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Announcements Commercial

Litigation Capital Management agrees to fund Comet liquidation claim

Dispute financing solutions provider Litigation Capital Management said it had agred to provide litigation funding to Geoffrey Carton-Kelly, a partner of FRP Advisory, additional liquidator of CGL Realisations Ltd, formerly known as Comet, seeking to recover £83 million from Darty. Kelly alleges that a transaction with Darty - a subsidiary of FNAC Darty, a multinational electrical retailer based in France. - that occurred prior to Comet entering into administration had reduced the amounts that would otherwise have been available for Comet's creditors. The litigation finance agreement would cover proceedings issued in the High Court against Darty.
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Announcements Commercial

Longford Capital Teams up with Willkie Farr & Gallagher LLP to Offer Litigation Funding to Willkie’s Clients Involved in Commercial Disputes

Longford Capital Management, LP today announced that it has entered into a $50 million funding agreement with Willkie Farr & Gallagher LLP to provide equity capital to fund attorneys’ fees and litigation costs, and to monetize the value of meritorious legal claims for Willkie’s clients involved in commercial litigation cases handled by lawyers based in Willkie’s Chicago office.

Willkie is an international law firm of approximately 850 attorneys with offices in New York, Washington, Houston, Palo Alto, San Francisco, Chicago, Paris, London, Frankfurt, Brussels, Milan, and Rome.

The agreement provides Willkie’s clients with an alternative method of funding litigation and enables clients to treat meritorious legal claims as corporate assets capable of being monetized.  Longford provides funding for disputes in several areas of law, including antitrust, patent, trade secrets, subrogation, health care reimbursement, and a variety of contract and fraud claims.

In addition, Craig C. Martin, Chairman, Midwest, a member of Willkie’s Executive Committee and a partner in the firm’s Litigation Department, will join Longford’s board of Independent Advisors. For many years, Mr. Martin has known and worked with members of the Longford legal team, including William P. Farrell, Jr., co-founder and managing director, and Justin A. Maleson, director.

Mr. Martin said, “Our new agreement with Longford will provide our clients with an alternative funding model for high-stakes commercial disputes, especially those with outcome determinative trials, for businesses as plaintiff or as defendant.  We have a talented group of trial lawyers with diverse skill sets and believe this is a tremendous opportunity for the firm to offer corporate and private equity clients a new level of service.”

Mr. Farrell said, “We have known Craig Martin and his Chicago-based trial team for many years. They are successful litigators and trial lawyers representing sophisticated clients.  We look forward to assisting Willkie by providing its clients with attractive financial options in connection with commercial disputes.”

About Longford Capital

Longford Capital is a leading private investment company that provides capital to leading law firms, public and private companies, research universities, government agencies, and other entities involved in large-scale, commercial legal disputes.  Longford was one of the first litigation funds in the United States and is among the world’s largest litigation finance companies with more than $1 billion in assets under management.  Typically, Longford funds attorneys’ fees and other costs necessary to pursue meritorious legal claims in return for a share of a favorable settlement or award.  The firm manages a diversified portfolio and considers investments in subject matter areas where it has developed considerable expertise, including business-to-business contract claims, antitrust and trade regulation claims, intellectual property claims (including patent, trademark, copyright, and trade secret), fiduciary duty claims, fraud claims, claims in bankruptcy and liquidation, domestic and international arbitrations, claim monetization, insurance matters, and a variety of others. For more information, please visit www.longfordcapital.com.

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Commercial

Scotland’s New Rules for Personal Injury Claims

A new court rule in Scotland takes effect on June 30th of this year. The rule allows for QOCS, or qualified one-way cost shifting in personal injury cases. Scotsman explains that until this rule goes into effect, losers in a personal injury case pay costs to the winner. With QOCS, the claimant is not required to pay costs for the defendant, even if the case is unsuccessful. The defendant will pay their own legal fees unless the plaintiff has acted inappropriately in the case. Fees will be capped at a percentage of any award. A spike in new cases taking advantage of this rule is anticipated. More law firms representing plaintiffs are expected to move forward with cases they would not have, prior to the rule being enacted. QOCS is part of a larger spate of civil procedure reforms currently taking place in Scotland, as a move to welcome third-party funding, collective actions, and damages-based agreements. Together, these reforms will no doubt level the playing field between large corporates and common citizens—widening access to justice for those who need it most.
Commercial

Litigation Finance—Helping Plaintiffs Against a Bankrupt Defendant

Is a positive verdict enough once a defendant declares bankruptcy? It may not seem like it, but in fact, plaintiffs may find bankruptcy court a more expedient option in some situations. Omni Bridgeway explains that the focus in a bankruptcy court is on speedy, fair resolutions. Mediation is possible, though less common. Working with a litigation funder is a great move for plaintiffs. Experienced funders can devise ways to lower costs, reduce risk, and may even recommend the best attorney for the situation. Omni Bridgeway’s latest podcast covers these issues and more, including:
  • Settlements under Rule 9019
  • The role of funders in maximizing recoveries
  • Why bankruptcy-specific counsel is so important
  • How bankruptcy court may be the best venue
  • Rule 2004 exams to help assess whether a judgment can be collected
  • Pre-bankruptcy litigation counsel
Commercial

The Impact of Global Inflation on Litigation Funding

Is post-pandemic global inflation a certainty? Probably not. But it’s worth noting that pandemic alleviation spending, quantitative easing by the Fed, and a sizable budget deficit are creating similar conditions to the last large inflation peak—way back in 1947. There are other factors to consider, some of which are difficult to predict. Consumers are excited to spend, travel, and do all of the things the pandemic prevented them from doing. What does that mean for litigation funding? Exton Advisors suggests that we could be looking at a sweeping change in global investing. As the world economy readjusts after COVID, investors may become intensely risk-averse. As interest rates rise and liquidity becomes scarce, capital invested into third-party legal funding could drastically reduce. A dramatic rise in litigation is expected as COVID winds down and businesses reckon with insolvencies. But as liquidity shrinks, funders with the most available cash on hand for deployment may emerge big winners. At the same time, big cases with the potential for massive awards may diminish, shrinking the pool of potentially profitable cases. If inflation continues and borrowing rates stay high, legal funding can come to the rescue of corporates that need to monetize illiquid assets without waiting years for a complicated case to reach its conclusion. As always, litigation funding is poised to adapt to the needs of the modern world.
Commercial

Cladding Class Action Halts as Litigation Funder Withdraws

A sizable class action against Carter Holt Harvey ended abruptly when offshore third-party funders voided the funding arrangement for unspecified reasons. Law Fuel details that the case, which revolved around faulty cladding materials, could have ended in an award of $40 million or more. As of now, Carter Holt Harvey is seeking costs, and has made no offer to those impacted. New Zealand’s Ministry of Education sought compensation upwards of $1 billion over defective materials in more than 800 public schools. The case settled—terms of which were undisclosed. While the case was not thrown out, Justice Matthew Downs determined that Adina Thorn made several misleading statements about potential award size. We will keep an eye on this case and continue to report on it as it develops. 
Commercial

LexShares Seeks Investors for Legal Finance Fund

Having closed its $25 million LexShares Marketplace Fund in January of 2018, LexShares’ second fund—targeted at $100 million, is well underway. Crunchbase recently spoke to Jay Greenberg, founder and CEO of LexShares. Greenberg described the value and adaptability of litigation finance, explaining that meritorious cases can be pursued even when plaintiffs lack the resources to fund them. LexShares uses innovative technology to source cases. A single piece of software curates cases for the company—roughly ¾ of all new cases funded by LexShares are sourced using this AI software. Not surprisingly, LexShares and other legal funders have seen a spike in demand from businesses seeking to monetize pending litigation, or open cases without decimating balance sheets. It will be interesting to keep an eye on LexShares' unique approach as the litigation funding market continues to heat up. 
Commercial

Should Litigation Funding Agreements Always be Discoverable?

Do both sides of a case need to know when third parties have an interest in the outcome of their case? David Levitt of Hinshaw & Culbertson says yes. He has proposed changing the rules in the District of New Jersey to require plaintiffs and defendants alike to disclose information about TPLF agreements. Bloomberg Law explains that the District Court of New Jersey is considering implementing a rule requiring that TPLF agreements be discoverable. Notably, the local rule would allow plaintiffs to self-describe their own agreements. Specifically, the rule would require disclosure of information about funding for attorney fees and expenses. Also, it requires disclosing specifics of any contingent financial arrangements based on any award or settlement amount, or any non-monetary result. Levitt suggests that this proposed local rule doesn’t address mutual discoverability fully enough. He believes that all jurisdictions should mandate the discovery of TPLF agreements. Self-description of funding agreements by plaintiffs may also prove to be inadequate, according to Levitt. He cites the fact that insurance disclosures require producing actual documents for discovery, rather than a vague description. It’s been asserted that like insurance agreements, TPLF agreements don’t have to be relevant to be discoverable. Yet some, including Levitt, have suggested that third-party funders increasingly exert influence over the cases they fund. Although Levitt did not cite any evidence to back up his claim, he maintains that strong public policy should provide both sides of a legal dispute access to comparable information about the other parties, so attorneys will know when non-parties are influencing a legal case based on their own financial interests. Clearly, the disclosure debate around third party legal funding isn't abating any time soon.
Commercial

RTB Case Moves Ahead in EU

Targeting the oft-maligned Real-Time Bidding (RTB), the Irish Council for Civil Liberties is taking IAB Tech Labs to court. The focus is on consumer privacy. This is a potentially far-reaching case as it addresses tactics used by Twitter, Amazon, Google, and Facebook among others. Tech Crunch explains that RTB is, in fact, the largest ever breach of consumer data. Dr. Johnny Ryan, a whistleblower who was once an AdTech specialist, can demonstrate how IAB Tech Lab uses a coding system to track highly sensitive information about internet users. This can include their politics, income, medical issues, substance abuse or addiction, reading habits, and facts about minors living in the user’s household. Dr. Ryan also points out that the inherent lack of security in the RTB process makes it vulnerable to hacking—meaning outside, unnamed parties could gain access to user information. EU law requires that user data be protected from unauthorized use or access. According to Ryan, the lawsuit has become necessary because repeatedly reporting violations yielded no results. He also stated that a complaint lodged with the Airish Data Protection Commission (lead data supervisor to Google in the EU) in 2018 has still not been responded to effectively. The following year, DPC announced the opening of a formal investigation. To date, the case remains unresolved. Dr. Ryan finds himself wishing he’d begun this litigation much sooner. Moreover, he wishes it weren’t necessary at all, and that consumer protection agencies tasked with keeping data safe would do a better job. The focus of GDPR is to protect consumer data so the average consumer doesn't need to become data-savvy, or worse—paranoid about who might have access to their private data. These supervisory entities are taxpayer-funded. So when they fail, it means citizens are not getting the protection they’re paying for.
Litigation Finance News
Commercial Special Features

Key Takeaways from LFJ’s Special Digital Event on Australia: The Evolution of a Litigation Finance Market

On Tuesday June 15th, LFJ hosted a special digital event on Australia: The Evolution of a Litigation Finance Market. Moderator Ed Truant (ET), founder of Slingshot Capital, helmed a panel discussion  that covered a broad range of issues facing the Australian market. Panelists included Andrew Saker (AS), CEO of Omni Bridgeway, Stuart Price (SP), CEO of CASL, and Patrick Moloney (PM), CEO of Litigation Capital Management.  Below are some key takeaways from the event:  ET: From my perspective, and I have diligenced many managers on a global basis, the Australian fund managers seem to be the most successful and consistently performing fund managers in the world, can you offer any insight as to why that may be the case?  PM: The fact that the panelists here today have been around since the inception of the industry in Australia, it’s given us a long time to think long and hard about not only how we originate these opportunities for investment, but how we undertake the due diligence process, and how we manage those processes. AS: There’s a combination of factors. It’s partly to do with the strength of the legal system here in Australia, involving a sophisticated judiciary. As a second point, there’s historically been limited competition. As a consequence, litigation funders could afford to be more choosy—and cases were generally of higher quality. ET: Another difference in the Australian market is the concept of contingent fees for law firms. Can you comment about why that really doesn’t exist in the Australian market? Is that changing, and what effect may that have? SP: Contingency fees were introduced in 2020 in Victoria, where law firms were able to receive a return/reward of the settlement proceeds. This has really expanded the litigation funding market—providing different forms of litigation funding for plaintiffs—that should be a positive outcome. PM: There’s a strongly held perception in Australia that there’s a conflict of interest between lawyers participating, and having their fees tied to the outcome of a particular dispute resolution. I think that’s one of the reasons Australia has resisted the contingency fee type of charging that has been prevalent for many years in places like the US. ET: Do you find that people consider Australia a market leader in Litigation Finance in terms of innovation? Have you seen examples of Australian innovation cross-pollinating to other jurisdictions? PM: I’m not sure that Australia really has led a tremendous amount of innovation in our industry. Our greatest innovation is in taking this industry and turning it into a business. AS: Australia has been innovative in the evolution of the business, and its coupling with the conducive class action regime we have here in Australia. There are some very good minds around the world within our organization and elsewhere that are taking this industry in new directions. It’s still very much in its infancy, and the next steps for its evolution are going to be interesting and exciting to see. ET: As your business grew, what changes did you witness in terms of regulatory, legislative, etc. And how did those changes affect the market? AS: I’m a recent newcomer to the industry. I’ve been with Omni Bridgeway now for six years. During that period, we’ve seen the growth of the industry and its continued adoption outside the traditional uses of litigation funding. So that’s one of the more significant changes we’ve seen—adoption by corporates, for exploring ways to mitigate legal risk. The other significant issue is the growth of regulation and the industry of criticism that seems to be evolving toward litigation finance, which all started from a very noble social access to justice limb. I think it continues to have those characteristics. But for whatever reason, an ear has been gained for those who are critical of the industry—which will lead to a reassessment of how the industry is regulated and run. PM: I’ve been involved in this industry directly now for 18 years. The greatest shift I’ve observed has been that shift between those who use litigation finance for necessity to those who use it through choice. People who need finances in order to continue their dispute or go through the arbitral process. And the maturing of our industry has now brought it to larger corporates who use litigation finance as an incredibly efficient capital source to run their portfolio disputes and manage risk, and to also bring in an efficient way of managing disputes through to their conclusion. ET: Looking forward, in the insolvency market, there’s an expected tsunami of insolvency claims post-COVID, yet Australia as a country appears to have managed the economic impact perhaps better than the rest of the world. Is the tsunami coming? SP: Australia has done remarkably well on a global scale. Its economy is strong and it seems to have weathered the impact of COVID very well. I’ve been speaking with a number of insolvency practitioners, and they do not expect a tsunami. They certainly don’t expect a large wave—but out of any crisis will always come bad behavior and some insolvencies. So for people who are committed to the insolvency market, when you’re there consistently, you’ll have a relatively consistent stream of opportunities. There is unlikely to be a tsunami—but as ever there will be corporate misbehavior, which can lead to insolvencies.
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Commercial

Investment Fund Loses Millions Backing Litigation Finance in Chinese Courts

As Litigation Finance grows in popularity, more new players are entering the playing field. Some fields, like IP litigation, are considered especially lucrative and are a popular focus for upstart funders. However, success in this landscape is far from a sure thing. TechKee details how a litigator, Rasheed McWilliams, and investor Brian Yates, formed iPEL in 2017. Their intention was to buy up patents and file infringement lawsuits against big companies. iPEL borrowed millions in a startup loan from Direct Lending Investments (DLI). Yates assured investors that patent lawsuits in China would lead to huge awards in the $100 million range. He also promised cases against recognizable names in tech and electronics. Yates’s claims were met with skepticism by many in the patent-enforcement industry. Verdicts in the hundreds of millions do present themselves in the United States occasionally, but in China, IP cases rarely net awards over one million dollars. In November of last year, DLI revealed that it expected to lose tens of millions on its iPEL investment. This led to criminal charges against DLI's chief executive—alleging that he inflated parts of the funding portfolio. DLI has since been sued by the SEC for providing manipulated data. Bradley Sharp, a consultant appointed by the court, sued DLI consultant Duff & Phelps after investigating the fund. Sharp stated that iPEL changed its focus to Chinese patent cases after its US strategy was revealed to be ineffective. DLI also provided funds to Parabellum Capital, another prominent litigation funder. DLT is now in receivership, while iPEL is still actively pursuing cases.
Commercial

Litigation Basics from Longford Capital VP

More people than ever now understand the broad strokes of what Litigation Finance is and what it can offer. Investors fund cases through funding entities that are then owed a share of any recovery or award in the case. Litigation funding is non-recourse, so funders can take a higher percentage in exchange for the enhanced risk. Bloomberg details the litigation funding basics with input from Andrew Stulce, vice-president at Longford Capital. In a funded case, the client still maintains control over decision-making, while the duty of the lawyer remains to the client. Funders are passive investors, and while they do have a financial interest in the cases they fund—they are not permitted to make decisions that impact the outcome. In a traditional funding model, lawyers sometimes take a reduced fee so that lawyers and funders both receive a share of any recovery. In a monetization model, funders make payments to the claimant—to cover legal costs and other expenses while a case is adjudicated. Return structures can vary and will be spelled out in the funding agreement. When it comes to due diligence, funders will have very specific requirements that must be met in order to provide funding for a case. This includes having an experienced litigator go over the case to determine its suitability for funding. The strength of the case and the defendant’s ability to pay damages can all enter into the decision-making process for funders. Meanwhile, claimants are encouraged to select funders carefully—understanding their sources of capital, for example, and how the process can affect the timeline of their case. Rules regarding non-disclosure and confidentiality agreements can vary from one jurisdiction to another. But funders will often need privileged information that falls under the heading of confidentiality when deciding whether to fund a case.
Commercial

Bad News for Funders That Attempt to Control Cases

A recent order in a case between Laser Trust and CFL Financing is turning heads. The English High Court has made three cost orders against CFL. The court determined that the funder exerted an excessive amount of control over the case it had funded. Pinsent Masons explains that litigation funders can be exposed to adverse costs orders if they overstep boundaries to exercise control over-funded cases. Justice Marcus Smith stated that ordering a non-party to pay costs is highly unusual, and would not typically happen to funders. However, if third parties exert excess control over a case, they may be required to do so.  Michael Fenn of Pinsent Masons suggests that this judgment should be considered a reminder to all funders to beware of the influence they exert in the cases being funded. Monetary consequences can follow if too much control is exercised by third-party funders.
Commercial

State Bars Weigh in on Litigation Finance

As the number of jurisdictions embracing litigation funding grows, bar associations are following suit. Lawyers utilizing third-party funding as an option for clients would do well to note guidance offered by the state bar association on funding agreements and professional ethics obligations. While more state bars are expected to lend their opinions on the practice, New York and California have their own approaches to litigation funding. Above the Law details that litigation funding agreements have been enforced in New York for years—including those between funders and law firms. The Professional Ethics Committee of the New York City Bar made a formal statement regarding Rule 5.4 of the Professional Conduct guidelines with regard to portfolio funding arrangements. Rule 5.4 prohibits sharing fees with non-lawyers, and would therefore preclude the use of portfolio funding agreements. This 2018 opinion inspired intense dissent and led to the formation of a Litigation Funding Working Group, whose report was released in 2020. In it were suggestions including changing Rule 5.4 to welcome litigation funding and portfolio agreements, as well as recommending no mandatory disclosure of litigation funding. In California, concern about legal ethics is a major focus of the State Bar of California Committee on Professional Responsibility and Conduct. Their formal opinion states that third-party litigation funding is permissible under California law. However, it reiterates the importance of counsel to respect the duty to the client before any obligation to funders. If a funder has any control over decision-making in the litigation, clients must be informed of that. Of course, reputable litigation funders already know that it is inadvisable to exercise control over the cases they fund.
Commercial

Interview with Liti Capital Co-Founder: Jonas Ray

Editor's Note-- a previous version of this article stated that Liti Capital is the first to tokenize litigation finance. In fact, LawCoin Inc first tokenized litigation finance several years ago.  We regret the error.  Litigation funding has a new landscape to conquer—cryptocurrency. Liti Capital has tokenized litigation finance shares, creating an equity token that is asset-backed—which is unusual in blockchain. Using tokens allows a wider swath of investors to participate, as the entry threshold is lowered. Korea Times recently spoke to Liti Capital’s co-founder, managing director, and head of strategy, Jonas Ray, about how crypto and litigation funding coexist. Ray begins by introducing the Liti Capital team. It includes those with litigation finance experience, of course. But also those who specialize in blockchain, financial tech startups, intelligence, and enforcement. For the most part, investing in litigation finance is something only institutional and well-heeled investors can take part in. By using blockchain and tokens, anyone with a computer or smartphone can utilize investment tools that simply weren’t available previously. In a sense, a litigation funding token accomplishes the same goal for investment that funding does for pursuing legal cases—it increases access for those who need it most. Getting involved in Liti Capital can be as simple as buying a LITI token—which is a share of Liti Capital SA. In addition to occasional dividends, shares afford owners voting rights and participation in Liti’s annual general assembly meeting. Or wLITI tokens can be bought. These do not offer voting or participation rights, but wLITI tokens are fully tradable. Ray also explains that between 5-10% of company profits will be dedicated to finding and stopping crypto scams. Liti encourages community members or LITI holders who have been victims of crypto scams to inform Liti. All of this offers more flexibility and perks than traditional investing could—particularly in regard to litigation funding. Currently, asset-backed equity tokens are rare in the crypto space. Liti offers a tangible way to make a difference using small blockchain-based investments—while supporting endeavors to make crypto and blockchain safer for all users.
Commercial

Recent UK Decision May Impact Future Insolvencies

Are insolvency claims about to become more expensive and time-consuming to pursue? Some have suggested yes, after a ruling in Manolete Partners Plc v Hayward and Barrett Holdings Ltd 2021. It’s said that the recent ruling impacts those who assign insolvency claims, as well as insolvency practitioners themselves, by increasing the cost of claims, and may require two separate sets of proceedings regarding the same set of facts. Why? National Law Review details that there are significant differences between filing a hybrid claim under the Insolvency Application Rules and filing under Part 7 of the Civil Procedure Rules. One main difference is the court fee—which is much smaller under the standard rules. Another is that a hybrid claim may have to be adjudicated as two separate claims. Claims like breach of contract or breach of duty cannot be addressed with an Insolvency Application. So claims under the Insolvency Act must now be tried separately from cases under the Civil Procedure Rules. To sum up, an officeholder may file transaction avoidance proceedings under the Rules (Insolvency Application). But claims for breach of duty or other claims that don’t come under the purview of the Rules must then be filed using Part 7 of the Civil Procedure Rules. Assignees are not creditors, official receivers, liquidators, or contributors. As such, malfeasance claims are not something an assignee can pursue. If the incorrect procedure is used, courts can require applicants to pay the higher Part 7 court fee if they wish. But there is no requirement for courts to allow this, making it particularly unlikely if they suspect abuse of process. A safer option is to be certain where and how claims should be filed. While this case will make insolvency proceedings more difficult, costly, and time-consuming—it does not keep meritorious claims from being pursued.
Commercial

Jurisdictions Expanding Funding Access for Offshore Asset Recovery

As parts of the world seek out post-COVID normalcy, a predicted spike of legal claims is en route. Insolvencies are increasing, as are claims of fraud, breach of contract, and breach of fiduciary duty. With that in mind, a group of practitioners who deal in fraud, insolvency, and enforcement held the Asset Recovery Americas Conference—focusing on enforcement law in Latin America and the United States. Validity Finance details that several prominent jurisdictions are adopting policies more welcome to litigation funding in insolvency matters. Adding needed clarity to the use of third-party legal funding is a boon to clients and lawyers—but also to investors. The newly passed Private Funding of Legal Services Act, adopted last month in the Cayman Islands, makes several important changes in the law. First, champerty and maintenance laws were stricken. Contingency fee agreements and conditional fee arrangements are now permitted—with caps on how much lawyers can be paid above their normal fees. Finally, it allows for the use of third-party litigation funding agreements, with specific stipulations on how payments are calculated. The British Virgin Islands have accepted litigation funding since the late 1990s when they abolished champerty laws. The practice of third-party funding is seen as a vital part of ensuring access to justice. Meanwhile, Brazil allows funding, but has no laws in place governing the practice. Funding has yet to become mainstream there—which means that new laws may be on the horizon as legal and financial practitioners embrace the practice. The potential for growth is enormous, though a clearer legal framework is needed. Similarly, Argentina has no legislation directly impacting litigation funding—so restrictions are minimal. Legal fees are high in Argentina, and scandals are common. As such, there’s a widely held belief that litigation funding should be mainstreamed to provide citizens better access to the legal system.
Commercial

Litigation Funding in Asia—What’s the Holdup?

Litigation Finance has long been increasing in popularity and sophistication in places like Australia, the UK, the US, and Germany among others. Yet despite this run-up, much of Asia seems slow to adopt the practice. Law.Asia suggests that now that Hong Kong and Singapore have opened their doors to the practice of third-party legal funding, other Asian jurisdictions may follow suit. Both Singapore and Hong Kong allow litigation funding for international arbitration—including mediation and enforcement. Hong Kong extends this to liquidators, affirming that liquidators do not need court approval in order to enter a funding agreement. Harbour Litigation Funding founder Susan Dunn explains that banks, big business, sovereign wealth funds, and government entities are all making use of third-party funding—believing it to be a strong solution for runaway legal budgets. Dunn details that the straightforward nature of a funding agreement is highly attractive to businesses in particular. For investors, litigation funding is a way to diversify investment portfolios with assets uncorrelated to larger markets. Of course, this kind of investment requires experienced funders with a solid track record of picking winners. Portfolio funding can help diversify the risk involved. The funding industry has been spurred toward major growth during the COVID pandemic. Financial turmoil led to business closures and cash shortages across most major markets. And alongside this development, many new players have entered the legal finance space. Robin Darton, insolvency and restructuring partner at Tanner De Witt, explains that COVID has also brought with it a glut of insolvencies, breach of contract, fraud, and breach of duty claims. This presents more opportunities for funders and investors. Litigation funding in Asia presents an array of opportunities—time will tell how Asian jurisdictions will respond.
Commercial

The Cayman Islands Refines Litigation Funding Regulation

Last month, the Private Funding of Legal Service Act 2020 (AKA the Act) became law. The Act brings codification to the rules governing the practice of third-party litigation funding—which had been addressed on a case-by-case basis previously. Like many jurisdictions, champerty and maintenance laws had to be abolished before litigation funding could be supported by the law. This was a key element of the Act. Mourant details that the Cayman Islands recognizes three types of litigation funding agreements:
  • Conditional Fee Agreements—where clients pay slightly more than standard legal fees if the case wins, and nothing if the case doesn’t.
  • Contingency Fee Agreements—where lawyers receive a set percentage of any award given, but clients pay nothing if the case is lost.
  • Third-Party Funding Agreements—where funders and clients agree on terms by which funders will cover case costs in exchange for payment after the case wins. Funding agreements are generally non-recourse, so clients pay nothing if the case is not successful.
Other vital aspects of the Act include allowing contingency fee agreements except in the case of criminal proceedings, or any case under the purview of the Children Act. Conditional fee arrangements are also permitted, with set limits imposed on how much attorneys can add to normal legal fees. Total amounts paid to lawyers may not exceed 33% of the total judgment or award. If lawyers want to enter a fee agreement with different terms, that may be possible with court approval. With regard to third-party funding agreements, the Act requires that funding agreements must be in writing, and comply with existing law. The Act leaves room for further regulation to be imposed later, as needed. Such rules could include disclosure requirements or the acceptance and regulation of new types of funding agreements. Overall, the Cayman Islands has created a welcome environment for funders and investors.
Announcements Commercial

Liti Capital launches tokenised private equity for litigation finance

Liti Capital SA, a Swiss Litigation Finance company, is launching into the world of crypto tokenisation with the goal of providing retail investors with investment opportunities previously only available to the top 1 per cent of investors.David Kay, CIO, successfully enforced what was at the time the largest international arbitration award in history, bringing in more than one billion US dollars of cash and securities. Liti Capital has already raised USD12 million in cash and litigation assets from private investors, owns a share of three cases valued at over USD200 million, and is ready to open up to a wider market. “We wanted to find a way to get everyone involved,” says Jonas Rey, Co-Founder and Managing Director of Liti Capital, “but how the financial markets are structured all but prevents that. The blockchain finally gave us the answer we were looking for.” Liti Capital uses the LITI token to represent a share in the company under Swiss law. While the LITI token gives access to voting rights and to dividend payment upon completion of a KYC process, it is not on any exchanges by design. The Company made a wrapped LITI (wLITI) for trading on Uniswap and soon other DEXes. 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 per cent and 10 per cent of its investment capital investigating and funding litigation against these scam coins and rug pulls.
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Commercial

Arkansas Teacher Retirement Fund Pursues Litigation Funding

Investments made by Arkansas’s Teacher Retirement Systems increased by a staggering $783 million. This ranks the fund in the top 5% of public pension funds in America. This comes after last year’s investments fell to only $15.1 billion as of the beginning of COVID shutdowns. Northwest Arkansas Democrat-Gazette details that trustees were asked to consider a proposed investment of $30 million into a fund focusing on third-party litigation funding. One trustee, state education commissioner Johnny Key, suggested that such an investment would be illegal according to a 2015 law regulating consumer legal lending. The committee will likely revisit the investment after due diligence is conducted. Trustees did authorize investments of up to $50 million in three different funds in a variety of industries—including real estate funding, renovation and redevelopment of commercial property, and utilities like power and telecommunications. Changes in investment policy have been voted on—albeit without the approval of the full board. New investments may require increased input from investment consultants. It’s suggested that this change might make it more difficult for the fund to invest in new areas—such as third-party legal funding. There is concern that a speedy, possibly reactionary change to an existing policy will not produce the desired result.
Commercial

Fishing Magnate Magnus Roth Settles Tugushev Fraud Claim

When Alexander Tugushev went to London in 2018, he expected to sue Magnus Roth and his former business partners for a cut of Russian fishing group, Norebo. The claim revolved around a one-third share based on informal verbal agreements made long before the founding of Norebo. Business Matters explains that counsel recently argued that Tugushev gave up his claim in the fishing industry when he accepted a position as Deputy Chair of Russian Fisheries Committee in 2003. Four years later, his career in public service ended in disgrace as he was sentenced to a six-year prison term for fraud and accepting bribes. Currently, Tugushev is facing multiple legal battles including investigations into stolen documents and a complex claim in London. Tugushev’s claim is being financed by unnamed litigation funders. Curiously, funding entity 17Arm appears to have been established solely to fund Tugushev’s claim. Roth and his partner, Vitaly Orlov, denied ever offering a piece of their business to Tughhev. Indeed, Tugushev was in prison when the company was formed. The settlement details have not been released. As the original claim was nearly GBP 350 million, it’s hard to imagine that Tugeshev and his funders won’t enjoy a nice payday all the same.
Consumer

Maxima and DAS UK Form Partnership for Clinical Negligence and Personal Injury Scheme

Optimise is a new scheme covering clinical negligence and personal injury, specifically aimed at small law firms. The partnership comes amid motor legal reforms and offers a full dedicated authority scheme for firms and sole practitioners who take on clinical negligence or personal injury cases. DAS LEI details that the partnership will offer firms fixed competitive rates, an online portal to simplify processing and case submission, and a dedicated relationship manager. There is expected to be a range of clinical negligence specialist areas like specific types of product liability or medical negligence—such as dental negligence. DAS UK is part of the world’s largest group of reinsurers. John Durbin, Sales and Business Development Manager, explains that it feels like the right time to help out smaller law firms that specialize in personal injury and clinical negligence.
Consumer

Percent Announces Partnership with Mustang Litigation Funding

Alternative Investment specialist Percent recently announced a strategic partnership with Mustang Litigation Funding. Mustang, founded in 2018, focuses on portfolio litigation funding and personal injury case funding. This includes product liability, auto accidents, and premises liability. The partnership is expected to expand investment options and grow the companies' network of partners. Percent explains that litigation finance is now a well-established alternative asset class that’s gaining global acceptance. Non-recourse funding is provided to pursue meritorious legal matters, with remuneration to the funder coming out of any settlement or award in the case—often calculated based on how long the case takes to be resolved. Jimmy Beltz, Co-Founder and Managing Partner of Mustang Litigation Funding, stated that this partnership will be a boon to investors who can now benefit from this uncorrelated asset class. Alex Pirro, VP of Capital Markets at Percent, details that Mustang’s impressive relationships with partners and firms speak well of the funder's ability to source and manage cases.
Commercial

Tyro Payments Class Action Investigation

A potential class action against Tyro Payments Limited is being investigated by Bannister Law Class Actions. Tyro is Australia’s largest non-bank provider of Point of Sale Electronic Fund Transfer services. Service outages in January of this year impacted hundreds of businesses—causing loss of sales revenue, service fees that provided poor or no service, customer dissatisfaction, and general damage to businesses as they sought to compensate for Tyro’s outages. Bannister Law Class Actions explains that the claim alleges breach of warranties, breach of contract, and that the services provided by Tyro were not of reasonable quality. Further, Tyro allegedly fraudulently claimed that its service worked 99.9% of the time. This potential class action will be funded by Court House Capital. As such, claimants will not endure any out-of-pocket costs. Fees and costs will be deducted from any settlement or award. Eligibility requires the following conditions to be met:
  • Businesses contracted with Tyro payment services before January 5 of this year.
  • Businesses endured connectivity issues beginning in January 2021.
  • Losses were endured due to Tyro connectivity failures.
Potential compensation will be based on loss of revenue, terminal and rental fees, and any damages caused by finding replacement services. Interested parties may contact Bannister Law Class Action Tyro Team.
Commercial

Peking University Founder Group Seeks Litigation Funding

Liquidators of Nuoxi Capital and Kunzhi Ltd are presently engaged in negotiations with potential litigation funders. Multiple sources claim that it will be very expensive to recover various inter-company claims—not to mention the need for a Beijing court to accept a previous keepwell ruling originating in Hong Kong. LinkedIn details that the proceedings are expected to generate recoveries for offshore bondholders. Claims stem from PK Founder allegedly breaching EIPU deeds, as well as the alleged breach of keepwell assurances. Nuoxi Capital focuses on issuing debt securities for credit, refinancing, and acquisitions. Founded in 2017, it operates as a ‘special purpose entity’ in the Tech industry.
Commercial

Former Client Sues Legal Team for Damages for ‘Gross Overpayment’

Law firm King & Spaulding, along with partners Craig Miles and Reginald Smith, are being sued by former client, Trinh Vinh Binh. The firm is accused of failing to follow client instructions, and of ‘erroneous allocation’ of funds. Claims include breach of fiduciary duty, fraud, and negligence, as Binh seeks fee forfeiture in addition to damages. Law.com details that Binh, a resident of The Netherlands, hired the firm in 2015, and entered a fee agreement with litigation funder Burford Capital. King & Spaulding would represent Binh in arbitration with The Socialist Republic of Vietnam. Burford agreed to provide up to AU $4.678 million. All told, more than AU $3.5 million was available for legal expenses. The legal team assured Binh and Burford Capital that this would be enough to effectively resolve the arbitration. As of May of the following year, Binh’s legal team had been paid nearly $2 million, with slightly less than that remaining in the team's coffers. According to the filing, Miles and Smith allegedly colluded with Burford to seek ways to impose more fees. Burford Capital is not a named defendant and declined to comment on the case.
Commercial

Northern Territory Stolen Wages Class Action Seeks Claimants

Shine Lawyers is seeking claimants for a newly launched class action on behalf of indigenous Australians whose wages were stolen. Wage control legislation led to wages being withheld in the period between the late 1800s and the early 1970s. This may include farmworkers, domestic staffers, laborers, stockmen, and others. Shine details that to join the class action, the following conditions must be met:
  • Impacted parties must be Aboriginal or a Torres Strait Islander.
  • Claimants or their families must have worked in the Northern Territory prior to the law change in 1972.
  • Claimants or their family members were not paid all owed wages.
Thanks to third-party legal funding from Litigation Lending Services, there is no cost for claimants to sign up for the case. Fees and costs will be deducted from any settlement or award. Shine Lawyers estimates that millions in unpaid wages may be owed to claimants. The case seeks to reconcile payments with everyone who was shorted.
Announcements Commercial

Apex Litigation Finance are delighted to announce the appointment of two new Advisors to its team.

The appointment of Jan Buza and Jozef Maruscak provides key support for Apex’s growth strategy, strengthening resources to meet a significant increase in case numbers. Jan Buza led Business Development at Exponea, a data company that raised over £30m and was later acquired by Bloomreach, the leader in Commerce Experience. He then worked on employing AI (artificial intelligence) and predictive analytics in litigation at CourtQuant and was part of Deloitte’s Legal Tech accelerator program. Most recently, he co-founded and heads product development at Trama, a Legal Tech company that is building an AI-powered trademark registration service. Jan says: “It is great to be on board with Apex. I have watched them over the past eighteen months or so as they established themselves as a leading provider of litigation funding solutions. Their innovative use of AI in this field mirrors my own background and I look forward to making a valuable contribution to their capability.” Jozef Maruscak co-founded various Legal Tech projects while studying law at Cambridge University. He then continued as the CEO of CourtQuant, a start-up specialising in predicting key attributes of legal cases using AI and predictive analytics. He is now a partner and Head of Business Development in Sudolabs, a company building software products for Silicon Valley start-ups and Y-Combinator founders. Jozef says: “The legal market is increasingly driven by AI, and I wanted to bring my experience in this area to a company that fully embraces its potential, and that’s definitely true of the senior team at Apex. There is a bright future for AI as a tool to support better decisions by litigation funders and I am confident that Apex is in the best place to disrupt the market.” Commenting on these appointments, Apex CEO Maurice Power expresses confidence in the company’s strengthened resources: “We recently announced that we were looking to expand our team with talented individuals and Jan and Jozef exceed our expectations. “They both have a CV and skillset that fits perfectly with our continuing journey of employing AI in litigation finance to drive up efficiency and performance for our clients and investors. Jan and Jozef will both combine their contribution at Apex with exciting commitments in complementary roles.” About Apex Litigation Funding: Apex Litigation Finance Limited brings together experts from the legal and finance sectors to provide third party litigation funding to litigants (corporates, liquidators, and individuals) who are unable to pursue a claim due to the prohibitive cost of litigation. Although the claim may have merits, uncertainty over the total costs and the potential risk of being ordered to pay the defendant’s cost, should they lose the claim, prohibits access to justice for many claimants. Our process is augmented by artificial intelligence systems to assess risk. As a professional litigation funder, Apex will make available funds to pay legal and other costs associated with a claim in return for an agreed share of any successful return. If there is no recovery, or if the claim is lost, there is nothing to repay. For details, please see www.apexlitigation.com  
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Litigation Finance News
Announcements Commercial

Special Digital Event — Australia: The Evolution of a Litigation Finance Market

On Tuesday, June 15th, 6pm EST, Litigation Finance Journal is hosting a roundtable discussion on the evolution of Litigation Finance in Australia. Topics will include the increasing threat of industry regulation, the Joint Parliamentary Committee’s perspective on litigation funding and class actions, how Australia may serve as a blueprint of sorts for global jurisdictions including the US, UK and EU, and the structural and cultural differences inherent to running a litigation funding firm in Australia.

As followers of the lit fin industry are well aware, Australia is the nation where Litigation Finance was born. The funding industry has come a long way since then… so far, in fact, that there is increased talk of regulation given the massive class actions that are taking place. But will such regulation be fruitful or counterproductive? And what about the many benefits Litigation Finance brings to Australian society, such as increased access to justice and a more robust legal landscape?

Hear from prominent founders and CEOs of major Australian-based litigation funders, including Omni Bridgeway, LCM and CASL, as they discuss the evolution of the Litigation Finance market in Australia, as well as the lessons other jurisdictions such as the US, UK and EU can learn from Australia.

This is a can’t miss digital event!

  • When: Tuesday, June 15h, 6pm EST (Wednesday June 16th, 8am Sydney time).
  • What: Panel discussion and Q&A with attendees. Audio-only event.
  • Who: CEOs and Founders from three major Australian litigation funders (LCM, Omni Bridgeway, and CASL).   

This 1hr and 15min event will be recorded, and all ticket holders will receive a recording of the event. So if you can’t make the time, you can still access the conference! The event will be moderated by Ed Truant of Slingshot Capital. 

For more information and tickets, please visit this link.

We hope you enjoy! – The LFJ Team

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