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Announcements Commercial

New Research: CFOs Increasingly Aware Of Commercial Litigation Assets And Poised To Unlock More Value From Legal

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research probing how CFOs and senior financial officers influence corporate legal departments, legal spend and their companies' success in recovering value through affirmative recoveries. Christopher Bogart, CEO of Burford Capital, commented: "CFOs bring a commercial mindset to other areas of the business—and the legal function should be no exception, particularly given the amount of working capital potentially at stake, measured not only in the many millions now spent on commercial claims but also the even greater opportunity costs of diverting corporate resources and the untapped opportunity to pursue valuable claims altogether." The research suggests that companies are on the cusp of a paradigm shift in how they approach legal assets, and that financial officers understand their value and have new opportunities to more fully leverage tools to unlock them.  Key findings from the research include: Affirmative recovery and cost management programs are extensive—and ready for growth
  • 73% of financial officers report extremely/very extensive affirmative recovery programs, and 84% report extremely/very extensive legal cost management programs
  • 46% report a need for improvement in these programs
Companies have extensive opportunities to enhance liquidity
  • 75% of companies with over $1 billion in annual revenues reported unenforced judgments worth $20-$100 million in 2020
  • Companies with inadequate affirmative recovery programs are 27% more likely to leave money on the table
Financial officers have new ways to apply the same financial approach to legal as other business areas
  • Just 24% say they apply quantitative financial modeling to make decisions about litigation as they do in other areas of the business
  • 39% say litigation variables don't lend themselves to quantitative analysis—revealing an untapped opportunity to utilize tools and partners to quantify legal risk
Bringing a commercial mindset to legal will reinforce more commercial behaviors—benefiting the business
  • 59% believe that pending litigations are assets because they represent future cash flow, even if they don't show up on the balance sheet, and 56% believe that the legal department should have commercial targets
  • However, a significantly large percentage of financial officers aren't yet bringing a commercial mindset to legal
  • Those who conduct quantitative analysis of litigation are significantly more likely to say that their companies need to place greater priority on their affirmative recovery programs—suggesting the kind of appetite for improved performance and financial innovation that leading companies value
The 2021 Legal Asset Report: A Survey of Finance Professionals can be downloaded on Burford's web site and includes snapshots of energy, food, healthcare and other industries. Its findings are based on the online survey responses from 378 senior financial officers of companies with annual revenues of $50 million or more in the United States, the UK and Australia, conducted in March and April 2021 by Bauman Research and Consulting. Over half of respondents hold CFO titles and all are in roles that include knowledge of their companies' litigation expenditures. About Burford Capital
About Burford Capital Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its principal offices in New York, London, Chicago, Washington, Singapore and Sydney. For more information, please visit www.burfordcapital.com.
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Announcements Commercial

Legaltech leaders Disputed.io raise further funding

LegalTech company, Disputed.io, has increased investment to over £1.5m from its latest round of investment. The latest funding follows on the back of significant growth for the business after the launch of its first product, CaseFunnel, an automated claims solution 13 months ago. Eighty per cent of the investors followed-on, on the back of the soft-launch of the business’ latest product, FinLegal the first online marketplace for litigation funding.

The latest investors in the business include new investors Perry Blacher a FinTech specialist with 25 years’ experience building and operating online businesses and Alan Falach, the co-founder of Global Legal Group, a London-based global company specialising in the legal market.

Commenting on the investment Alan Falach says, “There are still huge opportunities for the legal sector to use technology and improve the economics of claims and access funding for litigation and ATE insurance. Disputed.io is at the forefront of this evolution and I’m excited to be involved in the venture.”

Founder and Chief Executive Officer of Disputed.io Steven Shinn, adds: “It is a real testament to the vision and products at Disputed.io that we have secured more investment. Perry brings a wealth of experience in start-ups which is invaluable as a high growth start-up and Alan’s knowledge and network in the legal sector further increases our brand equity in the legal sector.

“We have exciting plans for the business over the coming months as the demand for the platforms have grown. We also have ambitious international growth plans and the latest funding enables us to tackle our bold targets.”

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Commercial

Litigation Finance Transparency is On the Rise

The regulations surrounding the practice of third-party legal funding are ever-changing. As the practice becomes more popular as a product and an investment—interest in legislating litigation funding grows. Recently, Roy Strom discussed what we can expect in the coming months.   Bloomberg Law business columnist Roy Strom details his early experiences as a journalist covering Litigation Finance. After learning of the practice from a New York Times piece, Strom found a local startup that was starting its own funding practice. That group eventually became the powerhouse funder, Longford Capital. Strom advised funders to advertise their offerings and let the public know that funding is an option. He found that neither funders nor the legal firms that utilize them wanted to talk openly about their business practices. So while third-party funding is a net gain for society, the shroud of secrecy invites suspicion. Dai Wai Chin Feman, Parabellum Capital’s director of commercial litigation strategies, explains that in jurisdictions that have clear rules regarding funding, funders and legal teams are more comfortable discussing their relationship. A perfect example is the Willkie-Longford pact, in which Longford Capital struck a deal with Willkie, Farr & Gallagher to fund about $50 million in cases.  Laws surrounding disclosure vary from one jurisdiction to another, and no lawyer wants to invite court interference into a funding agreement unnecessarily. Rule changes like New Jersey’s new disclosure requirements might actually be helpful for third-party funding—in that it invites greater transparency into the process, though opinions vary widely. Litigation funding can be beneficial to clients, legal teams, and justice itself. It seems counterproductive to be anything less than transparent. 
Commercial

Manolete Partners’ Profit Takes a Hit

Manolete Partners, a leader in insolvency litigation funding, recently released a financial report. In it, they revealed that shares have lost half their value within the last year. Yahoo Finance reports that Manolete profits have decreased 26% due to higher staffing costs and a reevaluation of case value. As the government’s emergency insolvency stoppage ends in September, it’s likely that insolvency specialist Manolete will see a flood of new cases. At the same time, Manolete’s share of cash from resolved cases increased 113%, owing to a record 135 insolvency cases completed in 2020.
Commercial

Jurisdictional Gambling Debate Gains Attention from Litigation Funders

A recent case involving gambling license jurisdictions and online gaming has gained the interest of Advofin, the oldest litigation funder in Austria. Advofin is seeking EU 40 million to recoup funds lost by more than 2,000 Austrian citizens who gambled online. Gambling News details that many of the implicated operators are well-known names, like PokerStars, Leo Vegas, and 888. When an Austrian resident agrees to the terms of an online gambling site, they essentially enter a legal contract with the operator. This means that operators in Malta targeting Austrian players are breaking local law. Currently, there is one casino, Casinos Austria, that is licensed to operate in the country. Austrian law says only licensed operators in the country may offer casino gambling. Lawyers for Maltese operators said that the claim represents jurisdictional overreach. Article 56 of the Treaty for the Functioning of the EU establishes freedom to, among other things, deliver goods and services across the EU. That would imply that the Malta gambling operators were within the law. This case is one of about 50 currently being funded by Advofin.
Commercial

Abuse Survivor Accuses Dilworth School of Failing to Protect Students

One survivor of sexual abuse in childhood is spearheading a class action against Auckland’s Dilworth School—the wealthiest school in New Zealand. Neil Harding, along with an undisclosed claimant, asserts that the school knew that young boys were being sexually abused by teachers and staff as early as the 1970s. The case is being funded by LPF Group—the leading New Zealand litigation funder. TV NZ 1 News reports that instead of protecting students, the school opted to punish those who complained. Some abusers were moved to other postings, but Dilworth often filed suppression orders in the event that a former employee was convicted of abuse. In addition to the class action against the school, eleven men have been charged with sexual offenses against students. At least 100 former students have reported past sexual abuse by school staffers to police. So far, only one of the abusers has been sentenced. Assistant Principal Ian Wilson was given a sentence of fewer than four years. Harding is adamant that it’s not just the abusers who are at fault. He maintains that the Dilworth School failed these students by perpetuating a cycle of ongoing abuse. Others who have been impacted by Dilworth’s actions can confidentially file their interest. Because the case is being funded by LPF Group, there is no upfront cost to claimants.   Not surprisingly, Dilworth trustees declined to comment.
Commercial

New Disclosure Requirements for Funders in New Jersey Federal Court

Will a new disclosure requirement in New Jersey federal court ‘create more issues than it solves?’ Some members of the International Litigation Finance Association (ILFA) believe so. On Monday, Chief Judge Freda Wolfson ordered that third parties providing non-recourse legal funding must be disclosed to the court. Reuters explains that the new disclosure requirements will include the funder’s name and address, and especially whether the funder has approval or control over settlement or strategy decisions. Specific aspects of funding agreements may also be sought, but are not required to be disclosed by default. This requirement was the focus of a long skirmish between the ILFA and business-focused entities like the US Chamber of Commerce. Shannon Campagna, executive director of ILFA, expressed disappointment that industry members were not consulted about the impact of the new rule. She went on to say that the rule is contrary to most existing case law, and is likely to complicate—rather than simplify—the issues it’s trying to address. The new rule will lend some certainty to funded cases, as judges often differ on what types of disclosure and how much disclosure should be required.
Commercial

Manolete Appoints Lord Howard Leigh as New Chairman

Manolete, a leader in insolvency litigation funding, recently announced that Lord Howard Leigh of Hurley has been appointed as Chairman designate and senior independent director. Accountancy Today details that Leigh founded Cavendish Corporate Finance in 1988, where he is still a senior partner. Thirty years later, Cavendish merged with FinnCap to form FinnCap Group plc—now listed on the London AIM market. Leigh expresses delight at the new appointment and states that he’s looking forward to growing the business.
Commercial

Richard Dietz Continues Fight in Pakistan Asset Recovery Case

The ongoing legal action between the Pakistani government and asset recovery firm Broadsheet experienced a new development on June 9. Richard Dietz withdrew an application to have attorney Stuart Newberger give testimony about VR Global’s litigation funding agreement with Broadsheet—the asset recovery firm Dietz funded. Broadsheet was handed a multi-million dollar payment by the government of Pakistan in January, yet Dietz is still seeking compensation. Intelligence Online reports that Broadsheet was hired to recover assets concealed by Nawaz Sharif, the former prime minister, in a 2000 contract with the National Accountability Bureau. In 2017, VR Global provided $6 million in funding to Broadsheet. Once Broadsheet was given nearly $29 million, VR expected at least $21 million in repayment. Yet, representatives for Broadsheet petitioned a DC federal court to sanction VR for this filing—calling it ‘unnecessary.’ The case and its surrounding issues have necessitate the formation of a complicated web of recovery professionals, government agencies, and funders, as well as the Broadsheet Inquiry Commission. Ultimately, the NAB was found to have negotiated an ineffective contract without proper oversight. Dietz’s case against Broadsheet remains ongoing.
Commercial

Interview with Burford Capital’s Connor Murphy

Connor Murphy is currently a Director at Burford Capital. His focus is on new business origination with corporates and firms in the US. Before this, he was General Counsel for Capstone Advisory Group. Burford Capital reveals that many GC’s don’t even realize that legal finance is an option. But they should. since most companies could put funding to good use if they were aware of its capacity to turn legal departments into a profit center. As the impact of COVID grew around the world, it was predicted that the pandemic would bring about a massive spike in bankruptcies. So far, that hasn’t happened. Murphy explains that while some companies are still vulnerable, and inflation seems inevitable—the damage to the world economy is less severe than anticipated. Murphy expounds on litigation funding in Canada, particularly for bankruptcy cases. Canadians may now use litigation funding as a source of liquidity, enabling them to pay creditors while retaining funds to carry on normal business operations. Litigation funding can have a particularly transformative impact on GC’s, as Murphy is well-equipped to comment on. In fact, it can transform a defensive GC’s office into a proactive, commercially-minded hub that generates revenue for the company rather than draining it on legal actions. Education appears to be key in the future of litigation funding. As more GC’s understand the benefits legal funding can provide, the more widespread the impact will be.
Commercial

Megan Mayers Ranks UK Litigation Funders

Litigation funding has taken off in the last decade, largely due to its utility and benefits—but also spurred by the financial unrest caused by COVID. In the ten years since its inception, the Litigation Finance industry has grown, adapted, and flourished as an investment and a product. Legal 500 takes a long look at the UK litigation funding scene and has assembled a list ranking the leaders of the industry. This list does not include insolvency specialists such as Monolete Partners, Innsworth, or others with a more narrow offering. In overall rankings, the top tier funders are Burford Capital, Harbour Litigation Funding, and Therium. In the second tier, according to Mayers, are LCM, Omni Bridgeway, Vannin Capital, and Augusta. Third are Bench Walk Advisors, Balance Legal Capital, and Woodsford. The funding industry began as a way to increase access to justice for those of modest means. Leveling the playing field in ‘David v Goliath’ situations is a net gain for all consumers—especially in terms of holding corporates and even governments accountable. Third-party legal funding has expanded and adapted to meet the need of law firms, clients, investors, IP holders, and even legal services. Along with these developments are regulatory changes, often spurred by those who are wary about legal funding. This is one factor that led to the creation of the Association of Litigation Funders (ALF)—a professional group that advocates, educates, and self-regulates the legal funding industry. Most of the largest funders have joined. But as the playing field widens, newcomers to the industry seem less likely to join, stating that the rules made by ALF are not enforceable or legally binding. Still, it’s entirely possible that the next ten years will be just as transformative to the Litigation Finance industry as the last.
Commercial

Litigation Finance Sees Regulatory Changes in Germany

The Legal-Tech Act has recently been passed in Germany and will take effect in October of this year. Essentially, it allows attorneys more flexibility with regard to contingency agreements. This act is the opening move in a series of planned reforms to Germany’s legal service market. Pinsent Masons details that the intent of the Legal-Tech Act is to address discrepancies in how legal tech companies are regulated, as opposed to how laws are applied to lawyers. Debt collection out of court is typically handled by legal tech companies—and they are treated differently than lawyers even when seeking to accomplish the same goals. This means that debt collectors aren’t subject to the same set of rules as attorneys. The Legal-Tech Act addresses this in several important ways. Contingency fees may now be used in out-of-court collections cases. Lawyers can make agreements to take on the costs for collections. This applies only to our court collections and judicial dunning (a German-specific rule that makes enforcement easier). This differs from the proposed act, which would have allowed litigation funding for all monetary claims under EU 2,000. These changes necessitate new disclosure, so the Legal-Tech Act covers that too. Debt collection companies are required to tell clients about other options, and to explain why collection agencies seek out contingency agreements. Debt collection agencies, in general, will face more scrutiny in Germany under the new law. Registrations will be required, and German authorities will confirm that their stated business model adheres to the new guidelines. The German government is confident that consumer protections will be strengthened by the Legal-Tech Act. Transparency will increase, particularly in collective actions. One litigation expert expressed concern, however, that the German parliament’s decision is reactive and incomplete. As it is only the first in a list of upcoming changes, any shortcomings in the Legal-Tech Act will soon be addressed.
Announcements Commercial

Litigation Capital Management agrees to fund Comet liquidation claim

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

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

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

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

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

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

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

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

About Longford Capital

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

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Commercial

Scotland’s New Rules for Personal Injury Claims

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

Litigation Finance—Helping Plaintiffs Against a Bankrupt Defendant

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

The Impact of Global Inflation on Litigation Funding

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

Cladding Class Action Halts as Litigation Funder Withdraws

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

LexShares Seeks Investors for Legal Finance Fund

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

Should Litigation Funding Agreements Always be Discoverable?

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

RTB Case Moves Ahead in EU

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

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

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

Investment Fund Loses Millions Backing Litigation Finance in Chinese Courts

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

Litigation Basics from Longford Capital VP

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

Bad News for Funders That Attempt to Control Cases

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

State Bars Weigh in on Litigation Finance

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

Interview with Liti Capital Co-Founder: Jonas Ray

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

Recent UK Decision May Impact Future Insolvencies

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

Jurisdictions Expanding Funding Access for Offshore Asset Recovery

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

Litigation Funding in Asia—What’s the Holdup?

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