obviously the opportunity to earn outsized returns. Single case risk is generally structured to make a 3-5x return—so you’re getting paid well for the risk. Private lending for the more credit-oriented type of LitFin plays—you’re still getting paid, or overpaid since the sector is still largely underbanked—although increasingly less so. The underlying collateral is not well understood by traditional lenders. Back to the market as a whole, it’s still, I think, growing. The legal services industry is a $1 trillion industry worldwide. Litigation Finance has grown a lot. There’s a growing awareness among mainstream corporates, if they have assets on their balance sheets that they can monetize, Fortune 500 companies are awakening to this possibility of using Litigation Finance to bring cases without sucking up the budget or disrupting their cashflows.  How important is ESG to investors such as Corbin, and also to your LP investors?  Obviously, we do a lot more than just Litigation Finance, but with respect to Litigation Finance in particular, the easiest way to think about it is not necessarily equal access to justice in our legal system. Right? Litigation Finance helps level the playing field, so David can go after Goliath. That’s obvious and simple to understand. But it kind of flows through and manifests itself in different ways. Take mass torts—environmental cases, for example—there’s a long history of poor minority communities being used as toxic dumping grounds. We have opioids, we have sexual abuse cases, etc, so from an environmental, socioeconomic, social justice perspective—there’s a clear angle there. But back to how we think about it more broadly, our approach to ESG is focused on the thoughtful application of ESG factors to enhance our business and it takes a lot of work. We’ve been working on it over the last 2-3 years. With the help of leading experts in the space and consultants to help us navigate what remains of a pretty fragmented information environment. We believe in meaningful integration of material ESG factors that can lead to a more complete picture of risk and opportunity, driving more informed decision-making with the opportunity to get better risk-adjusted returns.  Let’s say I’m a commercial litigation funding manager. I approach you for an investment opportunity. Is there anything you wish these fund managers did more of or less of? Any advice you can give to them? I think it’s important to have a real understanding and self-awareness of where you sit in the marketplace and to be commercial—it’s hard to raise money. The safe thing to do is to give money to the bigger players, particularly if you’re just starting out. We’ve seen a lot of people try to raise funds with unrealistic expectations, and refusing to partner with people in creative ways because they want a fund and don’t want to do co-investments—not thinking about the long game, and not realizing the best path to unlock capital may not be the one that they came into the meeting with. So really listening and trying to figure out where that happy medium is, to find a way to work together. Back to the point about most of the money coming in is going to established players, that’s the nature of the asset management industry as a whole. So we also like people who can talk through a bad outcome—lessons learned—that buys some goodwill. ... Find a way to get in the door, build trust, and hopefully everybody gets more comfortable and it becomes easier to build a relationship.  When you look at this industry, what opportunities are you seeing down the road for the funding industry? How do you see this industry developing in the coming years? Good question. I think everybody would tell you it’s probably going to grow and there’s probably going to be some price compression as the asset class matures. Maybe something you won’t hear as much—I really would like it to evolve into having a more active secondary market, which would help with the duration issue. As anything that helps generate liquidity, we would view as a positive. And obviously, it would help with valuation price discovery as well. So there’s a lot of activity now in private equity funds and private credit funds in terms of secondaries and continuation funds, as some of the older vintages are getting long in the tooth. It would be interesting to have some growth there, and I think similarly there’s a good amount of the bigger funds that are running up against the end of their fund life and they’re going to be motivated to sort of solve for that. I think there are some characteristics here that are going to make it harder for secondary markets to flourish in the marketplace. This stuff is idiosyncratic and hard to underwrite. You’re not buying IBM bonds. But it’s doable, and I think it’ll happen eventually. When it does I think it will be a very positive signal for the asset class.
Announcements Commercial Deals

Kerberos Capital Management Announces World’s First ESG-Linked Debt Product for Litigation Finance Markets

Kerberos Capital Management announced today the introduction of a groundbreaking new direct lending product to law firms with a margin ratchet linked to ESG targets – the first debt product of its kind in Litigation Finance markets. The program is intended both to recognize and reward firms that have already established a commitment to advancing ESG factors in their work, and to incentivize qualifying firms to continue those efforts into the future. To qualify for the program, firms must (A) demonstrate a material and ongoing commitment to providing pro bono legal services, (B) generate a threshold amount of revenue related to ESG-advancing case types, and (C) establish that they do not prosecute cases or otherwise conduct business in ways that run counter to ESG principles (a negative screener test). Key Performance Indicators related to each of these three primary qualifying factors will be assessed at the loan’s inception and monitored throughout the duration of the loan period, with downward margin adjustments ranging from 50 to 100 basis points. “At some level, most plaintiff-side litigation can be thought of as advancing social interests, as it is through this work that individual rights are vindicated and accountability is imposed. In the same vein, litigation financing in general has ESG attributes, because the capital provides increased access to justice. But we wanted to go further,” said Joe Siprut, CEO & CIO of Kerberos. “Certain categories of cases warrant special acknowledgment for advancing ESG interests to a unique extent, and Kerberos’ new ESG product is intended to incentivize the prosecution of those cases. Building these incentives into our debt products will drive better ESG practices and outcomes.” About Kerberos Kerberos Capital Management is a boutique alternative asset manager. We seek to provide our clients excess return at every point along the risk-reward spectrum with an emphasis on yield, opportunistic, and hybrid strategies. Kerberos’ flagship strategy is providing innovative capital solutions to law firms. The depth of our private credit and direct lending platform has enabled us to generate differentiated absolute and risk-adjusted returns in litigation finance markets, regardless of the business cycle or economic environment. Kerberos’ investment team is comprised of senior members from both the legal and private credit industries, including former principals of the world’s leading law firms and multi-billion dollar private credit funds. In 2020, the independent, London-based Private Debt Investor magazine named Kerberos Capital Management one of its Top 3 Global Newcomers in the private debt fund category. Kerberos manages both separate accounts and pooled vehicles for institutional and high net worth investors worldwide.
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.