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Commercial

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

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

On the Use of Liquidator Documents in Funded Litigation

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

Key Takeaways from LFJ’s Podcast with Ben Phi

On the latest episode of the LFJ Podcast, Ben Phi, Partner at Australian class action law firm Phi Finney McDonald, discussed his recent response to the Senate Economics Committee in regard to the proposed regulation of class actions. Ben outlined his response to the ‘rising D&O insurance’ and ‘social inflation’ arguments being made by Big Insurance, and the negative consequences that could emerge if large class actions are over-regulated. Ben's summary of his testimony regarding Australia’s continuous disclosure laws: BP: Our position is that the proposed changes are both misconceived and dangerous. Essentially, what the government is trying to do is to make it more difficult to bring shareholder class actions in Australia. Their thinking requires plaintiffs to establish fraud, recklessness, or negligence to establish a continuous disclosure breach. And they also require the regulator to establish those elements to pursue civil penalty claims. This is something the regulator is definitely opposed to. Our position is that this is going to weaken the regulatory framework that governs corporate disclosure in Australia. LFJ: I want to ask about the notion of Social Inflation. This is something the insurance industry has been pushing lately. It’s the idea of a perfect storm of litigation funding, what they call aggressive tactics being used by plaintiff’s attorneys, and rising anti-corporate sentiment that is influencing the size of jury awards. What’s your response to this argument? BP: That is an argument that may carry some weight in other jurisdictions, but it simply doesn’t apply in Australia. At the threshold level, we don’t have jury trials in Australia for class actions, all of the class actions that have been before the courts have been in front of our judiciary, which is excellent and independent. Shareholder class actions rarely go to trial. The vast majority of cases settle here and they do so for sizable amounts, and provide really strong returns to group members--even after accounting for legal costs, solicitors, and litigation funding costs. One of the key differences in our jurisdiction is that we’ve got an adverse costs regime that takes a lot of the excesses out of the system and also most of the entrepreneurship. Basically, anybody that’s involved in financing or conducting shareholder class action litigation—there’s no interest in taking on speculative claims. The thresholds that get jumped through before a claim is actually commenced are very very high.  LFJ: A potential consequence of this regulation is increased corporate malfeasance, because at the heart of these class actions is that issue—corporate malfeasance. Essentially if you’re looking to regulate class actions, you want to make it harder to hold corporations accountable. So to me...I hear that and think that’s an argument the public can get behind. From your perspective, is there a PR push being made by plaintiff law firms, litigation funders, and others, or is the issue just too esoteric for the general public to care about? BP: There have been PR campaigns at least in relation to the previous round of class action reforms. And there’s absolutely no doubt that the Australian public is against corporate misconduct and malfeasance with a high degree of sensitivity to that. In particular, Australians have been conditioned by a series of commissions like these judicial inquiries into the financial services industries—and each of those inquiries has exposed absolutely disgraceful conduct on behalf of corporations. And that’s been met with widespread outrage, and followed by class actions supported by litigation funders. I actually think there is scope for this to become an issue in the next federal election—and that election is due to take place sometime in the next twelve months. LFJ: Where do you think the government is ultimately going to come down on this? Do you think there will be enough of a pushback to stem onerous regulation, or—how do you think this will play out? BP: Those who follow the Australian market will know how dangerous it is to predict the future. One thing I can say for certain, is that I really don’t see the government’s position changing—the government has really put a stake in the ground and we don’t expect them to shift from that position, particularly in an election year, and particularly given the promises that have clearly been made to the insurance industry and areas of big business. There doesn’t appear to be any political advantage in them backing down. Click here to listen to the entire episode.
Commercial

Is ‘Conscious Uncoupling’ Becoming a Legal Trend?

The concept of ‘conscious uncoupling’ was widely mocked when actor Gwyneth Paltrow mainstreamed it during her divorce from musician Chris Martin. In short, conscious uncoupling is a five-step process that helps couples separate and divorce in a less acrimonious, more amicable way. Spears details that the thrust of the concept is solid—ending a marriage should be as painless and amicable as possible. This has become a dominating principle in family law of late—resulting in concepts like hybrid mediation, collaborative divorce, and various other styles of alternative dispute resolution. This trend led to the unveiling of a new model of divorce, Uncouple, which aims to lessen polarization. This advancement comes alongside an impending change welcoming no-fault divorce to England and Wales. This means that during a divorce, it is no longer necessary to determine who is at fault, which is also likely to lower acrimony. Not all divorces are amicable, however. When separations, custody of children or pets, or asset division becomes contentious, one party often finds themselves with significantly fewer resources than their spouse. The first step to moving forward may be having the financial war chest needed to litigate effectively. This is why George Williamson founded The Level Group—which offers litigation funding to divorcing spouses. This may include covering legal fees or even living expenses so that clients can’t be financially manipulated by their spouse—and thus can maintain their bargaining capability. A recent divorce, the most expensive in London’s history, involved Farkhad Akhmedov and his ex-wife, Tatiana Akhmedova. The case dragged on for years, backed by funders Burford Capital, who will receive a portion of the eventual settlement. Burford is also funding the forced compliance of various court orders to relinquish funds and assets. While it’s definitely preferable for divorces to be amicable, it’s nice to know that when they aren’t—litigation funders are standing by to help.
Commercial

Lloyds & QBE Face Class Actions Over COVID Business Interruption Claims

Book building has begun in two class actions against Lloyds and QBE—accusing them of failing to pay on valid business interruption policies during the COVID pandemic. Both claims are being underwritten by Omni Bridgeway, a leading litigation funder. The Sydney Morning Herald details that as many as 25,000 businesses in Australia may be eligible to sign on to the class action, which was started by Gordon Legal—the firm which famously won $1 billion for those harmed by a government debt recovery scheme. The actions are seeking compensation for rejected payments, missed opportunities, and other losses relating to the non-payment of valid claims. Business interruption policies often cover natural disasters. Many insurers remain adamant that policies had never been intended to cover global disasters like a pandemic. They claim it was unclear, even mistaken, wording in policies that suggested pandemics would be covered. One insurer, Insurance Australia Group, stated that it could owe as much as AU $1 billion if forced to make good on the policies. QBE has declined to comment on the impending actions.
Commercial

What Will We Learn from the New Jersey Disclosure Rule?

On June 21st, Local Civil Rule 7.1.1 went into law. Signed by Chief Judge Freda Wolfson, it requires disclosure of third-party funding in New Jersey. Currently pending cases will be given 45 days to submit disclosure that includes names and addresses of third-party funders. If they are legal entities, their place of formation is required as well. Above the Law explains that the required disclosure includes a description (but not the actual funding agreement) of the funder’s interest, and whether or not funder approval is needed for decisions related to litigation or settlement. After this, additional discovery may be required on a case-by-case basis. Some say there is a need for this new rule because of the potential ethical concerns in litigation funding. Conflicts of interest, questionable fee-sharing, and a fair distribution of knowledge surrounding the case and participants are all cited as good reasons for the new rule. But what will it really accomplish? Marla Decker, managing director of Litigation Finance firm Lake Whillans, acknowledges the importance of avoiding conflicts and not allowing funders to control litigation. But she maintains that funders routinely or inappropriately controlling litigation is just not happening. Claimants, as one might imagine, are not keen to give up control over litigation strategy or the terms of a potential settlement. It’s likely that the outcome of this new law will be that courts will see that litigation funding is an above-board practice with a strong ethical foundation. Decker expresses concern, however, that the new rule could result in a spike in unnecessary and even onerous discovery. She explains that it makes more sense for courts to address discovery on a case-by-case basis. Disclosure is a regular part of cases, and devising a one-size-fits-all regulation is counterproductive and potentially damaging.  
Commercial

Legal Equity Partners Acquires JustKapital Litigation from Law Finance

LawFinance recently announced the completion of the sale of its litigation funding arm—JustKapital Litigation—to Legal Equity Partners Pty Ltd. Lawyers Weekly reports that the sale, which was announced in January and approved by shareholders one month ago, is a step forward in de-risking the company. The company stated that it experienced a lower probability of recovery than expected. As chief executive Daniel Kleijn explains, the sale will ensure that LawFinance can continue focusing on aspects of the business that generate the strongest returns for shareholders. LawFinance plans to continue pursuing active cases.
Commercial

Hedge Funds and Burford Capital

A decade ago, all eyes were on hedge funds as they were believed to be the most shrewd investors. After a decade of sub-par returns, that reputation has soured somewhat. Still, hedge funds currently maintain over $3.5 trillion in assets under management.   Yahoo! Finance reports that Burford Capital found its way into the portfolios of six different hedge funds as of the end of Q1 2021. But at the end of December 2020, that number was seven. In fact, recent calculations suggest that Burford isn’t even in the top 30 most popular stocks among hedge funds. How serious is that? And what does it say about Burford? Several hedge funds remain confident that Burford's stock is a good buy. These include Orbis Investment Management, as well as Arrowstreet Capital, Springhouse Capital Management, Glendon Capital Management, and Citadel Investment Group. Still, there has clearly been a dulling of Burford’s shine among prominent hedge funds. Total hedge fund stock holdings in Burford decreased 14% from the fourth quarter of last year. Hedge fund interest in Burford is still well below average. With that in mind, Burford receives a hedge fund sentiment score of 32.3, which ranks similarly valued stocks based on their relative hedge fund positions, present and past. It’s worth noting that since the end of the first quarter, Burford stock returned 19.4%. Several smaller hedge funds bet on Burford with great results—since it outperformed the market by a significant margin.
Commercial

Burford Responds to Proposed Fee Cap for Litigation Funders

One would think that if new laws are being created to regulate an industry, prominent members of that industry would be consulted. That doesn’t seem to be the case regarding Australia’s proposed law that would place an arbitrarily determined cap on fees for law firms and litigation funders in class action cases. Burford Capital took the opportunity to respond to the proposal, pointing out that the proposal itself is not based on existing data or case law. Capping fees, Burford explains, will lead to cases being settled for less than their true value. Burford also points out that the costs and subsequent risks of class action cases in Australia often necessitate the use of litigation funding. The practice is a vital part of securing access to justice for those who can afford it least.
Commercial

Inheritance Funding Simplifies the Probate Process

When a loved one dies, thinking about money may be the last thing on anyone’s mind. But it may also be an introduction to the complex and time-consuming world of probate. MONDAQ Canada details that even a simple inheritance claim could take months or longer to be resolved, not including time to transfer property and assets. The process can also be expensive, necessitating legal fees, new taxes, accounting services, and maintenance of properties. BridgePoint, a third-party legal funder, now offers an inheritance loan. This is short-term funding that’s available quickly to help manage an estate until a payout can happen. Trustees and beneficiaries may be eligible for this type of funding. Such a loan can relieve a lot of pressure and worry from an already emotionally draining situation. Cindy Williams, VP of BridgePoint Financial, explains that even when entitlement for inheritance is clear, the timeline may not be. Inheritance funding can give everyone room to breathe.
Commercial

Nanoco Litigation Against Samsung Continues

Nanoco Group recently released an update in their legal action against tech giant Samsung. The suit alleges the willful infringement of Nanoco IP. The patent infringement suit was filed against multiple Samsung entities in February of last year. Nanoco has accepted financial assistance from a third-party litigation funder in order to pursue the case. Directors Talk Interviews explains that an inter partes review, or IPR, is a standard facet of intellectual property infringement cases. The Patent Trial and Appeal Board for the Eastern District of Texas Court instituted IPRs on all five patents relevant to the case. There is a predetermined timeframe for these reviews, which means a decision should be reached and released before May of next year. Nanoco has petitioned the court to wait until after the IPR decisions have been made before moving forward with a trial. Brian Tenner, CEO of Nanoco Group, has affirmed that the company must win the trial and the IPRs to achieve success here. He remains confident in the merits of the case. Tenner also detailed that support from shareholders, along with the involvement of a third-party litigation funder, is a key factor in Nanoco’s ability to pursue the case while maintaining normal business operations. IP litigation is a common investment for legal funders due to the potential for high payouts.
Announcements Commercial

Liti Capital Announces Identifying Information of Their First Crypto Con Artist

Geneva, Switzerland – June 29, 2021 – Liti Capital SA, a Swiss Litigation Finance company, has just found and identified the perpetrator of a cryptocurrency scam. This comes days after their commitment to push back against fraud in the crypto community and help create a safe atmosphere for innovation and investment moving forward. By tokenizing their equity, Liti Capital introduces litigation finance to the blockchain, providing retail investors with a new asset class and giving them the opportunity to fight back against crypto criminals.
Joel “Coach K” Kovshoff, a popular cryptocurrency influencer, was recently the victim of an elaborate con, resulting in the loss of $250,000 for himself and his investors. This is a common story in the crypto community, and the victims are rare to voice their misfortunes, particularly if they live in the public eye and their income is contingent on their reputations. As one of the few public figures to announce this potentially embarrassing story, he was able to catch the attention of Liti Capital through their mutual contact, Kurt Ivy at Splyt. The con artist used a unique tactic: he created a fake identity, complete with documentation, did extensive research on “Coach K,” and found him in public to slowly befriend him over time. This is how he was able to gain trust and eventually walk away with the money. He directed Joel to JD Capital, with whom Joel has worked with before, about a fund of CertiK he could purchase. After some more convincing, Joel paid the cost of the CertiK and waited for a response that did not come. However, the con artist may not have been as sophisticated as it seems. “These guys are acting with complete impunity,” David Kay, international litigator and CIO of Liti Capital said, “They’re so sure they won’t get caught that they don’t even cover their tracks. They don’t think anyone’s coming. Well, we’re coming.” Joel Kovshoff had given the con artist a chance to return the money, plus interest, before taking legal action. Liti Capital is on standby with a powerful team that has seen worldwide success. “The same tools we deploy to investigate international cases are the ones we will use to identify and pursue crypto scammers,” Jonas Rey, Co-Founder and Managing Director said, “My team of investigators and intelligence officers have found the con artist in question, his personal information, where the money is, and have engaged with counsel and security at his location. We will give him the weekend to reach out to us.” Liti Capital launched the LITI token yesterday, Thursday, June 24, 2021, at 11:59 PM EDT, and the wLITI on Tuesday, June 29, 2021 at 6:00 PM EDT. The LITI token will be available for purchase on their website after passing KYC requirements. The wLITI will be available to trade for on Uniswap. About Liti Capital Liti Capital is a Swiss Limited Liability Co specializing in Litigation Finance and FinTech based out of Switzerland. Liti Capital buys litigation assets to fund lawsuits and provide a complete strategic solution along with connections with the best law firm to help its client win the case. Tokenized shares of the company lower the barrier of entry for retail investors, give token holders a vote in the decision-making process, and distribute 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 operational, innovation and technical skills together to round out the leadership team. David Kay, CIO, ran a billion-dollar NYC private equity litigation finance firm before joining Liti Capital.
Commercial

The Tom Girardi Saga Continues

Remember the lawyer from Erin Brockovich? He married a former cocktail waitress. They bought multiple luxury houses and two private jets. If that sounds like the sensationalized stuff of reality TV, that’s because it is! The Girardis eventually wound up on The Real Housewives of Beverly Hills. So what happened? Institutional Investor details that Girardi applied for, and received, a loan of over $5 million from an Arizona-based litigation funder—Stillwell Madison. Ostensibly, the money was to be used for cases against Shell Oil, Eli Lily, GlaxoSmithKline, and others. If the cases made money, a portion was to be paid to the funders under the terms of the funding agreement. Instead, Girardi’s firm defaulted on their payments to the funders. Eventually, Girardi’s firm made a payment deal with Stillwell Madison, though Girardi neglected to mention that he had defaulted on another funding agreement with a different funder—Law Finance Group. Later, Girardi allegedly stiffed at least ten families in a case against Boeing. The families had lost loved ones in the Lion Air Flight 610 crash. As lawsuits for non-payment flooded in, it came to light that Girardi had taken out multiple loans—often reusing the same collateral. Erika Girardi filed for divorce against her husband in late 2020, just before Jay Edelson filed to sue both Girardis, the firm Girardi & Keese, and two litigation finance firms among others. Edelson alleges that Girardi has embezzled settlement proceeds that rightly belonged to clients so that he could continue to fund an absurdly lavish lifestyle. Stilwell Madison and California Attorney Lending, two litigation funders named in the suit, are accused of structuring an intercredit agreement among themselves. Erika Girardi remains on the reality series and affirms that she had no idea that her husband embezzled funds from anyone.
Commercial

How Litigation Funders Price Based on Risk

Critics of Litigation Finance appear to be celebrating Australia’s proposed cap of 30% on potential returns for litigation funders. It’s hard to argue that such a move would not have enormous, industry-wide consequences. Some say it’s ‘unfair’ for funders to reap high profits while claimants, who were actually damaged by the factors in their cases, receive a paltry sum. But who is really taking on the most risk? Dispute Resolution Blog details what it describes as the ‘real’ value of risk in litigation finance. It also reveals that when educating the public about the benefits of litigation funding, funders failed to impress upon consumers the reasons that lead to litigation funds being priced as they are. Commonly, prices are structured as either a share of the award (usually 30-40%) or a multiple of the capital provided (usually about 3 times). While this might seem high to the uninitiated, this is the same basic pricing structure that was used during the development of litigation funding in the 90s. There are two main approaches to pricing litigation funds: Capital Structure Pricing and Probabilities Pricing. Capital structure pricing is similar to basic accounting, where assets and liabilities are matched. Liabilities are tiered from cheapest to most expensive—starting with senior debt and ending with equity. This model is not unlike getting a good interest rate due to a lifetime of good credit. Someone without any credit could not get that rate because they’re considered inherently riskier. Probabilities pricing is a more academic pricing philosophy basing the cost of the funds on the probability of success. That means occasional losses are factored into the costs of the funding deployment. Time is also a factor since it can be years between deploying funds and receiving an award. Ultimately, the funding industry would do well to be more transparent not just about funding agreements, but about how current pricing is calculated.
Commercial

Litigation Funding as ESG

We already know that litigation is expensive. We also know that even if a claimant can technically afford a lawyer, they can easily be outspent by corporations and other big spenders who may be practiced in avoiding responsibility. That’s why litigation funding was developed—to level the playing field between the Davids and Goliaths of the legal world. PGMBM details that litigation funding is a net gain for society in several important ways. First, it makes it easier for people of average means to pursue litigation. Second, it’s instrumental in holding corporations and governments accountable when they fail to maintain standards or protect the citizenry. Maintaining accountability for corporations, utilities, and others encourages fairness and can be a precursor to impactful social change. Third, litigation funding is increasingly the main source of funding for collective action cases. This is particularly important for rural and low-income citizens who are essentially at the mercy of governments, utility companies, and others. When these entities pollute or cause damage to farmlands or water supplies, citizens often have no recourse other than expensive legal action. With that in mind, it seems clear that litigation funding should be counted among ESG investments—those that focus on environmental, social, and governance issues. This may be coming in the EU, as a Code of Conduct for funders is en route, and will likely pave the way for funders to label themselves as ESG.  
Commercial

Singapore Widens Door for Litigation Funding Use Cases

As of yesterday, the Singapore Ministry of Law is extending the third-party legal funding framework in order to cover more types. These include domestic arbitration proceedings, some cases heard at the Singapore International Commercial Court—and related mediation proceedings. Ministry of Law details that Singapore first welcomed third-party funding in 2017, though only for international arbitration and related mediation. The funding industry has grown since then, and the response to the practice has been overwhelmingly positive. In addition to extending case categories that may now utilize TPF, the Ministry has amended several professional conduct rules. These include:
  • Lawyers involved in cases using TPF must comport with Legal Profession Rules 2015 regarding conflicts of interest.
  • Registered Foreign Attorneys may be subject to additional scrutiny when TPF agreements are used, as could foreign TPFs.
  • Amendments regarding orders for adverse costs, as well as security for costs, in cases utilizing third-party funding.
  • Singapore Statutes Online, part of Singapore’s government website, lists these amendments in full.