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Regulatory Issues

Woodsford Praises Singapore’s Expansion of Funding Laws

Singapore’s Ministry of Law announced last month an extension to its existing framework of laws impacting litigation funding. The extended framework will expand the types of proceedings that may utilize third-party funding. Woodsford Litigation Funding explains that domestic arbitration and related mediation are included in the expansion. This comes after a ministry report detailing that funders, litigators, and businesses alike have all responded positively to the increased use of litigation funding. Charlie Morris, Woodsford's CIO, has stated that the warm reception that litigation funding has received is to be expected. Woodsford remains committed to deploying capital in Singapore.
Announcements Consumer

Legal-Bay Lawsuit Funding Announces Increased Funding for Personal Injury Cases

Legal-Bay, The Pre Settlement Funding Company, announced today that they are preparing their underwriters for an increase in personal injury applications over the coming months. The first half of 2021 saw an unprecedented number of claims filed, and now that summer is well underway with crowds of people getting out and about, they expect to see even more. Legal-Bay is expanding their personal injury settlement loan department in order to accommodate plaintiffs who would rather opt for presettlement funding rather than wait out the endless months until their case can see the inside of a courtroom. Legal-Bay is one of the best lawsuit loan funding companies in the industry, and they offer a lightning-fast approval process; most clients can expect to receive cash in hand within 48-hours of submitting their case documents. Chris Janish, CEO, commented, "We are bracing for a brisk summer funding season based on people needing money to live normally again. And unfortunately, with more summer activities taking place more accidents are happening.  Our sales and underwriting teams are prepared for any clients who need fast funding." If you are involved in an active personal injury lawsuit and need an immediate cash advance against an impending lawsuit settlement, please visit Legal-Bay HERE or call toll-free at 877.571.0405. Legal-Bay remains vigilant in assisting their clients with personal injury claims. Anyone that has an existing lawsuit and needs cash now can apply for loan settlement funding to help get through their financial crises. Legal-Bay funds all types of personal injury loans for lawsuits including slips and falls, car or boat accidents, work-related injuries, medical malpractice, premise liability, and more. Legal-Bay's pre settlement funding programs are designed to provide immediate cash in advance of a plaintiff's anticipated monetary award. The non-recourse law suit loans—sometimes referred to as loans for lawsuit or loans on settlement—are risk-free, as the money doesn't need to be repaid should the recipient lose their case. Therefore, the lawsuit loans aren't really loans, but rather cash advances. To apply for a loan on lawsuit right now, please visit the company's website HERE or call toll-free at: 877.571.0405 where agents are standing by.
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Case Developments

Omni Bridgeway Funds Two Class Actions on Combustible Cladding

It’s estimated that a class action in Australia may assist developers with their restoration and replacement costs. This case is expected to be the largest in the nation in 2021, as it involves more than 3400 apartment buildings now deemed unsafe. The Urban Developer explains that noted funder Omni Bridgeway is funding two class actions related to cladding. The issue itself—that the cladding was combustible--was discovered after fires in the Lacrosse building in Melbourne and at Grenfell Tower in London. Fatalities occurred, and the fires led to a rise in property insurance rates. In some cases, insurance has become elusive, if not impossible to get. Omni Bridgeway is funding all costs to run the two class actions, as well as covering exposure to costs. This non-recourse agreement means that claimants may participate in the action without paying a fee. The funder is also investigating multiple cladding manufacturers to determine if more are deemed to be combustible. Among those impacted are thousands of residents whose apartments are no longer habitable. Willoughby City Council has also joined a class action over a non-story performing arts hub that was declared unfit for purpose. While the opt-out deadline has passed, the open class action structure means anyone who qualifies can benefit from the action. The Alucobond cladding case may be worth several billion. The lead claimant here is listed as Shore Dolls Point building, located in Sydney. But the action will not be limited to Alucobond cladding or Vitrabond cladding—though the first class action is against Halifax Vogel Group and 3A Composites—both manufacturers of Alucobond. The second case is against manufacturers of Vitrabond products, Fairview Architectural. The compensation being sought is to cover cladding replacement and the associated costs. Losses may include improving fire safety protocols, covering the rise in premiums, and recouping the loss of property values.
Commercial

Insurers Shift Blame for Rate Hikes to Litigation Funders

Complaints against third-party litigation funding tend to focus on a few oft-repeated points. Increased litigation, class actions in particular, ostensibly cause insurance rates to rise. Funders aren’t always required to disclose their funding agreements, ostensibly hiding a potential conflict of interest. Finally, funders are blamed for a supposed increase in frivolous actions—even though no funder wants to take on a case without merit. Business Insurance details that what often gets left out of these conversations is the risk funders are taking. If a case is unsuccessful, the non-recourse nature of funding agreements means that funders lose their entire investment—often a significant loss. It’s this risk that mandates what are viewed as high percentages for funders. Insurers in particular are unhappy with the funding industry. This is understandable, given that funders have supported many actions that held insurers accountable. One representative from Zurich North America refers to ‘abusive practices’ by litigation funders as leading to hardships for insurers. One partner with Woodruff Sawyer & Co lamented that there’s no need for new ways to sue people. Surely, policyholders whose coverage is in question would disagree. Is it correct to call third-party funding an industry with ‘no regulation and no requirements for transparency,’ as Page Faulk of the US Chamber of Commerce's Institute for Legal Reform does? Not exactly. While regulations for funders vary from one jurisdiction to the next, legislation and precedent are developing further with every new case. Eric Blinderman of Therium Capital Management explains that legal funding eliminates ‘David v Goliath’ cases where small plaintiffs get pushed into lowball settlements, or drag cases on for untenable lengths. Litigation funding is a tool for the little guy—so it’s no surprise that the big guys don’t like it.
Legal Innovation

Addleshaw Goddard Expands to Meet Litigation Funding Demand

The firm of Addleshaw Goddard has long been a proponent of third-party litigation finance, having used it to support clients in an array of diverse jurisdictions. Now they are launching a tailored set of solutions for clients, encompassing third-party funding, damage-based agreements, conditional fee agreements, and after the event insurance. Addleshaw Goddard explains that this expansion promises to be of specific interests to:
  • Those seeking to share risk when filing or defending a claim
  • Parties seeking impartial advice and guidance on funding options
  • Firms new to funding that need to better understand available options
  • Funders looking to develop new ways to structure funding agreements
Consulting with funding experts should be an essential part of due diligence on both sides of a litigation conflict, as it combines expertise from finance, litigation, commercial business, and funding. Mark Molyneux, Head of Litigation, states that this fully rounded approach is exactly what’s most needed in the market. Addleshaw joins a growing list of law firms that are expanding into the lucrative litigation funding market.
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Fundraising

Second Fund on Track for Litigation Capital Management

Litigation Capital Management maintains that its team has performed admirably in what has been a difficult and unusual year. On that note, LCM announced its second specialist litigation fund is on track to close this quarter, owing to explosive investor interest. Proactive Investors states that the GAR for its existing fund is currently 76% committed—roughly $115 million of $150 million. Applications for funding increased 10% in the past year, totaling 572. Owing to COVID-related disruptions and due diligence, commitment was down and the case selection process took longer than usual. LCM retains a robust track record, achieving an ROIC of 153% over the last ten years, and an IRR of 78%. It’s no wonder LCM is optimistic about its future.
Case Developments

Burford Capital Announces Conclusion of Akhmedov Divorce Enforcement

The divorce settlement between Farkhad Akhmedov and Tatiana Akhmedova has been in contention since it was first ruled on in 2016. London’s High Court determined that Akhmedova should receive over GBP 453 million of his more than GBP one billion estate. According to her, that judgment was not enforced. Bolly Inside explains that Akhmedova enlisted help from Burford Capital to enforce the judgment. This led to an asset search that spanned the globe and included art, a superyacht, multiple homes, and a private jet. Sadly, the case even saw Akhmedova suing her son, alleging that he helped his father hide assets from his mother. Ultimately, the court agreed that son Temur Akhmedov should pay his mother GBP 75.9 million, saying he participated in a scheme to keep money beyond his mother’s reach. Since the first hearing in London, Farkhad Akhmedov has claimed that an earlier divorce in Russia predates the later judgment—therefore invalidating the London judgment. The Luna, the family superyacht, remains in the possession of Farkhad Akhmedov. Burford Capital recently announced its receipt of over AU $103 million for its efforts on behalf of Mrs. Akhmedova. Burford funded efforts to enforce the London court judgment in the Akhmedov matter. This payment represents a roughly $20 million addition to 2021 profits. The matter has generated over $70 million in realized gain since its undertaking. Last December, Burford announced that it spent roughly $25 million in its enforcement efforts. An analysis by Canaccord Genuity called the settlement a “good result” for the funder. The Akhmedov divorce case is one of the largest ever in a London court—often called the divorce capital of the world—known for high awards to non-working spouses. Justice Gwynneth Knowles compared the facts of the case to the Tolstoy novel, Anna Karenina, calling the family the ‘unhappiest ever to have appears in my courtroom.’
Commercial

Why Third Party Legal Funding Continues its Rapid Growth

A recent study into the future of legal funding resulted in several interesting insights. These include potential market growth, use of funding by corporates, expense, and strategic input into cases. Alix Partners explains that between 2017 and the end of 2019, assets held by litigation funders in the UK increased 46%. When surveyed, however, more than 90% of respondents say they expect funding to increase in use and expand the types of cases it is used for. Roughly 15% of in-house counsel surveyed have used litigation funding. Private practice solicitors and barristers are more likely to have used it, or worked with those who have used it. Some corporates haven’t used funding because they say they don’t need it. But is that accurate? Or could companies be missing out on the benefits of legal funding because they don’t know how to best utilize it? That is especially possible, given how many misconceptions there still are about third-party funding. Funding your own litigation makes sense if you win—but taking a sizable risk with your own assets is just that—a sizable risk. Betting on a sure thing is nice, but funding allows corporates to take a chance on a less predictable case without risking assets. Working with a funding entity also provides legal expertise from a third party. This can help with strategy, evaluation, and more—yet this is rarely touted as an obvious benefit of the practice.
Consumer

Seth Lovis Struck from Rolls After Double Funding Discovered

Seth Lovis, former managing director of Seth Lovis & Co, has been struck after admitting to failing to meet his obligations to various lenders. An investigation by the SRA determined that the personal injury lawyer accepted funding from multiple lenders for the same case more than a dozen times. Law Gazette reports that Lovis’s attorney argued that this was not a premeditated plan to cheat lenders. Rather, it was ‘a mistake’ made in an effort to save his troubled firm. Lovis is described as having treated litigation funding as a line of credit. In addition to being struck from the roll of trusted attorneys, he’s been ordered to pay GBP 35,000 in costs.
Consumer Special Features

Consumer Legal Funding is Even More Necessary Post-Pandemic

The following piece was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC).  Consumer Legal Funding is when a company provides funds to a consumer who has a pending legal claim, typically a car accident, while their case is making its way through the legal system. The funds are used for household needs such as mortgage, rent, car payments, keeping the light on and putting food on the table. The funds are not used to pay for legal fees associated with the claim or case. This financial product is needed now more than ever as we recover from the pandemic caused by COVID-19. According to MarketWatch, almost half of Americans have saved less than $500 in the past three months. The article goes on to state that 56% are living paycheck to paycheck, and that 48% have experienced an unexpected financial setback in the past three months. In early July of 2021, Wells Fargo shuttered all of its personal lines of credit. This cut off thousands of consumers from accessing funds that they might need in an emergency, such as being involved in a car accident. So where are these consumers to go when, by no fault of their own, they are involved in an accident and become injured and cannot work, and therefore have either no income or limited income. These individuals often fall behind in their financial obligations such as their rent and car payments, and with limited-to-no savings, they are stranded. Banks, such as Wells Fargo, are cutting off their access to financial assistance at a time when consumers need it the most. In addition, according to BankRate “nearly three times as many Americans say they have less emergency savings, versus more since the pandemic”. Consumer Legal Funding is a non-recourse financial product, meaning you only have to meet the obligation if you are successful in your legal claim. This affords consumers the ability to meet their everyday financial obligations, while they make their way through the legal system. Because of COVID-19, legal claims are taking longer to make their way through the process. Even insurance companies are saying that it will take longer to get ahold of them. Consumers should learn more about their options when they have a pending legal claim and not be forced to take the first offer that comes along, just because they are financially stressed. Consumer Legal Funding can serve as a source of financial protection and comfort for consumers with nowhere else to turn—and as we emerge from the Covid-19 pandemic, this type of product is needed now more than ever. Note: When dealing with a funding company, make sure to ask if they follow the industry set of Best Practices that have been set out by ARC and the ARC companies. Eric Schuller President Alliance for Responsible Consumer Legal Funding (ARC)
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Consumer

What You Need to Know About Pre-Settlement Lawsuit Funding

As litigation funding expands and adapts to the needs of consumers, it is becoming known by an increasing array of names: lawsuit loans, car accident loans, pre-settlement funding, etc. That’s because third-party funders are always developing new ways for non-recourse legal funding to help those in need. National Law Review explains that pre-settlement funding can be a boon to those who have been hurt in an accident and have a pending case. Even if the case is a slam dunk, it will take time for a settlement or judgement to be achieved. In the interim, there are bills to pay and lost wages to contend with. This kind of funding, which does not require good credit, can provide much-needed wiggle room to plaintiffs waiting to be compensated. The caveat is that their eventual payout could be much less than it would have been if a funding agreement was not in place. Funders use a variety of criteria when selecting who to fund:
  1. Litigation often must be active and be handled by a lawyer.
  2. Cases should be likely to end in a judgement for the plaintiff.
  3. Personal injury cases are among the most commonly funded.
  4. Client is in a funding-friendly jurisdiction.
  5. Potential for a high settlement.
  6. Defendant has the ability to pay an award to the plaintiff.
  7. The plaintiff and attorney should both be committed to a positive outcome.
A pre-settlement advance differs from a structured settlement in a few key ways. Structured settlements benefit defendants, as they’re used when defendants cannot pay the full award at once. Specific terms may vary depending on various factors. Pre-settlement funding is provided in a lump sum before a case is settled, benefiting the plaintiff. Given the inherent benefits to investors and plaintiffs alike, it’s likely that pre-settlement funding will continue to grow.  
Commercial

IP Dispute? Legal Funding Makes a World of Difference

Not all companies are enthusiastic about filing an IP lawsuit—even a highly meritorious one. Such cases are costly, complicated, and may not resolve for years. At the same time, the potential for a large recovery is high.

Omni Bridgeway suggests that Litigation Finance may be the key that allows companies to defend their intellectual property without tying up working capital. When a case is likely to succeed, using non-recourse funding to pursue it is an ideal solution that keeps operating funds free for running day-to-day operations.

A look at some recent cases illustrates the high recoveries that are possible with effective IP litigation. Last year saw an unparalleled spate of high awards in IP cases—some reaching $100 million, and a few even surpassing $1 billion. Similarly, cases involving trade secrets have also yielded large awards, with several moving from state to federal courts thanks to the provisions of the Defend Trade Secrets Act.

Of course, there’s more to litigation funding than just handing out cash. Funders apply due diligence to cases being considered, with an eye toward possible recoveries, expected time frames, and the ability of defendants to pay. Even if a funding agreement is not reached, consulting with a funder can give plaintiffs a clear, unbiased idea of the strength of their claim.

Litigators speak to the ‘unexpected benefits’ of funders underwriting patent litigation. To wit, the involvement of funders is likely to improve the quality of the case. Funders will pose many of the same questions that will be asked in court—such as the plaintiff’s efforts to protect their IP or to keep it restricted to secure networks. Ultimately, consulting with a legal funder is a net gain for plaintiffs.

Commercial

CAT Hearing Will Determine if Class Action in Forex Claim Can Proceed

Banks like Barclays, JP Morgan, and Citigroup may believe that the fines levied against them in 2019 mark the end of a long road, yet that may turn out to be far from the truth.  Law Gazette reports that after a five-year investigation showed rampant market rigging during the period between 2007-2013, banks were fined more than 1 billion Euros. And now, the same banks may now face a class action claim led by asset managers, hedge funds, corporates, and pension funds. A Competition Appeal Tribunal will hear arguments on whether the class action should proceed. The claim is supported with funding from Therium Capital Management—demonstrating once again the value of funding for increased access to justice.   Lawyers for claimants stated that the case should proceed on an opt-out basis, arguing that the Consumer Rights Act protects not just individual consumers—but small businesses harmed by illegal, anti-competitive conduct.
Commercial

Litigation Capital Management Secures Another Major Funding Agreement

Prominent third-party litigation funder LCM (Litigation Capital Management) has secured a trio of major legal funding agreements in the last seven weeks. These include cases against rail services giant Govia, French electrical retailer Darty, and former Carillion auditor KPMG. As expected, investors have noticed LCM’s success; share prices rose 25%. Many analysts, including Simon Thompson, are lauding the stock and calling it a ‘buy.’ Investor Chronicle details that COVID has created conditions favorable for third-party funders. The increase in insolvencies, restructurings, and business closures drives a spike in funding requests. This, in turn, creates more investment opportunities. LCM anticipates an even larger financial windfall as the company awaits the launch of a $150 million third-party fund. It will see a payout of 25% of profits after an 8% soft hurdle rate. This is considered a very lucrative and achievable revenue stream, especially considering LCM has achieved a 78% IRR during the last ten years.
Consumer

SPAC Deal Seeks to Conjure Tens of Billions

A newly formed SPAC (special purpose acquisitions corporation) unveiled a plan to take MSP Recovery public. Lionheart Acquisition Corp II is valuing MSP at around $32 billion, or roughly 10.5 times the anticipated 2023 revenues. Some are calling this a new high in financial wizardry. If the market jibes with Lionheart’s predictions, CEO John Ruiz would hold a stake worth more than $20 billion, with Frank Quesada (Ruiz’s partner) holding a $7 billion stake. Forbes explains that MSP’s business model begins with buying up medical claims. By determining which claims were paid by governments instead of other responsible entities, MSP will collect the billed amount, which is often different than what was assessed by the healthcare system. There may also be double damages in some instances. MSP has constructed a powerful set of analytics and data infrastructure with which to sort through millions of claims to seek out cases worth pursuing. It’s been suggested by MSP that about 11% of the annual Medicare and Medicaid budget is paid in relation to accidents, misconduct, and fraud—meaning that the government should not be held responsible for paying. Currently, MSP reports owning almost $50 billion in claims from a long client roster that includes hospitals, doctors, and Medicare Advantage insurance companies. It could recover as much as $27 billion from its current portfolio of claims. Some might argue that this is a business model that shouldn’t exist. Money can only be made here due to the failings of the US healthcare payment systems and its lack of effective accountability. Ruiz, however, is not shy about touting the genius of his plan—explaining that this business model exists in a space that is essentially devoid of competition. After receiving $440 million in backing from Virage Capital Management, Ruiz began his pursuit of more than $50 billion in claims.
Consumer

SCOTUS Enforcement Ruling a Boon to CFPB

The Supreme Court case of Collins v Yellen has the Consumer Financial Protection Bureau on alert, largely because it addressed the scope of agency powers--left unresolved after Seila Law v CFPB. Reuters details that the CFPB has seen several of its recent enforcement actions challenged on constitutional grounds. This new ruling is reason for hope. Previously, the Seila case held that it’s a violation of the Constitutional separation of powers to prevent a president to fire the CFPB director at will. The ruling did not address what ought to happen to past cases heard in lower courts. In Collins, the court affirmed that there was no Constitutional defect in the appointment of the FHFA director—so there was no legal basis on which to void his actions. This addresses multiple arguments that have occurred since Seila, with defendants asserting that the CFPB’s original director did not have standing to begin actions against them. CFPB stated that an argument negating the director’s actions lacks the support of precedent and doesn’t hold up to logic. As such, a complaint filed by CFPB against student loan provider Navient will stand. The Bureau affirmed that Navient failed borrowers systemically and illegally, and that the complaint remains as valid now as the day it was filed. Similarly, representatives for American Check Cashing Inc argued that a suit alleging deceptive practices should be tossed. Ultimately, the action was ratified.
Commercial

Guaranteed Rate of Return for Aussie Class Actions Rankles Litigation Funders

A new government proposal has been met with strenuous objections from litigation funders, lawyers and company directors alike. The proposal would mandate that at least 70% of any payout in a class action must go to the members of that action. Some find it telling that the Law Council of Australia stated that such a limit would make claims financially untenable for litigation funders. Financial Review reports that the proposal was made after a joint parliamentary committee in 2020 advised that Australia adopt a guaranteed rate of return for class actions. In May of this year, AG Michaelia Cash and Treasurer Josh Frydenberg requested submissions on this idea. It was also suggested that class actions relating to financial products including shareholders class actions be exclusively heard in Federal Court. These two proposals are intended to ensure that claimants were compensated fairly for their losses, and to prevent funders and legal firms from hoarding a disproportionate percentage of an award. This may seem reasonable from a client’s perspective, but when funders take 100% of the financial risk, surely they deserve a sizable share of the award? There’s also a focus on eliminating so-called ‘forum shopping’ to choose the jurisdiction most favorable to a particular client or case type. Some say it makes more sense to use a sliding scale approach, wherein the minimum payout to claimants increases as the recovery amount grows. At the same time, 50% of the gross award as a proposed backstop is reasonable, according to the AICD. Funders should be permitted to seek a return on their investment, without being hobbled by inflexible laws that don’t consider all relevant factors.
Commercial

AxiaFunder Opens New Doors for Litigation Investors

Litigation Finance has experienced tremendous growth in recent months—owing to the pandemic among other factors. It’s increasingly popular among investors seeking an uncorrelated asset class. However, few mechanisms exist to allow investors to select the cases they fund directly—one of those, is AxiaFunder. UK Investor Magazine explains that AxiaFunder is the brainchild of Cormac Leech, whose experience with legal funding led him to believe investors wanted to be empowered to invest directly in cases of their choosing. Potential returns in litigation funding can be quite high, with AxiaFunder boasting a greater than 20% targeted return on portfolios of cases. While many funded cases can take years to complete, others will be settled much earlier—allowing investors to see returns in as little as 12 months. For investors, one of the most compelling aspects of investments in legal funding is their lack of correlation with traditional markets. Unlike bonds or equities, litigation isn’t affected by economic growth—in fact, trying economic times may create a greater need for funding and a wealth of cases to choose from. While every case is different, AxiaFunder asserts that its funded cases contain a 70-75% probability of a win at trial or via settlement. Funding requests have been robust, and AxiaFunder estimates that about 1 in 20 cases is accepted for funding. Obviously, effective vetting of cases is a crucial component of a successful legal investment. The risk of losses in legal funding stem from unsuccessful cases. This can result in the loss of the entire investment, and could even include an order to pay costs. That’s why ATE insurance is used for all funded cases on the AxiaFunder platform. Additional insurance is sometimes used to protect investor capital to the tune of about 50-80%.
Commercial

Liquidators Can Now Assign Examination Powers to Legal Funders

Australian Federal Court has established that liquidators may assign the right to examine relevant parties and to acquire documents.   MONDAQ details that in 316 Group Pty Ltd, the liquidator transferred its right to sue to a legal funder, with an agreement that the liquidator would receive 15% of any recovery—a typical arrangement. The funder approached ASIC for permission to make an application for summonses and documentation as an ‘eligible applicant.’ This was granted, and the needed documents were obtained. However, under the “Harman” principle, the respondent argued that the funder sought to use the documents for reasons unrelated to why they were produced. Moreover, they asserted that examinations conducted by litigation funders were an abuse of process and represented a pursuit of private purpose. If the actions of the funders were determined to be without benefit to the company itself, that would constitute private purpose. If the purpose of the examination is not to benefit the corporation—that could be an abuse of process. The court found that stance unpersuasive though, holding that the funder didn’t need court permission to use the documents to recover a debt. Debt recovery is the original purpose for the documents, albeit on behalf of another party. The company, via the liquidator, maintained a 15% interest in the recovery, valued at about AU $2.2 million. It was clear from the outset that liquidators had the right to assign claims, as detailed in the Corporations Act. What was not clear was whether liquidators could legally assign their ‘right to sue.’ However, the Insolvency Reform Act 2016 did allow liquidators to assign that right. This was ultimately affirmed by the court, opening the door for many more such arrangements to come.
Commercial

Legal Funding Trends: Mergers, Specialization, Evolution

It’s been fascinating to watch the progression of litigation funding happening around the world. Territories each develop their own regulations based on specific goals, when welcoming the practice. Some are positioning themselves as litigation destinations, while others seek ways for the practice to benefit citizens with the greatest need. Legal Futures details in a guest post from Asertis Chief Executive Ian Madej, that we can expect to see more new entrants into the litigation funding market. Notably, Madej suspects that many of these startups will be unprepared for the harsh realities of the market. A recent case involving British sub-postmasters demonstrated the value of litigation funding to the entire world. The quintessential funded case helped people of average means gain justice when a huge and well-monied entity wronged them. The sub-postmasters lacked the financial means to seek the justice they deserved, and funding worked exactly as intended. Funding startups are popping up with increasing frequency, possibly believing it will be easy to generate big returns early on. In most jurisdictions, barriers to enter the funding space are limited. But success in litigation funding requires the infrastructure to conduct due diligence—including input from litigators, financial professionals, investigators, and experts in a variety of industries. In all likelihood, many of these upstart funders will wash out of the industry due to being inexperienced, over-leveraged, or lacking in a clear investment strategy. Meanwhile, existing funders are adapting to the changing realities of their industry. Some are developing niche practices with specialized staff in order to focus on specific industries. No doubt, this will continue.
Commercial

Demand for Litigation Finance Rises in India

Thanks to the global financial upheaval caused by the COVID pandemic, companies around the world fear a financial shortfall. Litigation funding is one way that corporates alleviate financial pressure. The Leaflet explains that litigation funding provides a level playing field in legal conflicts where one party has far more resources than the other. Without it, plaintiffs may be forced to accept a lowball settlement rather than hold out for a more appropriate award. Legal funding isn’t just a net gain for plaintiffs lacking in financial resources. Before a funder agrees to take on a case, due diligence is applied. No funder wants to back a losing case or even a frivolous one. Funders will vet cases on their merits, risks, complexities, and the defendant’s ability to pay, before deciding whether or not to fund. Currently, India lacks a legislative regime for third-party legal funding. The nation does not allow contingency fee arrangements between lawyers and clients either—which amplifies the need for funding. In 2018, the Indian Supreme Court approved legal funding in Bar Council of India vs AK Balaji. Several states including Gujarat, Karnataka, and Madhya Pradesh, have amended existing rules to clarify the exact circumstances required for funder involvement in a legal matter. A 2017 committee report affirmed the importance of, and need for, litigation funding—particularly in helping India become a preferred jurisdiction for arbitration. This committee examined steps taken in more arbitration-friendly territories like France, Singapore, and Hong Kong. These all include the existence of well-established legislative structures that are welcoming to third-party funders. What’s needed here is for India to focus on domestic markets, which until now has not been emphasized. Aside from a single active funding entity, India is without a formal regulatory structure to govern the practice. Establishing that will likely increase confidence in the Indian legal system around the globe.
Commercial

Have Two Recent Rulings Killed the Whistleblower Funding Model?

Two recent court rulings are being touted as a death knell for a controversial litigation funding model involving whistleblowers. The Justice Department has never downplayed its opposition to investors profiting from government lawsuits. Whether the practice is an innovation in identifying wrongdoing while profiting financially, or heretical to the idea of whistleblower protections—it does seem that the involvement of litigation funders in whistleblower cases may be on its way out.

Reuters details that the cases in question, one involving Bayer and Eli Lilly, the other against biopharma giant UCB, are significant on several levels. The Bayer/Lilly claim, led by subsidiaries of NHAG, was ultimately dismissed. NHAG is a group of ‘professional whistleblowers’ that the Justice Department described as essentially a shell company existing as a profit center on behalf of investors. Mere weeks later, another NHAG subsidiary requested a review of a dismissed case against UCB.

John Mininno, NHAG founder and plaintiff’s lawyer, explained how he used public data to find and investigate fraud. He would then file suits under the False Claims Act on behalf of the government—collecting whistleblower bounties. These can be as much as 25% of the total settlement.

This seems reasonable on its face, as fraudsters would be punished and investors would profit. As a result, several contingency-fee law firms took on cases based on this business model. Even more incredible is that this model didn’t require government backing to file cases. Qui tam relators are used and may pursue a claim even if the DOJ declined to prosecute. Ultimately though, the DOJ didn’t just decline to support cases—it actively petitioned courts to dismiss them.

Some say that Mininno’s scheme is now facing a reckoning. At the same time, it’s unlikely that litigation funders will completely stop funding whistleblowers. However, according to a newly adopted DOJ policy, funding for whistleblower cases necessitates full disclosure.

Commercial

London Legal System Attracts Super-Rich from Russia and Kazakhstan

The legal services industry in the UK is one of the largest on Earth. One side effect is that commercial courts are often used in cases involving no British citizens. The super-rich are largely coming from the Soviet Union. Some may be avoiding taxes or political persecution, while others have kept their ties to the Kremlin. The Bureau of Investigative Journalism reports that a spike in cases from parties outside the UK is not necessarily a negative. In fact, it sends a message that English courts are fair and equitable, which many do not claim about Russian courts. Kompromat—embarrassing or scandalous information intended to destroy credibility—can be used in Russian civil cases. Now there’s talk of this concept finding its way into British courts. In order for the UK to continue its role as a leading jurisdiction for foreign cases, the legal system there must get its house in order. UK courts have a reputation for granting global asset freezing orders in some instances—often referred to as a ‘nuclear option.’ Michael Redman of Burford Capital states that courts might have been better off not granting worldwide freezing orders. British courts weathered the difficulties of Brexit, but may not overcome the impression that they’re allowing undemocratic systems to infiltrate their jurisdiction. Boris Johnson has proclaimed a push toward a ‘global Britain’ that maintains good standing in the global theatre. A successful legal services industry aligns with the economic strength of Britain, leading to a safer and more prosperous UK. Yet, Johnson is said to have delayed the release of a parliamentary report on Russia’s impact on the legal system. Legal services professionals agree that London must take care not to lower its integrity in the interests of attracting foreign litigants.
Commercial

Insurers Launch Class Action Against Claimants—Yes, Really!

When we think of a class action, we think of ordinary citizens seeking compensation for wrongdoing by a large, often commercial or governmental entity—usually with the support of third-party funders. So what led to a group of insurers filing suit against the owners of a cargo vessel? Mills Oakley details that the APL England, a cargo ship traveling from China to Australia, lost valuable goods after encountering rough waters. More than 80 containers were lost or damaged. After a failed attempt at negotiation, the insurers who covered the cargo filed suit against the owners and charterers of the APL England. Thus far, it’s practically unheard of for insurers to become plaintiffs in such a case. Courts were unsure how to proceed in this largely unprecedented situation that requires keeping policyholders informed and protected. Perhaps even more striking is that litigation funding, a common feature in modern class actions, is not being utilized in this action. No doubt, this case will be watched closely by insurers, policyholders, and those in shipping and logistics. While it’s possible that insurers will not be compensated for their losses, it’s equally possible that this case will set a stunning precedent for insurers when an untoward incident triggers a claim.
Commercial

UK Funder Fenchurch Legal Joins Mintos

Investment specialist Mintos is joining forces with UK litigation funder Fenchurch Legal. This is expected to create new opportunities for investors, particularly those looking to enter the legal funding arena. Mintos explains that Fenchurch Legal offers a unique product that emphasizes aiding ordinary consumers as opposed to the massive corporates many funders focus on. Fenchurch’s main clients are firms that take on cases such as pension mis-selling, personal injury, and housing disrepair claims. By focusing on smaller, socially relevant claims, more cases can be funded—diversifying risk. Fenchurch launched in 2020 with a deliberate focus on ‘After the Event’ claims. All Fenchurch disbursements are backed by an ATE policy. It fills a gap in the addressable market for small-ticket cases in the UK, where the legal funding market has more than doubled over the last three years—even before COVID changed the legal landscape. The cases that Fenchurch funds result in one of two outcomes: Winning claims see the loan repaid by the defendant, while losing claims are covered by ATE insurance. This creates an extremely attractive opportunity for funders and those who invest in them. The funding market is expected to continue its growth, particularly in the UK and US. In fact, the market is predicted to reach EU 18.3 billion by 2027. Managing Director of Fenchurch, Louisa Klouda, expressed delight at joining the Mintos platform. She is confident that the venture will help Fenchurch achieve its goal of becoming the leading expert in third-party funding in the UK.
Commercial

ASIC Addresses Concerns of Third-Party Legal Funders

A new consultation paper from ASIC details multiple areas likely to change in response to concerns from the litigation funding industry. Does this indicate a relaxation of governmental attempts to hobble the legal funding industry? Investor Daily explains that while a requirement for litigation funders to hold an AFSL became law in 2020, not all provisions were upheld immediately. This relief is scheduled to expire in April of next year. A total of 31 recommendations have been made, including relief from equal treatment duty in MIS distributions, and from requiring disclosure in some commercial cases. The government has expressed that it will consult on the new recommendations this year. The expectation from ASIC is that their paper will establish definitions for oft-used terms within MIS regulations.
Commercial

Insurers Remain Wary of Third-Party Litigation Funding

Litigation funders and insurers may never see eye to eye. After all, third-party litigation funders make it their business to hold insurers accountable—literally. By funding cases for average citizens against corporations, legal funding helps average citizens who would not otherwise have their day in court. Business Insurance explains that insurers insist that funding leads to larger claims and higher premiums. Funders, some say, are often allowed to fund cases surreptitiously, leading to potentials for conflicts of interest. Funding is similar to contingency fee arrangements, with one distinct difference. Plaintiffs don’t pay if a case loses in either situation, but if a case is successful, funders are repaid and given a share of the recovery. Funding is helpful to plaintiffs, and also to law firms who may be unable to take on meritorious cases due to lack of available resources. Third-party funding is gaining popularity around the world, and many insurers are not pleased. One director at AM Best explains that funding drives the size of awards and settlements, creating an untenable situation for insurers and those seeking new policies. If funders have direct control over the cases they fund, this problem can become exponentially worse. Laura Lazarczyk, EVP at Zurich North America, refers to ‘abusive practices’ by funders, including funding frivolous litigation. To avoid conflicts of interest, some US courts now require third-party funding to always be disclosed. Efforts to expand this requirement nationwide have not picked up much traction. Funders claim that funding is not relevant in all cases, and no jurisdiction openly permits funders to retain control over decision-making in the cases they fund.
Announcements Commercial

Liti Capital Announces New $5 Million Investment to Acquire New Assets

Liti Capital SA , the blockchain litigation finance company, announces an investment of $5 Million. This $5m will be used to purchase assets worth up to a potential $50m. Of the initial private raise of $12m, $10m was used to secure assets worth up to $100m of potential asset value. Once this new $5m is deployed in an asset purchase, the combined $150m potential value dwarfs the current market cap of $25m. Those assets are what back the LITI equity token. Litigation finance is the practice of purchasing a percentage of a lawsuit to help fund the effort and then helping to win the case in order to collect that same percentage of the award. The $5M investment will be used to purchase these litigation assets. As one of the highest ROIs of any asset class, the returns are not dependent on the state of the financial markets. This short video illustrates the value proposition. “Liti Capital is a company, not a cryptocurrency. Therefore, increasing our Market Cap is a good thing for our investors because it means we are putting new money to work to buy assets and create profits,” says CIO David Kay.“We were able to invest our first $10M and turn it into assets valued around $100M. We expect to use this new investment to produce similar results.” Liti Capital launched its LITI equity token on June 24th and it wrapped LITI token, the wLITI, on June 29th. LITI tokens are available on liticapital.com and wLITI on uniswap.org. Liti Capital tokenized its equity shares with the goal of providing retail investors with investment opportunities previously only available to the top 1% of investors. Tokens lower the barrier of entry for smaller investments and reduce costs and increase security for both investors and the company. Additionally, tokens provide liquidity to an asset class that has traditionally been firmly illiquid. Liti Capital's belief is“private equity for all.” Additional long-term goals include helping to protect the crypto community, prosecute scammers, and return the lost funds to the token holders with the hopes of preventing these activities in the future and ensuring a safe environment for investment and innovation. Liti Capital will spend between 5 and 10% of its investment capital investigating and funding litigation against these crypto con artists and scammers. Join the company's Telegram Channel, t.me/Liti_Capital_Official , for updates and live chats. About Liti Capital Liti Capital is a Swiss Limited Liability company specializing in Litigation Finance and FinTech based out of Switzerland. Liti Capital buys litigation assets to fund lawsuits and then helps the plaintiff win the case. By tokenizing shares, the company lowers the barrier of entry for retail investors, gives token holders a vote in the decision-making process, and distributes dividends to token holders upon the success of the plaintiff. Co-Founder Jonas Rey heads one of the most successful intelligence agencies in Switzerland, Athena Intelligence. His two co-founders, Andy Christen and Jaime Delgado bring innovation entrepreneur experience and blockchain expertise to round out the leadership team. David Kay, CIO, ran a billion-dollar private equity litigation finance firm before joining Liti Capital.
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Commercial

Pure Funders vs Professional Funders – What’s the Difference?

The subject of costs is a contentious and evolving topic. A recent ruling by Judge Marcus Smith has turned some heads in the funding community. It involves a third-party cost application brought against Colosseum Consulting, by Laser Trust. Colosseum was the funder of a case between Laser and CFL Finance—which had an outstanding costs order against it for nearly GBP 330,000. Colosseum faced an order for costs. Omni Bridgeway explains that according to the funding agreement, Colosseum had an inappropriately high degree of control over the case. Judge Smith called the agreement close to absolute control. It was not determined how much control was ultimately exercised by Colosseum, but the larger issue was that neither Colosseum nor CFL was forthcoming about the terms of the agreement. With that in mind, Colosseum was ordered to pay the assessed costs—without the Arkin cap. Some have suggested that removing the Arkin cap was excessive, even punitive. Part of the ruling relates to Colosseum’s status as a “pure funder,” as opposed to a “professional funder.” The difference here was determined in Hamilton v Al Fayed 2002, a Court of Appeal case. A “pure” funder does not seek to control the funded case, has no personal interest in the litigation at hand, and does not stand to benefit. Pure funders rarely have cost orders made against them. However, funders that exercise control or seek to increase their payout are far more likely to see costs orders. The facts of the case between Laser and CFL are highly complex. Suffice to say that everyone involved should have known it was not well-suited to a professional funder. Though it’s unclear how much control Colosseum exerted over the case, the agreement terms are evidence that Colosseum’s motive was financial gain rather than charity. As such, they were not a “pure funder,” and could therefore be ordered to pay costs.
Commercial

On the Use of Liquidator Documents in Funded Litigation

Litigation funders may purchase claims from liquidators, keeping a portion of the recovery. But there are practical questions that need answers here—such as whether funders may use evidence from previous examinations of the insolvent company’s affairs. In the instance of LCM Operations Pty Ltd; 316 Group Pty Ltd, LCM bought claims from a liquidator, who would receive 15% of any proceeds collected. According to an article published on LCM’s website, ASIC approved the funder’s request for examination documents. There were no objections or challenges. Armed with evidence, LCM filed suit against Rabah Enterprises. Rabah countered with a complaint alleging that the use of the examination documents was a breach of the Harman undertaking—which states that documents obtained in court proceedings must not be used in unconnected proceedings. LCM then applied to Federal Court to affirm that using the documents was not a breach of Harman. The court determined that there had been no breach—as the focus of the examination was to gather evidence for claims. Rabah’s assertion was that litigation funders and liquidators are not on an equal legal footing in the use of examination documents. He also claimed that the examination itself was a potential abuse of process under terms of the Corporations Act. Yet this act also allows liquidators to assign claims to other parties. Those other parties then enjoy similar standing to the liquidator, without court approval. Because the claim against Rabah could have totaled more than $14 million, it’s clear that the liquidator was poised to benefit financially. However, Rabah still maintained that LCM required leave that should not be given by the courts—because LCM’s predominant purpose was the 85% in the agreement. Ultimately Justice Stewart determined that ‘predominant purpose’ may include other goals, such as a partly private purpose. In this case, LCM benefited, but so did the liquidator. Rabah’s objectives were ultimately unconvincing, and Justice Stewart found for LCM.