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Consumer

SPAC Deal Seeks to Conjure Tens of Billions

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

SCOTUS Enforcement Ruling a Boon to CFPB

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

Guaranteed Rate of Return for Aussie Class Actions Rankles Litigation Funders

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

AxiaFunder Opens New Doors for Litigation Investors

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

Liquidators Can Now Assign Examination Powers to Legal Funders

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

Legal Funding Trends: Mergers, Specialization, Evolution

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

Demand for Litigation Finance Rises in India

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

Have Two Recent Rulings Killed the Whistleblower Funding Model?

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

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

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

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

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

Commercial

London Legal System Attracts Super-Rich from Russia and Kazakhstan

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

Insurers Launch Class Action Against Claimants—Yes, Really!

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

UK Funder Fenchurch Legal Joins Mintos

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

ASIC Addresses Concerns of Third-Party Legal Funders

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

Insurers Remain Wary of Third-Party Litigation Funding

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

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

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

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

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

On the Use of Liquidator Documents in Funded Litigation

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

Litigation Funding in the Middle East & North Africa

It’s clear that the COVID pandemic has changed the way we communicate around the globe. Still, international disputes are still happening and need resolution. Third-party litigation funding is becoming an increasingly mainstream practice that addresses new and ongoing issues alike. Omni Bridgeway explains that the practice is gaining acceptance in the MENA region, which includes the middle east and north Africa. Abu Dhabi Global Markets and the Dubai International Financial Centre have embraced legal funding. The current growth in this region is necessitated by the high cost and complex nature of international arbitration, coupled with communication issues caused or exacerbated by COVID. While third-party legal funding is known for increasing access to justice for those who can afford it least, legal firms and corporates also use funding to manage costs and risks, while monetizing assets like IP or pending litigation. For businesses impacted by COVID, non-recourse funding makes a profound difference. Some businesses find that even if a funded case is unsuccessful, they were still better off taking the non-recourse funds and investing their own money back into operations. So far, the MENA region has been slower than expected to embrace third-party funding. This may be due to champerty concerns or misconceptions about the fairness or transparency of funding agreements. In time though, it’s likely that the value of litigation funding will demonstrate itself. This region has several well-established markets for litigation and arbitration. So it’s likely that the practice of third-party litigation funding will only expand—inviting new entrants into the market. With that will likely come new regulation, as it has with Europe, Australia, and the US among others.
Announcements Consumer

Legal-Bay Lawsuit Funding Raises Over $2MM with Joint Venture Partner to Fund Personal Injury Claims

Legal-Bay Pre Settlement Funding reports an expansion to their capital needs now that funding applications are on the rise. The entire legal system had practically ground to a halt due to Covid-19, which caused massive delays in the courts. But now that life is starting to return to normal, backlogged dockets are being addressed. With renewed activity, Legal-Bay is seeing an increase in applications for settlement funding. Chris Janish, CEO of Legal-Bay, commented, "We are pleased to report that with our acquisition of over $2MM in cash and conversion of another $1MM in old notes that we are poised to ring in a new post-Covid era of funding with a $3MM capital base. With courts slowed due to the pandemic, our industry has seen a downturn of funding volume, but Legal-Bay is now positioned to fulfill our origination volume expected over the next few months. Our ultimate goal is secure a minimum of $10MM in new capital to fill our business needs over the next twelve-month period and beyond. We have entered discussions with key institutional groups, and now with the pandemic behind us—as well as an exceptional seven-year track record of settling funding claims—we believe the future looks bright once again." Legal-Bay is a direct funding source and considered one of the best lawsuit funding companies in the industry. Their turnaround time is lightning fast, and their customer service is top notch. They've been in the pre-settlement lawsuit funding business for over a decade, so their experience is extensive. If you would like more information about Legal-Bay, please visit their website HERE or call toll-free at 877.571.0405 for any other questions. Legal-Bay funds all types of lawsuits including commercial litigation, personal injury cases, dog bites, car and truck accidents, medical malpractice, Purdue OxyContin cases, Boy Scouts of America or clergy abuse cases, workplace discrimination, wrongful termination or conviction, and many more.
Commercial

LCM Agrees to Fund Competition Case Against Govia Thameslink Railway

Litigation Capital Management, an AIM-traded firm, announced that it is funding a collective action against Govia Thameslink Railway and its parent companies. Sharecast details that the case asserts that BTR abused its leading position in the rail services market, thereby breaching the Competition Act 1998. Such cases are increasing in the UK, owing to the proliferation of third-party litigation funding. GTR operates in London and the SouthEast of England, operating regional and commuter services. LCM executive vice-chair Nick Rowles-Davies affirmed the company’s commitment to facilitating cases that help the communities they serve.
Commercial

The 2021 Legal Asset Report

Burford Capital recently commissioned a 2021 Legal Asset Report. Compiled by Bauman Research and Consulting, it surveyed 378 senior financial officers of large companies in Australia, the US, and the UK. Burford Capital explains that many companies are looking at their legal assets in a new way. Some companies know that they’re sitting on high-value legal assets, but are unclear or unsure about how to unlock their full value. There are five key steps that can address this:
  • Innovation and collaboration: Accounting departments can join forces with legal departments to devise new ways to monetize legal assets.
  • Treating pending claims as the assets they are. Using legal funding to better time the flow of capital from legal assets makes a lot of sense.
  • Set income targets for legal departments. Many companies are reticent to do this, but legal funding makes it simple and cost-effective.
  • Quantitative modeling: Financial officers may be loath to use quantitative decision-making for commercial claims. They shouldn’t be.
  • Rounding out corners: Outsourcing expertise is commonplace, and should apply to all areas of the business that are expected to generate revenue.
Commercial Special Features

Creating and Resourcing an Enforcement Plan to Persuade a Funder to Invest in Your Enforcement

The following article was contributed by J-P Pitt, Investment Manager at Asertis.  Stating the obvious, the principal reason a funder chooses to fund enforcement, as with every aspect of litigation funding, is to receive more at the end than is paid at the beginning. In practical terms, enforcement extends beyond being purely a legal process. Much of it involves practical project management, where litigation is one of two key workstreams. The other is influence or persuasion – communications or PR. These two elements are entirely complementary and complimentary. In project management terms, the starting point is a critical path to cash, which needs to be mapped out. Enforcement can be complex, with many moving parts, and, whilst the goal - to realise recoveries - is always clear, the path is often far from clear. To persuade a funder to invest, three essential pieces of work are necessary to map out a critical path to cash: an asset analysis of the defendant(s); obtaining legal opinion(s) or advice in the relevant jurisdiction(s); and the creation of an enforcement plan. Based on a comprehensive asset analysis, having an enforcement plan in place at the outset is pivotal to maximizing chances of success. Allocating sufficient time and adequate resources to execute the plan is therefore of paramount importance. The execution of that plan should be informed, or intelligence-led. In order to create and execute the appropriate strategy, the project team should be thought of as taskforce, since it will need to be multi-disciplined and cross functional. It must be cohesive, and the components must be able to operate in concert with each other. Therefore, teams that have worked together successfully on complex projects are always comforting and persuasive from an investment perspective. Like all projects, there must be a director who drives progress by coordinating how and when the task force conducts its activities. To achieve the strategic goal of realising recoveries (by seizing, and where necessary selling, assets) the director’s key role is to ensure taskforce components operate in concert. Hence, the director must be a professional decision-maker, who ensures clear communication and unity of purpose by giving timely and clear direction. The director could be: the claimant; the funder, if the claim has been acquired; a key lawyer who may be sitting in a core jurisdiction, or simply one who has experience of coordinating and delivering such projects; or an investigator who may have assembled the team in the first place. So, what are the taskforce components? For the litigation workstream, lawyers will be required for each jurisdiction in which the legal/litigation workstream needs to be pursued. Insolvency Practitioners (IPs)/liquidators and/or Trustees in Bankruptcy, as insolvency is often the most critical tool in any enforcement. Forensic accountants may also be required, usually for two purposes: to assist with the tracing of funds; and as expert witnesses at trial to prove how those funds have been traced. For the influence workstream, communications professionals are required to manage, if appropriate, the media narrative surrounding a case and any messaging. This may involve both front foot PR (offensive) in order to generate indirect pressure, and back foot PR (defensive) to protect reputational risk: often the most critical factor for any litigant and/or funder. Finally, investigators form a crucial part of the team and should be instructed from the outset to ensure that any enforcement plan is well informed and its execution is intelligence-led. The information they provide should inform the taskforce director’s decisions and assist in directing how and when the task force conducts certain activities. The investigators’ role is multi-faceted: understanding what motivates a defendant; conducting an asset analysis – identifying what and where assets are; monitoring throughout the life of the case; and assisting with gathering evidence. There are several key vulnerabilities which can undermine success, and potentially, one weak link can undermine the overall objective. Lack of coordination and communication anywhere within the taskforce can potentially be very damaging. The same applies if there is a poor sequencing of activities, such as seeking to recover an asset before a full intelligence picture is gathered. Equally, a bad practitioner, investigator or comms specialist, who oversteps their brief, might derail the case through negligence or incompetence. Failure to appreciate a defendant’s critical vulnerabilities and motivations (e.g. is there a trophy asset with totemic value?) might result in strategic mistakes. Clearly, if there are insufficient funds to marshal the necessary resources, then the team effort may well fall short of the required standard for success. Money is an issue in every type of commercial litigation: it is often not enough to win the case in court and receive judgment in your favour. It must be understood that the financial resources required to achieve success in enforcement of that judgment are considerable - at least as much will be expended in achieving success as was expended in obtaining the judgment. Often it can be significantly more. Accordingly, there should be plenty of contingency factored in. Although the goal may be clear, the path that has to be taken to reach it, is routinely unclear. Ultimately, anyone seeking funding for an enforcement opportunity should front-load their assessment of the risks and approach the funder with a clearly thought-out plan. This will enable any funder to understand firstly what the opportunity is and whether it might be a viable investment, and secondly, how the risks may be treated, tolerated or taken; most usually, treated.   J-P Pitt is an Investment Manager at Asertis, specialising in commercial disputes funding. Prior to joining Asertis, J-P was a Director of Litigation Funding at Harbour Litigation Funding. He is also a qualified solicitor.
Commercial

Litigation Finance as an Asset Class

Despite existing for more than a decade, Litigation Finance is considered a relatively new asset class. The market for litigation funding is enormous—as global law firm fees reach $860 billion annually. According to a recent study from Ernst & Young, the market is set to expand even more as post-pandemic litigation is expected to sharply rise. Net Interest details that funding individual cases or class actions is what litigation funding is commonly known for. But that’s far from all they do. Legal funding doesn’t have to focus on one specific case. Portfolio funding is becoming increasingly common. It’s provided on a non-recourse basis, which means if the case is lost, a funder can lose the entire investment. Outcomes in litigation funding, more often than not, are either a sizable payout, or a total loss.  Burford Capital funds a variety of cases, and is the only large litigation funder to have an asset recovery team in-house. As Burford’s CEO explains, the integrity of the legal system depends not only on fair judgments but on ensuring that judgments are enforced. Burford recently funded enforcement of a divorce judgment in favor of Tatiana Akhmedova, ex-wife of a Russian businessman. Burford has utilized cross-jurisdictional asset tracing and recovery experts to ensure that court orders are upheld. As an asset class, litigation funding has the potential for astronomical returns. But with the prospect of a big payday comes significant risk. The cost of this risk can be high, and funding agreements are underwritten accordingly. Time frames can be unpredictable, as cases can take years to reach completion. It’s also worth noting that reported ROICs are sometimes touted as illusory because of the way portfolio funding is reported. Still, returns from litigation or arbitration are speculative, even when a legal team believes a case is strong. Ultimately, litigation funding holds the potential for high payouts, but also carries significant risk.
Commercial

What’s Next for Litigation Finance? Mergers and Specialization

In the UK, the litigation funding market has reached maturity as an asset class, and as a facet of the legal system. A new report from RPC states that litigation funding assets (both deployed and held by funders) topped GBP 2 billion as of 2020. There’s no reason to believe this won’t continue to increase. Law Gazette explains that litigation funding has aided consumers in getting recompense from Volkswagen, Amazon, and even the Post Office. Litigation is often prohibitively expensive. Corporations and governments have used their financial firepower to avoid responsibility for wrongdoing—and litigation funding is instrumental in leveling that playing field. It’s expected that more small players will attempt to stake a claim in the litigation funding space. Many, it seems, may attempt this without developing the infrastructure needed to effectively vet cases and make funding decisions based on the right factors. If one looks to the banking industry for clues as to how litigation funding might develop, mergers seem unavoidable. In 2019, two powerhouse funders—Omni Bridgeway and IMF Bentham, entered a strategic merger that ultimately led to increased funds, greater scale, and a larger global presence. Specialization is also a likely industry-wide development. By focusing on deep knowledge of a specific sector, funders gain the advantage of more complete vetting of cases, while building an in-house team of experts. Of course, it’s equally likely that successful specialist or boutique funders will move toward more mainstream cases. Asertis achieved this recently, to great effect. In all likelihood, specialization and mergers will increase, as will the types of cases being funded and the size of industry capital.
Commercial

Australian Class Action Pits Jewelers Against Lloyd’s

Underwriters at Lloyd’s are currently facing a class action in Australia. Omni Bridgeway is funding the action, which is being run jointly by Berrill & Watson and Gordon Legal. Insurance Business Mag details that the case stems from non-payment of business interruption policies after closures related to COVID. It alleges breach of contract, and the proceeding has been filed as ‘open class.’ Gordon Legal explains in its FAQ that if Lloyd’s is found liable, the policy will determine how losses are calculated.
Commercial

LCM Funds Class Action Against Go-Ahead Group

A collective action against Govia Thameslink Railway Ltd and its parent companies is underway. Litigation Capital Management, a UK funding leader, has entered into a litigation funding agreement to pursue the case. Proactive Investors explains that the claim asserts that GTR breached the Competition Act 1998 by restricting travel and then artificially inflating prices. LCM CEO Patrick Moloney states that there has been an increase in competition-based claims. Vice-chair Nick Rowles-Davies adds that this clearly demonstrates the value of litigation funding in holding businesses accountable.
Commercial

Clarion Law Firm Promotes Stephanie Kaye to Legal Director

Clarion, the Leeds-based law firm, has recently announced three new promotions. Stephanie Kaye, formerly senior associate, was promoted to legal director. Insider Media Limited details that Kaye oversees apprentices at her firm, and has been a cornerstone of the growth and success of Clarion. Two members of the costs and litigation funding team: Tanya Foran and Bridie Sanderson, have been promoted to associates. Ella Wilkinson, a team member since 2018, recently completed her apprenticeship and is now a qualified paralegal. Andrew McAulay, head of costs and litigation funding and Clarion, stated that he looks forward to helping them enhance their skills.
Commercial

Hiscox Settles with Action Group Over Unpaid Claims

Around 400 companies are breathing a little easier now that insurer Hiscox has reached a settlement agreement with the Hiscox Action Group. The amount of the settlement will remain confidential, according to both sides—though a recent test case in January 2021 suggests that the total payout from the six largest insurers should be around GBP 1.2 billion. The Guardian explains that as pandemic-related business closures began, multiple insurers refused to pay business interruption claims. Harbour Litigation Funding provided the means for claimants to pursue this case, which is another example of legal funding as a means to hold wrongdoers accountable. The insurer released a statement in March saying that the anguish caused by non-payment is regrettable—though they had already set aside more than GBP 300 million for COVID-related payouts.
Commercial

European Class Actions Report Findings Rankle Litigation Funders

Are claimant-focused legal firms and litigation funders intentionally creating a rise in class actions? That’s one assertion of CMS’s European Class Actions Report 2021, which claims that even powerhouse corporates should be wary about litigation funding's impact. Global Legal Post details that between 2018-2020, class actions in the UK and EU have increased 120%. Moreover, technology cases have dramatically increased—as much as 15x—in the last four years. Is this, as the report suggests, because of opt-out procedures recently adopted in the UK? Or is it simply a matter of litigation funders creating an environment where more cases can be successfully pursued? Anna Morfey of Hausfeld explains that there is a widely held, but false belief, that lawyers and funders are the only ones who profit from opt-out class actions. Chair of the ILFA, Leslie Perrin, points out that it’s not necessarily a bad thing for businesses to fear class-action suits. Fears of being held accountable may lead to better, more fair business practices that negate the need for legal action. Perrin went on to say that changes in the law aren’t encouraging spurious class actions so much as leveling the playing field so consumers may more easily defend their rights.
Announcements Commercial

William Panlilio joins Litigation Capital Management (LCM) in Singapore

Litigation Capital Management Limited, a global provider of disputes funding, publicly listed on the London Stock Exchange’s AIM market, is pleased to announce the hire of William Panlilio as an Investment Manager based in Singapore. With extensive experience in international arbitration and cross-border disputes, William joins LCM after more than five years with King & Spalding where he was part of that firm’s Trial and Global Disputes practice, operating in the energy, infrastructure, construction, technology and mining sectors, and conducting arbitrations involving States and State-owned or affiliated entities. Prior to that, William was an Assistant Legal Counsel at the Permanent Court of Arbitration in The Hague, The Netherlands for close to two years. While at the court, he assisted arbitral tribunals in treaty and commercial arbitrations involving various combinations of States, State entities, international organisations and private parties. William is a US qualified lawyer who started his career Orrick, Herrington & Sutcliffe in New York, specialising in complex commercial litigation, financial institutions litigation, and cases involving U.S. foreign relations law, including the Alien Tort Statute. Commenting on William’s hire, LCM’s Head of Investments (APAC), Susanna Taylor said: “We are very pleased to welcome William to the LCM team. He is a highly experienced practitioner with an impressive track record of commercial and treaty arbitrations as well as broader corporate and commercial expertise. We are experiencing a significant uptick in funding applications in the APAC region, particularly those originated from Singapore, and William is well placed to assist LCM to take advantage of the recent changes in Singapore to allow litigation funding for domestic arbitration and International Commercial Court claims. William is a valuable addition to our global team of high-performing investment managers”. Litigation Capital Management (LCM) is a leading international provider of dispute financing solutions. This includes single-cases and corporate and law firm portfolios across international arbitration, commercial claims, class actions and claims arising out of insolvency, including assignments. LCM has an unparalleled track record, driven by effective project selection and robust risk management. Headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT.
Announcements Commercial

Apex Litigation Finance launches second investor fund

Less than two years since launching the company and its first investor fund, Apex Litigation Finance has begun marketing its second fund. The firm is inviting commitments from investors keen to add an asset class alternative investment to their portfolio. The UK based litigation funder is seeking to raise £50m to continue its focus on investing in small to mid-size claims. The firm specializes in supporting access to justice for claimants who either cannot afford to pursue their claim or are wary of the financial risk involved should they lose their case. Speaking about the launch of the Fund, CEO Maurice Power says: “We initially launched a relatively small fund to enable Apex to quickly demonstrate the opportunity present in investing in small and mid-size claims. Since launch we have successfully invested the fund’s capital in a high volume of cases, with claim sizes ranging from £30k to £40m+. “With our high volume/low value focus, innovative use of predictive analytics technology and supportive funding solutions, we have established Apex as a litigation funder of choice. With funding applications growing at an ever-increasing rate and the pipeline of meritorious cases close to exceeding the first fund’s limit, now is the perfect time to launch our second fund.” Apex say that litigation finance investments are an attractive alternative asset class as they are decorrelated from equity or fixed income investments. Investors wishing to explore the opportunity available are encouraged to contact Apex on enquiries@apexlitigationfinance.com. About Apex Litigation Funding: Apex Litigation Finance Limited is a company which brings together experienced individuals from the litigation funding, 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 litigant’s case may have merits, uncertainty over the total costs and the potential risk of being ordered to pay the defendant’s costs, should they lose the case, prohibits access to justice for many claimants. Following an assessment of the merits of the litigant’s case, through use of Artificial Intelligence (software utilising predictive analytics to ascertain the likely outcome, duration, and settlement value of the case), legal and commercial expertise, Apex will commit funds to pay legal and other costs associated with the case in return for an agreed share of any award upon a successful conclusion. If there is no recovery, or if the case is lost, there is no debt for the litigant to repay.