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Commercial Legal Innovation

LegalPay: India’s First Homegrown LitFin Company

LegalPay bills itself as India's ‘first homegrown litigation finance company.' The business was founded in 2020 by Kundan Shahi, and strives to expand the reach of legal funding as both an alternative asset class and a means to increase access to justice. Financial Express details that LegalPay focuses on cases nearing completion, or in the latter stages. Most funds are raised through large family offices in India. What’s unique about LegalPay is that it broadens the range of investors that can allocate capital into Litigation Finance. Shahi explains that regardless of net worth, anyone can take part in this alternative asset class. Democratizing access via a proprietary tech platform was instantly popular—as the first SPV launched was oversubscribed, then closed in an uncommonly short amount of time. LegalPay is a data-driven, tech-focused funder with a high bar for those seeking funding. Every case must pass a 15-point vetting system via a unique algorithm which ensures that only the most viable reach the legal team. In the short term, LegalPay hopes to create a banking system within the legal industry similar to what’s happening in the Indian agricultural sector.
Commercial

Who is Litigation Funding Really For?

When litigation funding began in earnest, funded cases tended to be those against deep pocketed corporations and governments. While Litigation Finance is a boon to justice, it’s also a business, with capital concerns. As such, most funded cases were chosen based on their ROI potential. MONDAQ details that the growth of the litigation funding industry is leading to an expansion of the potential client base. In the last three years, assets held by funders have more than doubled. Investors are flocking to legal funding seeking uncorrelated assets that can generate impressive returns. As new players enter the field, funders are casting a wider net. Rather than funding only large class actions, funders are bankrolling medium and even small cases, individual plaintiffs, and portfolios held by a company, university, or corporation. As opportunities to enter funding agreements increase, cases that were once viewed as too expensive to pursue are more likely to move forward. As a result, small businesses in particular stand to benefit from new funding opportunities. With the evolution of the industry in full swing, it's likely the client base will expand even further to encompass a wider range of potential claimants.
Announcements Case Developments Commercial

Operator of Great Northern, Southern, Gatwick Express and Thameslink to face legal claim worth up to £73m as over 3 million consumers are overcharged for London train fares

A legal claim seeking compensation worth up to £73m for routine overcharging on train tickets affecting an estimated 3.2 million passengers has been filed against the operator of one of Britain’s busiest commuter railway networks.

The collective claim against Govia Thameslink Railway (“GTR”) – the operator of the Great Northern, Southern, Gatwick Express and Thameslink lines - was filed on Wednesday 24th November with London’s specialist competition court, the Competition Appeal Tribunal (the “Tribunal”).

It was filed by Mr Justin Gutmann, a consumer rail campaigner who last month secured the landmark legal approval to bring to trial collective actions seeking compensation worth up to £93 million against two other rail operators, the South Western and Southeastern rail franchises, over the same issue.

The claim revolves around the lack of access to so-called ‘boundary fares’ – where travellers holding a London Travelcard should be offered discounted tickets taking them from the boundary of any zone covered by the card to their destination.

GTR is alleged to have not made ‘boundary fares’ sufficiently available for Travelcard holders to purchase, nor making passengers aware of their existence. The rail company’s failure has left customers with little option but to buy a higher fare than was necessary because their travelcard already entitled them to travel part of their journey. It is calculated that 240 million journeys since November 2015 could have benefited from boundary fares if travellers had been aware of them.

This is a breach of the UK’s competition rules (s.18 of the Competition Act 1998) and an abuse by GTR of its market powers. Great Northern serves destinations including Cambridge, Peterborough, King’s Lynn and Ely while Thameslink is a key commuter line to central London linking Brighton, St Albans, Bedford, East Grinstead and Luton Airport. Southern serves destinations including Brighton, Hastings, Portsmouth, Southampton, Eastbourne and Milton Keynes.

The claim is thought to affect an estimated 3.2 million passengers who held travelcards and used GTR services since November 2015.  The abuse is ongoing despite GTR also being the parent company of Southeastern.

Mr Gutmann, formerly of Citizens’ Advice, said: “This claim is the latest step in my campaign to stamp out routine overcharging of millions of passengers by some of Britain’s top rail operators. The failure of these companies to make Boundary Fares more freely available is scandalous and has been going on for years. It’s a practice that needs to stop – and passengers who have overpaid deserve compensation.”

What is the claim about? What are boundary fares?

Boundary fares allow passengers who own a Travelcard to travel beyond the zones it covers without doubling up on payment. Independent research has demonstrated that such fares are not readily available online or over the telephone and are rarely offered at ticket counters unless expressly requested. This practice is an abuse of the company’s dominant position and in breach of UK competition laws.

Who is eligible?

Passengers who owned a Travelcard at any time from 1 October 2015 and also purchased a rail fare from a station within the zones of their Travelcard to a destination outside those zones may be eligible for compensation under the Consumer Rights Act 2015 (“2015 Act”). This allows for a collective claim to be brought on behalf of a group of individuals who are alleged to have suffered a common loss. As a result of the 2015 Act, groups of persons who have all lost out do not need to bring an individual claim to bring compensation for their loss. Instead, these consumers may all receive compensation through a single, collective claim brought on their behalf by Mr Gutmann.

Affected passengers will not have to pay any legal costs to participate in the claim and do not need to do anything at this stage to be included in it.

What next?

The Competition Appeal Tribunal will now determine whether or not Mr Gutmann’s claim is allowed to proceed. Anyone who would like to receive further information about the claim, can visit the claim website, www.BoundaryFares.com, to sign up for updates.

Justin Gutmann represents the passengers bringing this legal case against Govia Thameslink Railway Ltd. Mr Gutmann has a wealth of experience working in the consumer rights sphere and he has strong expertise in the transport sector. He has spent a large part of his professional life dedicated to consumer welfare, public policy and market research, and he was recently approved as class representative in similar cases against the South Eastern and South Western rail franchises.

Mr Gutmann’s final job was Head of Research and Insight at Citizens Advice. He spent eight years working for London Underground. Mr Gutmann is represented by Charles Lyndon Limited and Hausfeld. His claim is funded by Woodsford, a global ESG and litigation funding specialist.

Commercial Regulatory Issues

Vultures in Litigation Funding—The Exception, Not the Rule

As litigation funding grows in popularity and legislation struggles to keep up—much attention is drawn to the outliers who fill funding opponents with fear. Unscrupulous funders get plenty of press coverage, further clouding already contentious issues. The FCPA Blog explains that multiple funders are currently facing civil suits for theft, fraud, and basically twisting the funding model into a dishonest profit center that harms clients and investors alike. Scams like double-promising shares of awards, or outright theft of funds make the entire concept of third-party funding seem suspect. It also adds fuel to the fires of those who want to over-regulate, or even curtail the practice altogether. These fraudsters aren’t just harming the Litigation Finance industry. They’re impeding access to justice, which is an essential component of legal funding. Ordinary people wronged or cheated by corporations, governments, or industry norms rarely are able to see their day in court. But litigation funding allows individuals and groups to have proper legal representation so cases can be adjudicated on a more level playing field. Thus far, funders have largely self-regulated. Ensuring that the unscrupulous are held accountable for misdeeds may become more important than ever in order to maintain integrity across the industry.
Announcements Commercial People Moves

Delta Capital Partners Management Welcomes Michael Callahan as Chief Operating Officer

Delta Capital Partners Management LLC, a global private equity firm specializing in litigation and legal finance, has announced the hiring of new senior executive Michael Callahan.

Mr. Callahan joins Delta as its Chief Operating Officer, where he will execute the firm’s strategic and tactical plans worldwide; lead investor relations; and oversee the implementation of new business initiatives, product development, and office openings.

Prior to joining Delta, Mr. Callahan worked at Boston Capital for 28 years, where he was a Senior Vice President and the Director of Asset Management. At Boston Capital, Mr. Callahan was responsible for a team of over 60 professionals monitoring and reporting on the performance of Boston Capital’s $7.7 billion portfolio, including both lower tier asset management and upper tier investor relations functions.  Mr. Callahan also led the team at Boston Capital that developed a proprietary asset management and reporting platform which was utilized throughout the company.

Christopher DeLise, Delta’s Founder, CEO and CO-CIO, stated, “We are very pleased to welcome Michael to the Delta team, where his extensive experience in asset management, investor relations, and investment company operations will be invaluable as Delta continues its global expansion and further enhances the firm’s strong position within the litigation and legal finance industry.”

Consumer

What’s in the New York Consumer Litigation Funding Act?

Litigation Finance has grown exponentially in recent years, with legislation trying to catch up. Opponents of the practice warn of frivolous litigation and usurious lending rates—owing to involvement from venture capitalists and other high-end investors. A recent New York Post editorial demanded increased oversight and new legislation governing the practice. National Law Review details that over nearly two decades, the litigation funding industry has evolved into a powerhouse force. It has created dynamics and partnerships that didn’t exist before, giving rise to a host of knotty concerns that must be untangled for the industry to gain mainstream acceptance and appeal. Several US states have adopted regulations that are already in place in some global jurisdictions. These new rules may place caps on the rates funders can charge, or mandate that funding agreements require specific types of disclosure or court approval. A new bill introduced before the New York State legislature, the New York Consumer Litigation Funding Act, includes an array of provisions. These include:
  • Communications with funders are protected under attorney-client privilege and work product rules.
  • Funders will not exercise control or decision-making over the cases they fund.
  • Referral fees to plaintiff lawyers are disallowed.
  • Third-party funding entities must register and post a bond.
  • Maximum annual interest rate will not exceed 36%.
  • Prepayment of the advance without penalty.
  • Funding agreements must disclose exact terms, in plain language, including the maximum possible amount the consumer will pay.
While these seem straightforward, some provisions here do not take all relevant factors into account. Fee and interest caps, for example, don’t consider that funders are taking 100% of the financial risk in a case. Still, it’s largely agreed that some formal regulation is necessary, and this bill may serve as a first step. 
Commercial Regulatory Issues

Class Action Reform Spurs Intense Response from Funders

The Australian government’s bid to reform class actions, and by extension third-party litigation funders, is nearing its climax. A parliamentary committee assembled to examine the bill has expressed support. A key argument in favor of increased legislation is that funders ostensibly make profits that are out of proportion to the risk taken and the costs incurred. Australian Financial Review explains that while this may seem reasonable on its face, the new legislation failed to consider some vital aspects of funding and class actions. The haste inherent in the consultation process seems unnecessary, even suspicious. Non-government members of the committee had less than one day to read and respond to the 68-page report. The report is expected to be put before the chamber for debate. The response from the Labor and Green parties, who have combined their efforts to block the bill, suggests concerns about the constitutionality of the bill. Legal firm Phi Finney McDonald was quoted in the report from the Labor party, describing the government’s efforts to paint this reform bill as a consumer protection win as “Orwellian gaslighting.” The fate of the bill seems to rest on a a few swing votes, including Stirling Griff, Jacqui Lambie, Pauline Hanson, and Rex Patrick. Patrick has already stated that his position is emphatically in support of access to justice. As such, he is unlikely to support the bill. The Green party also submitted a dissenting report, which claims the bill is designed to attack the business model of litigation funders in order to lower the number of class actions. Greens insist that the intention of the new bill is to protect the wealthy and empowered, while reducing the ways in which ordinary people can access justice. Aside from the ethical aspects, there are numerous questions of the constitutionality of the bill. If it is passed, there would likely be a spate of litigation to parse constitutional questions—which most believe is a poor solution to an already complex issue.
Consumer

The Impact of Small Verdicts and Settlements on the Trucking Industry

After last year’s report on nuclear verdicts in trucking cases, the American Transportation Research Institute has released a new study—this time examining the impact of small verdicts and settlements on the trucking industry. In it, it’s suggested that smaller verdicts may be causing a spike in insurance prices. Landline Media details that the report points to an increasingly litigious society spurred on by the relatively new practice of Litigation Finance. By describing funders and the lawyers who work with them as ‘collecting small awards as part of a booming business,’ the ATRI tips their hand as being anti-funding. Third-party legal funding allows those who have been harmed by a big company to have their day in court. That’s a net benefit, regardless of a rise in insurance rates. ATRI’s report suggests that it’s not so much ‘nuclear verdicts’ driving insurance premiums, but the sheer volume of smaller payouts. The report also refers to “settlement mills,” which may sound nefarious, but simply refer to a small efficient firm making short work of viable claims. It cannot be denied that litigation funding leads to an increase in lawsuits. That’s because many people with valid claims lack the financial resources to pursue them. The ATRI seems to suggest that addressing the inaccessibility of justice is less important than insurance rates, even as it affirms that the majority of reported claims never see a courtroom. With regard to verdicts versus settlements, the report suggests that settlements tend to include higher payouts. Further, more severe injuries increase the likelihood of settlements. In terms of cost, verdicts have a much higher overall legal spend than settlements. Ultimately, the best way to keep insurance premiums low is to be above reproach—not to impede injured parties seeking justice.
Case Developments Commercial

Tinder Founder Alleges He Was Misled About App’s Value

As difficult as it might be to imagine someone being misled by a Tinder communique, Sean Rad, a co-founder of the app, alleges that’s exactly what happened. Last week, Rad testified that Match Group (which also owns Hinge, OKCupid, and PlentyOfFish) undervalued Tinder by billions. PoliticSay reports that Match valued Tinder at about $3 billion. This figure was accurate two years earlier, but since that time, revenues increased fourfold. Rad alleges that Match “intentionally cooked the books” in order to lowball the founders on their purchase. According to Rad, the proper value of Tinder was at least $13.2 billion. An already complicated legal proceeding is being further clouded by allegations of conflicts of interest. One witness, Jonathan Badeen, had to drop out of the suit as a plaintiff due to an arbitration agreement. Attorneys for Match seized on this, attempting to paint the agreement as a conflict, saying Badeen’s agreement entitles him to a large (but undisclosed) payment if the case is concluded in Rad’s favor. Two other witnesses, former Tinder execs Rosette Pambakian and James Kim, also have deals with litigation funders. They say the money is not in exchange for testimony, and that the deal was necessary to make up for income lost when they joined the lawsuit. While the judge is allowing witnesses with funding agreements to testify, the defense may raise the issue during trial. More recently, Rad’s lawyers took issue with a juror who repeatedly arrived in court with a copy of the New York Post. Jurors are not allowed to view outside media during trials. Greg Blatt, who set the value of Tinder in advance of the sale, continues his testimony this week.
Announcements Consumer

LawCash®, Momentum Funding®, and Ardec Funding Will Merge to Form Cartiga — Push the Legal Tech and Financial Industry Forward

LawCash, Momentum Funding, and Ardec Funding, three companies that have pioneered the legal financial services industry for over 20 years, announced their new unified brand, Cartiga. Cartiga's focus is providing three primary legal services: plaintiff funding, attorney working capital, and risk management technology. Its mission is to map the way to a better future with fair and innovative solutions that help law firms and their clients navigate challenges, identify opportunities, and optimize litigation outcomes. "By combining these three industry leaders, our goal is to create a transformative organization that will drive change and innovation in the legal services industry through technology and personal connection," says Cartiga CEO Charlie Platt. "Aligned now with a common vision and data-first technology strategy, Cartiga will continue to provide for the financial needs of law firms and plaintiffs across the nation while charting a new path for the litigation industry." Cartiga's name reflects a long history of cartographers who have helped travelers and explorers find their way across challenging and often uncharted terrain through the practice of making maps. It represents the company's vision to enable better decisions by providing more insightful direction for legal industry stakeholders by utilizing technology and data. Cartiga aims to pioneer the next generation of legal services through strategic partnerships and industry-leading resources to help attorneys and law firms improve their businesses and better assess risk. About Cartiga
Cartiga combines deep legal experience and expertise to provide industry-leading products for plaintiff and attorney funding, as well as data-driven solutions that help law firms build stronger, more profitable businesses. Learn more at Cartiga.com.
Commercial

Insights on the Healthcare Industry from the 2012 Legal Asset Report

Perhaps more than any other industry, healthcare companies have scrambled to keep up with the changes brought about by COVID-19. Now that some of the changes made are destined to stay, healthcare companies are taking steps to further innovation. Burford Capital reports that according to Deloitte’s Healthcare Outlook for this year, doctors are prioritizing preventative care over treating conditions as they arise. Virtual appointments and more readily available data sharing and analytics are increasingly utilized to great effect, and collaborations in developing immunizations and other therapeutics appear to be an integral part of this newer, more modern medical landscape. Litigation relating to COVID, IP relating to pharma patents, opioid litigation, and other business challenges leave some companies under pressure and seeking solutions. Pandemic-related disruptions have manifested differently across the industry, as revenue was lost when elective care was put off or canceled altogether. This might be good news for some insurers, while others are building affirmative recovery programs—putting insurers in a position to pursue litigation as a plaintiff. How else are healthcare companies managing corporate litigation assets?
  • Increased affirmative recoveries are increasingly popular because they work. Employing third-party portfolio legal funding allows companies to pursue meritorious cases with a minimum of financial risk.
  • Adding value and controlling costs should both be included in the commercial targets for healthcare companies. A lack of knowledge or a failure to understand how to apply quantitative analysis to litigation assets can lead to missed opportunities to create increased value.
  • When financial departments and legal teams work together, the results can be significant. Developing commercial targets as well as employing better cost control can lead to increased opportunities to generate revenue.
Commercial Regulatory Issues

Key Points from the Global Class Actions Symposium

ICLG's Global Class action Symposium discussed the dynamic and evolving issues surrounding class actions and litigation funding. One takeaway is clear: attitudes about class actions and their funding are evolving with the industries themselves. Growing pains and a constant stream of regulatory changes point to new opportunities for claimants seeking compensation, and the lawyers and funders who serve them. ICLG.com details the increased popularity of a belief in class actions as a means to improve access to justice. Class actions can be a boon to average people who have been harmed by a government, utility, or big business they could never hope to take on alone. Experts from Harbour Litigation Funding and Berger Montague agree that while government regulation may serve to keep businesses honest—there are no provisions that address the losses experienced by those who have been wronged. In the end, governments will simply not be as motivated to seek recompense for claimants, even in large numbers. As laws change and precedents are set, businesses increasingly take steps to identify and address potential class actions before they become realities. The recent ruling in Lloyd v Google illustrates that even mundane choices like the precise subsection of law being referenced can make or break a case involving millions of claimants. Another theme discussed was the uneven maturity of class actions from one jurisdiction to the next. Australia has long enjoyed an amply regulated regime for class actions, while other parts of the world still struggle to set up a legal framework governing class action cases. Jurisdictional issues can complicate class actions, especially regarding securities, damages, and the overlapping legal constraints of cross-border litigation. Finally, ESG class actions are a growing focus. These actions focus on environmental, social, and governmental issues that can cover everything from corporate malfeasance to climate change.
Commercial Deals

US PE Investors to Buy UK Law Firm in the Coming Year

It’s predicted that several sizable UK law firms will find themselves in the hands of private equity investors in 2022. These investors will likely focus on large firms that are utilizing damages-based agreements (DBAs). Legal Futures explains that some firms, such as Rosenblatt, are expecting returns of 4-5 times the amount invested in various DBA cases. Regulations governing DBA cases led to many firms deciding not to utilize the practice. Steve Din, founder of Doorway Capital, details that legal professionals are increasingly investigating DBAs as an exciting new way to fund litigation. Din claims that investors aren’t interested in any specific firm or case. Rather, investors want to invest in large law firms. According to Andrew Leaitherland, former CEO of DWF and founder of Arch.law, US private equity funds will flock to UK-based firms, and create value the same way others have done with portfolio investments. One benefit of private equity investment is that investors can look at many different models and apply only the ones that already work. ScaleUp, a UK private equity firm, took a 35% stake in Keystone Law—and has successfully achieved a return on investment of 11x. There’s every reason to believe the financial sector will increase its investments in funding entities and legal firms going forward.
Announcements Commercial People Moves

Woodsford announces further international expansion, with a number of key strategic hires

Woodsford, the global litigation finance and ESG business, has announced further expansion with the appointment of Hon. Michael Barker QC to its Investment Advisory Panel and Deborah Mazer, Hugh Tait, Diane Chisomu and Oscar Moore to its global executive team.

Michael Barker was a Judge of the Supreme Court of Western Australia from 2002 – 2009 and the President of the State Administrative Tribunal of Western Australia from its foundation in 2005 until 2009. From 2009 – 2019, he was a Judge of the Federal Court of Australia.

Deborah Mazer is a U.S. lawyer and former litigator with a broad range of trial and appellate experience.  Her expertise includes complex commercial, bankruptcy, mass tort, securities, tax controversy, and IP litigation. Before joining Woodsford as an Investment Officer, Deborah worked at Davis Polk & Wardwell in New York. She is a graduate of Yale Law School.

Hugh Tait is an Australian qualified lawyer who has worked on a diverse range of complex, large-scale disputes, including class/collective actions in both Australia and England. Before joining Woodsford as an Investment Officer, Hugh was employed at Hausfeld in London, and before coming to England, was employed at one of Australia’s leading law firms, HWL Ebsworth.

Diane Chisomu and Oscar Moore have both joined Woodsford’s London team as Junior Investment Associates.

“From our foundation as a third party funder that helps level the playing field in David v Goliath litigation, Woodsford has grown into a successful ESG business, holding major corporates to account when wrongdoing occurs.  Whether it is helping consumers achieve collective redress, ensuring that inventors are properly compensated when Big Tech infringes intellectual property rights, or helping shareholders in escalated engagement with listed companies, our team is committed to access to justice. These exceptional appointments will help support continued growth in our key international markets.” said Steven Friel, Woodsford’s CEO.

Michael Barker commented, “I’m excited to have joined a flourishing business that has ambitious future plans, particularly in Australia, my home turf. I hope my expertise will facilitate further growth both here and beyond.”

About Woodsford  

Founded in 2010 and with a presence in London, New York, Philadelphia, Minneapolis, Toronto, Singapore, Brisbane and Tel Aviv, Woodsford’s team blends extensive business experience with world-class legal expertise.

Woodsford is a founder member of both the International Legal Finance Association (ILFA) and the Association of Litigation Funders of England & Wales (ALF). Woodsford’s Chief Operating Officer, Jonathan Barnes, sits on the board of both organisations.

Woodsford is continuing to grow, and we welcome approaches from experienced litigation lawyers and other professionals who are interested in joining our team.

Interviews, photos and biographies available on request.

Case Developments Commercial

Lloyd v. Google – What Have We Learned?

A Supreme Court decision was handed down in the Lloyd v Google appeal. And Google has a lot to be celebrating. In short, the question at hand was whether damages could be sought in a collective action over “loss of control over data,” without specifically listing the monetary or punitive damages of each individual claimant. Requiring individual loss statements from every claimant in a case impacting millions seems untenable. What happened here? Omni Bridgeway explains that the issue being decided is less about the individual damages and more about the type of claim filed. In the case, Lloyd, believing Goggle had secretly tracked millions of users’ internet activity. This was allegedly done without consent and for commercial purposes. Lloyd asserted a breach of section 13 of the Data Protection Act—which required evidence of damages. Lloyd argued that it was acceptable to ask for the same damages for all claimants without showing the particular losses of individual claimants. The Court of Appeal called this a “lowest common denominator” approach, saying some claimants would not recoup their full damages if such a pragmatic approach was taken. Lord Leggatt made several clear points in his decision, all suggesting that the representative claim was not the best way to pursue damages. First is the opt-out nature of the representative route when the group litigation order is better equipped for opt-in claims. Next, because the claims were of low value individually, it wouldn’t work to seek a declaration before moving forward to the quantum stage. Finally, it’s just not realistic to expect courts, attorneys, or funders to pursue loss declarations from millions of potential claimants. Obviously, it makes more sense to deal with a single representative. What we see here is clear evidence of the need to demonstrate damages in a misuse of data case.
Commercial Deals

Hedge Funds Continue to Be Major Investors in Legal Funding

We already know that litigation funding is growing by leaps and bounds. This industry is a little over a decade old, and by 2019, had become a global industry worth nearly $40 billion. As the reach of funding grows, more businesses are learning the ways in which legal funding can monetize existing litigation assets while sharing risk. Bloomberg Law explains that the non-recourse nature of litigation funding leads to funders exercising exceptional due diligence when vetting cases for potential funding agreements. Even with some firms turning away 90% of funding applicants, industry growth has not slowed. One Australian funder, Omni Bridgeway, estimates that the addressable market for legal funding is $100 billion globally. The potential for large awards is one of the main factors attracting hedge funds to Litigation Finance as an alternative investment. Profits for funders can take months or even years to realize. But when everything goes according to plan, the results are significant. Burford Capital funded the divorce case of the Ahkmedovs, a Russian oil family. Ultimately, Burford made a return of $103 million after a settlement.   Hedge funds aren’t the only ones investing in legal funding. College endowments and sovereign wealth funds are getting in on the action. Litigation funding investment is also attractive for ESG investors, since the main byproduct of funding is increased access to justice—particularly for those who can least afford it. Additionally, the uncorrelated nature of funding means it’s protected from the fluctuations of the market. This makes it an excellent way to diversify an investment portfolio—which has been more important than ever in the wake of COVID. All that said, Litigation Finance is fraught with risk and unpredictable timelines. Understanding those risks before investing is essential.
Commercial Regulatory Issues

Do Undisclosed Funding Agreements Imperil the Justice System?

All eyes are on Bank of America Corp v Fund Liquidation Holdings LLC, because of the issues the case is bringing before SCOTUS. In this instance, an upcoming decision has led the US Chamber of Commerce to lament the oft-repeated (but unproven) assertion that the American justice system simply cannot withstand undisclosed funding agreements. Reuters details that in an amicus brief, SCOTUS was advised that the 2nd Circuit Court of Appeals was inviting untoward conduct by litigation funders when it approved Fund Liquidation Holdings to become a plaintiff in a rate-manipulation class action in a case against international banks. But did they? The hedge funds who filed the case have since dissolved, giving their litigation rights to Fund Liquidation Holdings. This was not spelled out in the initial class action filing. Later, it was learned that Fund Liquidation Holdings was the real plaintiff, and had been controlling litigation from the outset. The judge ruled that Fund Liquidation Holdings did not have standing to sue, thus nullifying the class action. A subsequent appeal found that the initial filing need not end the class action, because Fund Liquidation Holding did have a constitutional claim when the case was filed and revealed themselves in time to assert that claim. The appeals court determined that there was no reason to spend on filing a new complaint due to what it deemed a ‘technical error’ in the filing. The banks have petitioned for SCOTUS review, referencing a 2002 decision in Zurich Insurance Co vs Logitrans Inc. In it, a case was nullified due to a mistakenly filed subrogation suit. The 6th Circuit Court found that they could not swap in the insurer as a plaintiff. The 2nd Circuit court denied that this approach would not result in unscrupulous conduct by funders. The Chamber of Commerce does not agree.
Commercial Deals

GLS Capital to Launch Patent Licensing Subsidiary: Celerity IP

Legal funder GLS Capital has announced plans to finance a licensing and enforcement campaign for patents owned by Asustek Computer Inc. The patents are related to cellular networks—specifically 3G, 4G, and 5G tech. Bloomberg Law details that the patents in question are owned by Asus and Innovative Sonic Ltd, which was developed in 2006 as a trust company to hold patent assets. While the exact terms are undisclosed, GLS Capital has a financial stake in the patent enforcement campaign and will receive a portion of the award if successful. GLS Capital is run by three former employees of funding giant Burford Capital. Patent disputes are particularly attractive to funders because of the potential for very high awards—sometimes 2-3 times their initial investment. At the same time, the non-recourse nature of litigation funding means that funders take on significant risk. This arrangement demonstrates the maturation of legal funding as an industry, and illustrates a growing acceptance in the global market.
Commercial

Manolete Points to COVID as Cause of Dismal Profits

Typically, a business focused on the insolvency sector can expect to be busy. During COVID, insolvencies were predicted to skyrocket. But as governments stepped in to alleviate financial peril for businesses, those counting on insolvency to keep their own businesses afloat were left wanting. Law Gazette details that according to Manolete Partners, firm revenues were down over the last six-month period. Unadjusted operating profits were down by 52%, to GBP 3.2 million. Total revenues represented a 15% increase over the previous six-month period—but are 46% lower than the same period last year. It is perhaps ironic that during a pandemic in which so many businesses shut down, a litigation funder focused on insolvencies experienced such a marked drop off in revenue.
Commercial Deals

Insights on the Transportation Sector

The transportation sector is notoriously litigious, complex, and vital to the global marketplace. The complexities of contracts, regulation, and the constant evolution of the industry can result in expensive disputes carrying high levels of risk. What’s more—these disputes are likely to be cross-border. Burford Capital shares key takeaways from its 2021 Legal Asset Report, which includes a snapshot of the industry as it stands now. First and foremost, the report shows that only 40% of CFOs have robust affirmative recovery programs. That’s a shame, since affirmative recovery can increase profits without a monetary outlay with third-party legal finance. Portfolio funding creates an influx of cash on assets that were sitting dormant—with the potential of more to come later when/if awards are realized. Like many companies, transportation-focused entities would likely benefit from increased collaboration between their legal departments and CFOs. Determining whether litigation assets should be pursued is something to be considered on both a legal and financial level. Currently, fewer than half of transport CFOs have substantial influence in their company’s legal department. This may be why so many litigation assets in the transportation field go unrealized. When calculating risk in litigation, it’s crucial to include duration risk. The more complex a dispute is, the longer it can take to resolve. Legal finance can address this risk by allowing third parties to take on duration risk while the company receives an influx of cash on a predictable schedule. The non-recourse nature of funding means the company pays nothing unless a case is successful.
Commercial Special Features

Key Takeaways from LFJ’s Special Digital Event: Innovations in Litigation Funding

On Wednesday, November 10th, Litigation Finance Journal hosted a special digital conference titled Innovations in Litigation Funding. The event featured a panel discussion on disruptive technologies within Litigation Finance, including blockchain, AI and crowdfunding platforms. Panelists included Curtis Smolar (CS), General Counsel of Legalist, David Kay (DK), Executive Chairman and Chief Investment Officer of Liti Capital, Cormac Leech (CL), CEO of AxiaFunder, and Noah Axler (NA) Co-founder and CEO of LawCoin. The panel was moderated by Stephen Embry (SE), founder of Legal Tech blog TechLaw Crossroads.  Below are some key takeaways from the panel discussion: SE: All of you seem to have an interest in taking litigation funding out of the back rooms and making it more mainstream so that anyone can invest. I want to ask each of you to briefly explain your specific approaches in trying to accomplish this goal. CS: Basically, what Legalist does, is we use artificial intelligence and machine learning to reduce the potential for adverse selection and hazards that may exist in the Litigation Finance field. By reaching out to those who have valuable claims, we’re able to select the cases we want, versus simply having cases presented to us and sold to us. This has been extremely valuable to us, as we get to really pick the best cases based on criteria that we are selecting. DK: I think we’re getting pretty close to it already being in the mainstream. I think adoption has grown a lot over the last ten years. In terms of moving it forward, our view on it at Liti Capital is that we are trying to democratize the availability of Litigation Finance both from the people who finance it and the people who have access to it. CL: What I really see AxiaFunder doing is connecting investors with a new asset class, and at the same time, providing claimants with a new source of flexible funding. AxiaFunder in a nutshell is a funding platform that connects investors with carefully vetted litigation investment opportunities on a case by case basis. The capital is put to work immediately, and then when the case (hopefully) resolves positively, we return the capital with a return. So there’s little or no cash drag. We see it as an obvious win-win. NA: What we’re seeking to do is open Litigation Finance, like some of the other folks on the panel, beyond the institutional space into individual accredited investors and also to retail investors. The additional value add we have, is that we fractionalize the investments as digital assets, or what are sometimes called tokens, using the Ethereum blockchain. We think ultimately that by doing that, we can bring liquidity to the Litigation Finance space and beyond Litigation Finance as well. We’re not the only ones securing this in the private security space. SE: One of the questions we often see with cryptocurrency, whether it’s right or wrong, is that it’s used to hide who is paying what to whom. How does that concept square with the growing concern of many investors (and to some extent, the judiciary) about transparency in terms of funding agreements and the identity of funders? DK: I think the key here is consistency, which is to say ‘who is the funder?’ and I think that’s an important distinction that gets a short shrift from a lot of these discussions. To put it another way, if Liti Capital is the funder, then it’s obviously very important to know who Liti Capital is, and who are any majority or control holders within Liti Capital. And we, like other companies on the blockchain, are still required to do KYC and other rules with our investors to ensure that we’re compliant with domestic and international law. So I think that piece is much ado about nothing. But what I will add, is that I do think litigation funders should be held to the same standard as companies, and whether or not an arbitrator has an investment in our company is important to know, or a decision maker has an investment in our company is important to know. And disclosures in the same way that’s required in US Federal Court makes perfect sense. This is not a new issue. I think where we fall prey to the people that are against litigation funding...we’re falling prey to this argument that somehow everything and everyone must be known—or it’s evil. Access to justice is not evil. Being able to compete with people with large amounts of capital is not evil. NA: I second a lot of the things David said. At LawCoin, we’re selling securities. We’re very upfront about that. That’s a hot button issue in crypto, whether or not a particular token is a security. We have a separate white list that exists off of the blockchain, which might in some cryptocurrency circles lead to criticism that we’re not a decentralized operation in the way that a lot of cryptocurrency evangelists argue that cryptocurrency is most suited for. We embrace the obligations that go with issuing securities, so as a result...there’s no issue with respect to our platform with having anonymous investors that haven’t gone through a KYCAML process. SE: Given the volatility of cryptocurrencies that we’ve all seen...how do you mitigate against a severe price drop or price increase, and what do you tell investors in that regard? DK: How does Blackstone or Apollo mitigate against market crashes or change in the underlying value of their equity? Volatility and movement in price just exist—in terms of value of the corporation. In terms of funding the cases, we’re not funding cases in Bitcoin or Ethereum. We’re not a cryptocurrency, we’re a company that’s listed on the blockchain. Our token trades on the blockchain, but our token represents the underlying equity of the company. The money that we raise, 90% of it is dollars, some small percent is in Ethereum, but...our expenses are paid in dollars, we raise money in dollars, our revenue comes in dollars. There is some currency risk in anything we would keep in Ethereum, but we manage it. ... You really just have to be aware and manage the fact that you’re operating in two currencies. SE: Given the way litigation sometimes drags on, especially in the US, given the unexpected twists and turns—what happens when you have to go back to your investor pool and say, ‘we need some more money?’ How do you manage that and how are the terms structured? CL: There are two aspects to it. First of all, before we actually issue a claim, there’s no adverse cost risk for the claimants or our investors. But once you issue the claim, you potentially have adverse costs risk for the claimants. If the claimants can’t pay, our investors could potentially be liable for the adverse costs risk, which we’re obviously not comfortable with. Before we will fund a case where the claim is going to be issued, we basically get a cost budget through trial, and make sure we have enough money to see the case through to the end of trial. Having said that, the cost-budget is always an estimate. So sometimes you need to come back and get more capital from investors. Litigation Finance Journal produces numerous digital events throughout the year. Please subscribe to our free weekly newsletter to stay informed about future events. 
Commercial Deals

Talking IP at the 2021 LitFin Dealmakers Forum

This year’s LF Dealmakers Forum was a hybrid conference, combining in-person guests and speakers with virtual ones. It was a balancing act between providing a normal and engaging experience, presenting high-quality content, and keeping pandemic safety rules firmly in mind. Above the Law details that the forum was a smashing success, and suggests that there were three main takeaways about IP and its relationship to Litigation Finance. First, funders are in control of enormous cash reserves. Many are actively seeking cases or portfolios to invest in. Patent and IP disputes continue to be lucrative and popular areas for funder investment. Often, businesses or researchers don’t follow up on complicated IP litigation due to the time, expense, and uncertainty involved. But with legal funding—such cases become opportunities for sizable payouts. At the same time, diversification remains as important as ever. Next, as the litigation funding industry grows more mainstream, funders have adapted to an array of new situations. In the industry's early days, funding was for class action cases or David v Goliath situations. While that’s still an important part of funding, the industry can now engage in insolvency matters, award enforcement and portfolio funding, as well as help businesses monetize existing legal assets. There’s every expectation that the industry will continue to develop new ways to expand access to justice. Third, the increasing number of players in the litigation funding space creates a need for IP-focused legal teams to stay current on what’s happening. As funders develop specialties and relationships with other legal entities, knowing how to find the right funder for one's specific situation is more important—and potentially more difficult—than ever before. It’s been suggested that the IP community do their own diligence regarding funders. As funders learn more about the IP industry to better serve those customers, so should the IP industry study up on the funding opportunities that exist.
Case Developments Commercial

Supreme Court Rules Data Claim Against Google “Doomed to Fail”

This week, the Supreme Court blocked a data protection claim against tech giant Google—saying that the case was doomed to failure. The court unanimously affirmed the appeal from Google. Law Society Gazette details that in Lloyd v Google, the Supreme Court was asked to overturn an earlier ruling from the Court of Appeal—which held that a representative for millions of iPhone users in England and Wales could file their case outside of the jurisdiction. The High Court disallowed the out-of-jurisdiction filing, though the Court of Appeal reversed this decision the following year. Richard Lloyd began proceedings in 2017 on behalf of anyone impacted by the ‘Safari workaround’ that was in use from August of 2011 through February 2012. Lloyd has said that the recent ruling sets the bar unreasonably high for damages in data rights cases. Lloyd still believes other claims will come forward. The Supreme Court held that damages for any breaches of the Data Protection Act 1998 (section 13) can only be claimed when the alleged breach resulted in material damage or distress to the claimant. Lord Leggatt stated that section 13 can’t reasonably give an individual right to compensation without proof of material damage. This interpretation led the judge to suggest that the claim has no chance of winning because it was framed as a collective action. Without proof of individual damages, the claims cannot hope to win.
Case Developments Commercial

Affiniti Finance Goes into Administration

Last week, one of the largest third-party litigation funders in the UK was placed into administration. According to a notice in the London Gazette, Affiniti has stopped taking in new business. Law Society Gazette reports that Affiniti has not made a public statement, nor have they responded to requests for comment. It’s not clear how the company will resolve the many large funding agreements currently in place. Affiniti was founded in 2014 and began by funding personal injury cases. Affiniti also has a commercial division that focuses on class actions and large claims for individuals. The administrators include Andrew Hosking, Paul Zalkin, and Sean Bucknall of Quantuma Advisory Limited. In the last month, two other firms have been placed on administration: Pure Legal, and Hampson Hughes—both based in Liverpool.
Commercial Regulatory Issues

Canada Embraces Litigation Funding

Like much of the world, Canada’s legal system can be expensive to access effectively. Even well-off Canadians may not be able to afford to follow up on meritorious claims against powerful defendants. Enter third-party legal funding. This practice affords potential clients the financial support needed to pursue meritorious cases without the risk of incurring a huge legal debt. Above the Law details that the non-recourse nature of litigation funding is a powerful tool for leveling the legal playing field. Commonly associated with class actions, third-party funding has evolved into a resource for individual clients, corporates, and even law firms looking to share risk and reap large rewards. In Canada, litigation funding is being used in insolvency proceedings, IP disputes, award enforcement, and more. Portfolio funding arrangements are increasingly common, allowing risk to be shared across a slate of unrelated legal cases belonging to a single company or firm. Typically, funders receive a percentage of an award or recovery if the litigation is successful. If the litigation fails, the funded party is not obligated to repay the funded amount. The funder, on the other hand, loses their investment. This is why new cases are vetted carefully and why these funder fees are much higher than interest from traditional bank loans. Once laws against champerty and maintenance were set aside in Canada, funding was viewed as a necessary aspect of increasing access to justice. Typically, LFAs (Litigation Funding Agreements) do not need court approval in Canada, though this is a recent development. LFAs are rarely made public except in class actions. The Ontario Superior Court of Justice recently affirmed the public policy benefit of legal funding, particularly for those seeking damages from wealthy corporates. Legal funding in insolvency cases has been a boon to debtors trying to save struggling businesses. Funds can help maintain operations by monetizing existing legal assets, benefiting debtors.
Commercial Regulatory Issues

Anti-Money Laundering Law Could be a Boon to Legal Funders

Until recently, there was a $150,000 cap on the incentive for employees to alert authorities when money laundering occurs. This monetary incentive was only for employees of regulated financial institutions, and was paid at the discretion of the feds. Market Screener explains how the law is changing, and what the impact on Litigation Finance might be. Last year’s Anti-Money Laundering Act was passed as part of the National Defense Authorization Act, and created a program that provides awards to whistleblowers who provide evidence of money laundering activities, even in violation of the Bank Secrecy Act. Thanks to the new act, those who voluntarily provide information to the Dept of Treasury, the Dept of Justice, or to their employer, will be eligible for up to 30% of monetary sanctions above $1 million. The information has to be new to law enforcement, and must result in a recovery of at least $1 million. Why the sizable payments? Workers are likely to face retaliation for whistleblowing, including loss of employment or even blacklisting. Though awards are available, they could take years to materialize—if they ever do. Even counsel for the whistleblowers is subject to risk, which is why such cases are often taken on a contingency basis. Legal funding can help whistleblowers survive financially while they seek new work or await an incentive payout. Non-recourse dispute funding can cover legal fees and other costs associated with whistleblower litigation. In some circumstances, funding can be used for living or work expenses, as whistleblowers wait for claims to be adjudicated. When vetting whistleblower cases for funding, there should be an expected award of at least ten times the requested funding amount. The federal or state case must show government involvement and a strong likelihood of success. Finally, the opposing party must have a demonstrated ability to pay any fines levied.
Announcements Consumer

Experity Ventures Acquires Anchor Fundings

Experity Ventures LLC (EV) the parent company for several technology driven specialty finance business units that are focused on the litigation finance space has acquired 100% of the equity of New York based Anchor Fundings. The financial terms of the transaction were not disclosed. Experity Ventures Founder and Chairman, Joseph Greco commented, "We are pleased to complete the acquisition of Anchor Fundings. We have watched Anchor closely and continue to be impressed with their growth, discipline and approach to the space and are excited to help them continue on their success trajectory as part of our industry-leading platform” Anchor Fundings Founder and CEO, Charlit Bonilla commented, "We are very excited to partner with the Experity Ventures team and platform to continue our growth and outstanding performance. The Experity platform enables us to offer additional services and solutions to our valued clients and partners as well as being able to leverage their innovative technology and efficient capital structure. Anchor Fundings has built a strong brand in the marketplace and we will continue to build momentum and recognition for the Anchor brand under the Experity platform”. Experity CEO, Ryan Silverman added, “Charlit and his team have built an impressive business and the pairing of Anchor inside of Experity is very complementary and strategic. We believe that Anchor is an important ingredient in our plan for continued growth, performance and leadership in the legal funding and finance space”. About Anchor Fundings Anchor Fundings is a New York City based consumer litigation finance firm founded in 2013 by Charlit Bonilla. Anchor provides immediate and value-added liquidity solutions for plaintiffs, attorneys, and healthcare providers. Anchor is differentiated by their experience in workplace accidents which allows them to participate in some of the largest most complex litigation. Since inception, Anchor has become a go-to capital source for plaintiffs, attorneys and medical providers nationwide. About Experity Ventures Experity Ventures, founded in 2019, is the parent company for Nexify Capital and Nexify Solutions, MedSolve Financial Group, ProMed Capital and Thrivest Legal Funding, LLC / dba Thrivest Link. Nexify Capital has entered into several strategic financing and operational partnerships with legal funding companies in the United States. Nexify Solutions develops and markets best in class enterprise and work flow software for the legal funding market place, which is designed to automate pre-settlement funding from intake to decision analytics, to servicing and payoff, while offering full accounting and reporting capabilities. MedSolve and ProMed capital are leading providers of medical receivable funding solutions to healthcare facilities. Thrivest is a direct to market pre-settlement legal funding company that has successfully provided thousands of non-recourse advances to individuals with pending litigation, predominately in personal injury cases. Experity has offices in Philadelphia, New York, Nevada and Florida. For more information on Experity, please visit www.experityventures.com
Consumer

Legal Funder Under Fire for Cash Advances in NFL Concussion Case

Craig Mitnick, a New Jersey lawyer who represented hundreds of NFL players in a concussion settlement, has asked a federal judge to vacate the award to a litigation funder. Balanced Bridge Funding (formerly Thrivest) provided advances to former players while they waited for settlement monies. Mitnick has been ordered by an arbitrator to repay more than $2 million in loans. Legal Newsline details that in his filing, Mitnick claims that Balanced Bridge, along with lawyers at Fox Rothschild, committed ethics violations. However, much of this stance has already been rejected by arbitrators. The Consumer Financial Protection Bureau has long had a bee in its bonnet about Litigation Finance. Recently, the CFPB was instrumental in multiple funding agreements being ruled invalid due to prohibited assignment of benefits. This was reversed in 2019, but other issues came to light. Specifically, that lawyers were encouraging clients to obtain advances on settlements from firms in which they hold financial interests. Mitnick encouraged former NFL players to sue the league over its alleged failure to inform players about the risks of brain injuries. After a consolidation of the lawsuits and a dispute with another firm that entered a fee-sharing arrangement with Mitnick, Fox Rothchild and Mitnick ended their relationship—leaving tens of thousands of dollars unpaid. Despite making $1.9 million in repayments, the amount owed is still over $2 million. Ultimately, Mitnick was ordered to pay Balanced Bridge $2.3 million in back interest, as well as a further $150,000 in fees and expenses. Mitnick’s firm asserted that the contracts couldn’t be enforced, as they were non-recourse in nature. But the agreements stipulated that if the firm defaulted, the creditor may pursue the debtor’s assets to recoup the outlay. These events have been touted as evidence that litigation funders are greedy. In fact, what this case may illustrate, is the importance of standardized contracts and clarity of expectations.
Commercial Legal Innovation

Blockchain Tech Meets Litigation Finance

The concept of blockchain investing is still a mystery to many consumers. To many it sounds complicated, risky, and predicated on guesswork. Blockchain-style investment in third-party legal funding is a new concept, and one that brings with it questions about transparency and disclosure. Law 360 explains how one hemp company, Apothio LLC, launched an ‘initial litigation offering’ to be used in its upcoming federal court battle. The company is suing a California county after the county allegedly destroyed acres of hemp plants—saying that the THC content was above the legal limit. This ILO is listed on the Republic platform, using blockchain technology and standard crowdfunding rules. Litigation tokens are purchased by investors, representing a percentage of interest in any award stemming from the case. Ava Labs' blockchain arm, Avalanche, is hosting the tokens. Litigation Finance is a rapidly growing industry that has demonstrated an unmatched capacity for innovation and adaptation to the needs of those using it. The crowdfunding aspect of the funding means that a new class of small investors can now access the impressive payouts that litigation funding can provide. These investors are generally less savvy and more risk averse. As such, the complexities of third-party legal funding may be untenable for inexperienced investors, but increasing access to this investment type can be a boon to those who take the time to learn the industry. Apothio LLC’s case is currently facing a motion to dismiss. If that motion is successful and the case ends, investors will be refunded 80% of their original investment. What happens when a defendant seeks disclosure regarding who is funding the case? Plenty of questions abound as to whether small blockchain investors could be seen as having influence over funded cases. Issues could also arise after the one-year period ends, in which purchased tokens become tradable. Depending on valuation, tokens could reveal information on a case.
Commercial

How Litigation Finance Can Address the Gender Pay Gap

Most industries report that women are still making less money than men, despite similar job performance. In American law firms, multiple studies affirm that male lawyers make more money than their female counterparts. A partner compensation survey from last year shows that male partners earned 44% more than female partners. Can third-party legal finance help address this? Validity Finance explains that while this 44% number seems discouraging, it’s actually a step up from 2018—when the pay gap was a maddening 53%. The data shows that the pay gap is emphatically not the outcome of women working fewer hours than their male counterparts, nor does it suggest that women are producing inferior work. Studies actually show that women work more efficiently than men, and that they tend to report higher annual billable hours than men. There are many factors that contribute to this, such as mothers choosing a non-equity partnership track, women being less likely to negotiate pay increases, and a dearth of women in leadership roles in their law firms. But many feel that the biggest hurdle to pay equity is origination credit. A study by the National Association of Women Lawyers showed that nearly half of the top 200 law firms do not have a woman in their top ten earners. According to another study, female partners reported only 67% of the origination credits of men. Third-party litigation funding can enable lawyers to offer an array of bespoke alternative fee arrangements. Sharing risk with clients and funders allows firms to take on more cases with less financial risk. It’s been suggested that women are penalized more severely when they take risks that don’t pan out. Litigation funding offers security for women to take those risks, without leaving their firms in a lurch. In short, legal funding is a proactive solution whose time has come.