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Commercial

Third Party Funding Can Impact Claim Cost 

With the third party litigation finance industry growing exponentially, trends show that claim investment may be cause for concern. US-based investment into third party funding in 2020 was around $17B. The global third party marketplace is expected to reach $30B+ by 2028, and many critics say this growth will stoke social inflation and overall claim cost.  InsuranceBusinesssMag.com reports that the liabilities of insurance are expected to rise as a result of third party litigation funding. The concern hinges on increased investment equating to longer ligation periods, driving higher claim costs and high dollar awards. The marketplaces seeing such social inflation include medical liability, auto/trucking and general liability, according to the report.  Third party funding is seeing a return on investment reaching upwards of 25% in recent years. This return is outperforming private equity and venture capital, making third party litigation investment an even more attractive asset class.  
Case Developments Commercial

Steinhoff Settlement Gives Investors Big Win

After three years of diligent negotiations, a GBP 1.4 billion settlement went into effect against Steinhoff International Holdings NV. This represents the second-largest settlement against a European company in a securities fraud case. Burford Capital explains that Steinhoff, a Dutch business with headquarters in South Africa, was responsible for more than 40 retail brands in at least 30 countries. In 2017, the company announced accounting irregularities and that it would delay the public disclosure of financial statements. The following day, CEO Markus Jooste promptly resigned. An investigation revealed GBP 6 billion in accounting fraud allegedly conducted by Jooste and several other senior executives. Share prices declined by almost 90%. Two years later, Steinhoff found itself facing at least $8 billion in legal challenges. Unsurprisingly, the beleaguered company opened the doors to settlement discussion. In the eventual settlement, about GBP 800 million will be given to defrauded shareholders. Former auditors Deloitte, as well as D&O insurers, have put up GBP 110 million more earmarked for shareholder compensation. Institutional investors largely see this settlement as a positive outcome and a good sign for anyone who may choose to join a similar group action. Funding leader Burford Capital was instrumental in achieving this record settlement and demonstrates how the right choice of funder can make a profound difference. In addition to providing funding, Burford worked with clients to collect supporting documentation for the case and advocated for an effective and fair-minded settlement. Clearly, the role of a funder can extend far beyond the deployment of capital.
Commercial Legal Innovation

Litigation Insurance is Not Just for Plaintiffs Anymore

Industry norms suggest that in commercial disputes, litigation insurance for defendants is not part of the equation. Usually, it’s claimants who make use of this type of after-the-event insurance. But why does this perception persist? Legal Futures UK suggests that because litigation insurance can meet adverse costs, it makes sense for both plaintiffs and defendants. For defendants, this is particularly vital in the case of cross disputes, or instances when the defendant didn’t want to go to court in the first place. After-the-event insurance is only enforceable when a case is successful. Most insurance policies state that a successful case is one where the legal action is settled or adjudicated with terms that are favorable to the insured. Litigation insurance is a common way to manage risk, which is especially valuable to defendants who have fewer options and less control than plaintiffs. After-the-event insurance helps defendants mitigate adverse cost exposure, allowing defendants to devote more resources toward a strong legal defense team. Ultimately, underwriters should be tailoring litigation insurance to meet the unique needs of clients—be they plaintiffs or defendants. For defendants, calculating the insurance premium against the possible adverse costs is an easy choice.
Announcements Commercial

Burford Capital surpasses $100 million in Equity Project commitments

Burford Capital—the leading global finance and asset management firm focused on law—today announces that it has crossed a significant milestone in its groundbreaking initiative designed to increase diversity in the business of law, with more than $100 million in cumulative Equity Project commitments made to back commercial litigation and arbitration led by female and racially diverse lawyers.

The Equity Project earmarks legal finance capital to promote diversity by giving historically underrepresented lawyers an edge as they pursue leadership positions in significant commercial litigations and arbitrations. The Equity Project also augments companies’ ESG and DEI initiatives by providing incentives for the firms that represent them to appoint historically underrepresented lawyers and to award them origination credit.

The Equity Project first launched in October 2018 with $50 million earmarked to back commercial matters led by women. After having committed more than that amount by December 2020, Burford announced an expansion of The Equity Project in October 2021, earmarking a further $100 million, broadening The Equity Project’s mission to promote both racial and gender diversity in law, and pledging to contribute a portion of its profits from successfully resolved phase two Equity Project matters to organizations that promote development for female and racially diverse lawyers on its clients’ behalf.

As of February 28, with more than half of phase two funds committed, Burford has now made more than $100 million in cumulative commitments to Equity Project matters.

Matters funded to date in this phase of The Equity Project include contract disputes, antitrust, federal statutory, IP/patent and treaty arbitration matters, with female and racially diverse litigators in leadership roles (first or second chair) as well as women-owned firms. Clients include large corporations and large litigation boutiques.

Aviva Will, Co-COO of Burford Capital and leader of The Equity Project initiative, said: “We are delighted by the overwhelming response to phase two of The Equity Project, particularly from corporate clients, and that’s reflected in the fact that we have crossed this significant milestone in a short period of time. The Equity Project is core to Burford’s culture and a part of our daily work, and we look forward to committing the remaining funding soon.”

David Perla, Co-COO of Burford Capital, said: “I’m very pleased to see the rapid commitment of our capital in phase two of The Equity Project. As the industry leader, we recognize that we may be the only commercial legal finance company with the resources to make such a significant financial commitment to increasing diversity in law. We are aware of our unique position and take seriously the significant impact Burford can have on the legal market in all the work we do.”

The Equity Project is supported by 26 Champions from leading companies, law firms and organizations. A list of Champions and more information about The Equity Project can be found on Burford’s website.

Commercial Investor's Corner Slingshot Capital Special Features

‘Secondary’ Investing in Litigation Finance: Why, why now, and how to approach investing in Lit Fin Secondaries

The following article is part of an ongoing column titled ‘Investor Insights.’  Brought to you by Ed Truant, founder and content manager of Slingshot Capital, ‘Investor Insights’ will provide thoughtful and engaging perspectives on all aspects of investing in litigation finance.  Executive Summary
  • Evolution of Litigation Finance necessitates the need for a secondary market
  • Investing in Litigation Finance secondaries is much more difficult than other forms of private equity due to the inherent difficulty in valuing the ‘tail’
  • Experts should be utilized to assess case merits and valuation
  • Life cycle of litigation finance suggests timing is right for secondaries
Slingshot Insights:
  • Investing in the ‘tail’ of a portfolio, where most secondary transactions will take place, can be more difficult than primary investing
  • Dynamics of the ‘tail’ of a portfolio are inherently riskier than a whole portfolio, which is partially offset by enhanced information related to the underlying cases
  • Secondary portfolios are best reviewed by experts in the field and each significant investment should be reviewed extensively
  • Derive little comfort from portfolios that have been marked-to-market by the underlying manager
  • Investing in secondaries requires a discount to market value to offset the implied volatility associated with the tail
In my discussions with litigation finance institutional investors, the topic of secondary investments has been raised a number of times by those who understand the economics of the asset class and are seeking to take advantage of some of the longer duration cases and portfolios in existence.  In this article, I explore why there is interest in the secondary market, why now, and how best to approach investing in secondary investments, as well as some watch-outs. The concept of secondaries has been well established in the private equity world, specifically leveraged buy-out private equity, and, having been in existence for a couple of decades now, represents a mature strategy not only within leveraged buy-out, but also infrastructure, real estate, venture capital, growth equity, etc.  So, it is not surprising to see the concept applied to litigation finance. As David Ross, Managing Director & Head of Private Credit at Northleaf Capital Partners, notes "Having been active in private equity secondaries for close to twenty years, Northleaf has extended its secondaries expertise over the past few years to include investments in litigation finance, which is an area that provides attractive and uncorrelated returns for our investors. Executing investments in litigation finance requires dedicated expertise but can provide attractive transaction dynamics for both existing investors seeking liquidity and prospective investors capable of underwriting and structuring an attractive secondary." To begin with, let’s first define what constitutes a “secondary” transaction.  Essentially, a secondary is any transaction where one party is acquiring the interests from the original investor (the ‘primary’ investor) in an investment opportunity.  In the case of litigation finance, this could take the form of a single case investment, portfolios or LP interests in funds, among other opportunities.  In this sense, they are the ‘second’ investor to own the investment, as they have acquired their interest from the first investor through the acquisition transaction. Types of Secondaries In order for a secondary market to make sense, at least for institutional investors, there needs to be a sufficient number of opportunities that are adequately aged to allow for one party to sell at typically, but not always, a discount to either their original cost or their current fair market value of the investment.  These opportunities can arise for a number of reasons, as outlined below. For fund managers, they may be looking to raise a new, larger fund, and in order to do so they will have to demonstrate that they are good stewards of capital and that they can produce attractive returns to investors relative to the risk they assume.  If these managers do not have a sufficient number of realizations in their predecessor portfolios, they will have to create a track record by selling off interests in single cases or entire portfolios.  In this way, they will receive arm’s length validation that their portfolio has intrinsic value, with the idea that other potential investors should take comfort in the fact that a third party has assessed the attractiveness of opportunities and decided to invest at a value that is, hopefully, in excess of their original cost, or matches their internal assessment of fair market value.  Of course, this assumes that the purchaser is a knowledgeable purchaser of litigation finance assets and an expert at valuing litigation finance investments, of which few exist in the world, as valuation is perhaps more art than science. A relatively recent public example of this is Burford’s multiple secondary sales of interests in their Petersen case, which was sold in several tranches at increasing valuations as Burford continued to de-risk their investment through positive case developments during its hold period.  According to the Petersen article hyperlinked above, Burford generated $236 million in cash from selling off interests in the claim, which significantly benefited its reported profitability and cashflow, and evidently, fueled its stock price at the time.  All in all, a smart move by Burford to hedge its bets and de-risk its investment by selling down to other investors.  However, it remains to be seen whether those who acquired the secondary interests in Peterson were as astute as the sellers, time will tell. For investors, they may be in a situation where they are in a liquidity squeeze, and could be frustrated with the duration of the litigation finance portfolio and therefore wish to exit the remainder of their investment to redeploy capital into a new fund or a new strategy. They could also have had a change in management which created a shift in strategy, or any number of other causes.  For investors in individual cases or funds, they currently face a difficult task in finding a secondary investor to acquire their interests, which can be made more difficult by the fact that the manager may not be motivated to find them a purchaser, as there is no economic incentive to do so. The fate of these investors remains in the hands of the manager.  However, if there are enough investors clamoring for liquidity, then the manager may be forced to hire an investment bank or another intermediary expert to solicit the markets’ appetite and obtain bids for the portfolio; but this will come at a cost which is typically assumed by the selling investor. But is a secondary a “realization”? The short answer is NO! While a secondary can be an indication of perceived value in the market, it is simply a point-in-time estimate of value by the new, prospective owner that makes a series of assumptions to underlie their valuation. As such, it has no bearing on whether the case is more or less likely to settle or win, whether the defendant has the resources to pay, and whether it could take two years or ten years to collect. Litigation is well known to have a binary outcome.  In the context of large cases where there are significant dollars at risk, it may be in the best interests of the defendant to take the trial risk and deal with the consequences by ultimately settling for a fraction of the damages after the court decision is handed down.  In the Petersen case referenced above, it has been felt by some in the market that an award could still be years away (in the absence of collection frustration tactics that the Argentinian government may pursue); and even then, there is some concern that the decision may allow for damages denominated in Argentine pesos, which have been significantly devalued since the case began.  In addition, the Argentine government has defaulted on its sovereign debt a few times over the last numbers of years and is currently in default on its International Monetary Fund loans, so it is difficult to assess the risk of collectability. Just because you win a case, doesn’t mean you get to collect the spoils. Collection is a whole other issue and perhaps a topic for another article.  Suffice it to say, that a case is not completely de-risked until the ‘cash is in the bank’ (your bank account, not the lawyer’s trust account). So, I personally would take very little comfort in the fact that another party has looked at a case and made a decision that it has value – you would have to have a deep understanding of that buyer’s motivations (are they merely incentivized to get money invested? Are they motivated by Litigation Finance FOMO?) and that buyer’s ability to value litigation, which is difficult to do with accuracy because of the number of variables & uncertainties involved. Why are litigation finance secondaries interesting? Perhaps the better question is, “Are litigation finance secondaries interesting?” And the answer is, “It depends”. When you look at a portfolio of litigation finance single cases, there are a number of individual investments that typically resolve early in the fund’s life, and this usually gives rise to attractive internal rates of return (“IRR”), but low multiples of  invested capital (“MOIC”); then, there are those that resolve in and around the 30 month mark, which is a fairly typical duration, which should result in stronger MOICs and perhaps somewhat lower IRRs; and then, there is the ‘tail’ of the portfolio (see chart below).  The ‘tail’ of a portfolio refers to those cases that are outside of the normalized expectation for case realizations in terms of duration that reside in the portfolio near the end of, or perhaps even outside of, the investment vehicle’s life.  These cases could be outside the normal time distribution because the cases are highly complex, the defendant has tried to procedurally frustrate & delay the litigation, the case is going through a long drawn out trial or arbitral process, or the nature of the case simply takes longer (intellectual property, international arbitration, etc.) among other explanations. Often, when an investor is provided with a secondary opportunity, they are quite likely looking at investing in the ‘tail’ of the portfolio because the early part of the portfolio has already been resolved, and the proceeds have either been paid out or used to fund the cases remaining in the tail.  Investing in the tail has many implications for expected outcomes. The potential tail outcomes, as depicted with red arrows in the chart below, indicate the uncertainty in both quantum and duration of the tail. In part 2 of this article, I will explore some of the intricacies of ‘investing in the tail’ and explore considerations for investing in secondary transactions in litigation finance investments. Slingshot Insights  For those investors interested in the litigation finance secondary market, I think it is important to approach the investment with caution and a high level of expert diligence to offset the implied volatility that the ‘tail’ of the portfolio offers.  It is also important to understand the motivations of the seller – a manager looking to create a track record will have different motivations than an investor who needs liquidity.  The seller’s motivations may also offer insight into the extent price can be negotiated. It is important not to lose sight of the typical loss rate of the industry and the fact that the tail should exhibit enhanced volatility (more losses) as compared to a whole portfolio, and so an investor should model their returns, and hence their entry price, accordingly. Should you choose to make a secondary investment, consider a variety of options to de-risk the investment by sharing risks and rewards with others (i.e. insurance providers or the vendor of the asset). Above all else, make sure your secondaries are diversified or part of a larger diversified pool of assets. As always, I welcome your comments and counter-points to those raised in this article. Edward Truant is the founder of Slingshot Capital Inc. and an investor in the consumer and commercial litigation finance industry.  Slingshot Capital inc. is involved in the origination and design of unique opportunities in legal finance markets, globally, investing with and alongside institutional investors
Commercial Regulatory Issues

Does Legal Funding Generate Frivolous Lawsuits? Experts Say No

One of the most common assertions from Litigation Finance naysayers is that access to funding to pursue cases will result in frivolous lawsuits that lack merit. Claims that such filings will clog court dockets, especially at a time when delays relating to COVID are abound, continue to be rampant. But are they accurate? The second International Congress on Litigation Funding suggests that no, legal funding does not generate meritless lawsuits. Stonward explains that several arbitration experts gathered to discuss that very issue. Panelists included:
  • Antonio Bravo: Partner, Eversheds Sutherland
  • Daniel Rodriguez: Partner, CMS Rodriguez-Azuero
  • Luis Dates: Partner, Baker McKenzie
  • Heitor Castro: Portfolio Manager, LexFinance
  • Guido Demarco: Director, Stonward
Topics at hand included the assertion that litigation funding necessitates increased regulation around the globe. This is needed, some say, to prevent a flood of nuisance lawsuits that are essentially cash grabs for funders. But does that argument hold water?  First, let’s note that funding opponents assert that litigation funding “could” lead to a rise in frivolous claims. They do not assert that it has yet led there, despite Litigation Finance being a growth industry for more than a decade. Surely, if the number of meritless cases were going to increase—it would have done so by now in at least a few jurisdictions. Yet, that has not happened in any demonstrable way. Transparency and disclosure are still concerns from some anti-funding groups. This begs the question, is funding relevant to all cases? Or is disclosure a ploy by defense lawyers to obfuscate the facts of a case in favor of prejudicing a court? Panelists believe that disclosure should only follow actual relevance and avoid conflicts of interest. As such, no sweeping disclosure requirement should be legislated. Influence is another area of concern. But as LF agreements don’t allow funders to control settlement or strategy decisions, the point is essentially moot.
Commercial Deals

Legal Funding Looks Toward Interim Finance for Bankrupt Firms

Resolution professionals are increasingly turning to third-party legal funders in order to provide operating capital until liquidation is complete, or a new owner reorganizes the company. Economic Times explains that a corporate insolvency resolution process is a tenuous situation requiring a balancing act between making payments and keeping the business going. When lenders refuse to provide the needed funds, third-party funders can provide interim funds to cover costs. This type of financing, called debt-in-possession, has become increasingly popular in Australia, Canada, the US, and the UK. LegalPay CEO Kindan Sahi says that the India-based funder is targeting mid-market clients to fund these ongoing concerns until firms can support themselves.
Case Developments Commercial

Galactic Pulls Out of Hog’s Breath, Priceline Class Actions 

Levitt Robinson, class action lawyers leading the cases against Priceline and Hog’s Breath, estimate that it will take over $8 million to continue the Priceline case. The case is now in jeopardy, as funder Galactic Litigation Partners has pulled its financing. Executive Franchise Business details that class actions claimants in the Priceline case are likely to discontinue their pursuit of the case now that funding has dried up. The Hog’s Breath case is unfunded, and an order to provide $1.23 million in security for costs is outstanding. With one case being withdrawn and one on hold, it’s unclear if Levitt Robinson will be able to court the funding necessary to continue either claim.  
Commercial Deals

Litigation Funder Focuses on High Volume of Small Claims 

The United Kingdom is home to The Catch Litigation Fund (KLIF), a litigation investment portfolio that saw returns of about 16% during 2021. Traditionally, many ligation portfolios focus on a small number of high value claims, with long timelines for successful execution. What makes KLIF different is that managers invest in a high volume of lower value claims, with a shorter duration to maturity.  G., Opalesque Geneva recently issued a report on KLIF’s performance. Launched in 2020 with $56M, the fund focuses on financial services sector claims for investment. With an average loan of $6.7M, KLIF sports an average time for return on investment of just three to 24 months.  Organization is key to KLIF’s approach, and by partnering with attorney’s directly they are able to source claims with shorter overall durations. With this structure, the fund is able to loan directly to the firms representing cases. KLIF is run by Katch Investment Group, with offices across the UK, Europe and South America. Founded in 2018, the alternative investment fund manages over $800M in assets.
Commercial Deals

Omni Bridgeway Funds NovelStem Arbitration

The stem cell biotechnology firm NovelStem International Corporation has launched arbitration proceedings against NetCo Partners to maximize value from legacy entertainment publishing assets. Omni Bridgeway has been announced as the litigation funder backing NovelStem’s ambitions. NewsFileCorp.com’s press release on the developing matter outlines that NovelStem’s Chairman plans to extract value from their 50% stake in Netco Partners. Netco’s publishing arm, Net Force, has generated over $24M in total revenue since inception, and NovelStem anticipates substantial returns may be captured across digital, media and entertainment pillars.   NovelStem’s Chairman further details that litigation investment by Omni Bridgeway is enabling flexibility for broader investment in NewStem Ltd. Over the coming months, NovelStem plans to brief investors on the success of the NetCo Partners litigation and growth of NewStem Ltd.’s new investment dollars. 
Consumer

Lion Air Flight 610 Victim’s Fund Embezzlement Probed by California State Bar 

With $2M missing from the Lion Air plane crash victims fund, California’s State Bar fears that disgraced attorney Tom Girardi may have embezzled the funds. Mr. Giradi was disbarred this past August, however, it appears that California investigators may have fallen prey to free gifts, plane rides and expensive wine from Girardi … allegedly tainting justice in the process.    DailyMail.co.uk reports that the State Bar of California is launching a new investigation into their handling of Tom Girardi’s potential malfeasances. The question is if Girardi has been able to buy his way out of discipline by California officials. A federal judge froze Girardi’s assets in 2020, after growing concern that he routinely misappropriated settlement funds to bankroll his Beverly Hills lifestyle.  Recently, Girardi was diagnosed with dementia and late stage Alzheimer's. Girardi has previously been sued by a slew of Law Firm Funders, each of whom made financial misappropriation claims against him. 
Case Developments Commercial

Lead Mine Owners Face Human Rights Class Action 

Augusta Ventures is funding a lead poisoning class action that may include more than 100,000 Zambians. London human rights attorneys at Leigh Day have collaborated with South African Mbuyisa Molee attorneys to file the class action lawsuit against Anglo American South Africa Limited (AASA).  Bloomberg.com reports that an AASA spokesman says that the suit is bogus, misdirected and completely opportunistic. The lawsuit alleges that AASA managed the mine in question, and for years contributed to toxic exposure to lead. Proponents further argue that lead exposure has damaged waterways adjacent to the mine. AASA’s parent company, Anglo American Plc, reported revenue of $30B in 2020, which leads many experts to suggest that the firm will look to string out any forthcoming litigation claims.  Augusta Ventures has taken on funding of the lead mine litigation class. Augusta is funded by the $2T asset management firm, Pacific Investment Management Company. With Augusta on board, it would appear that outgunning justice may be difficult for AASA over the long term. 
Case Developments Commercial

PriceRunner Launches $2.4B Anti-Competition Claim Against Google

After a seven year investigation, the European General Court upheld a $2.7B fine for Google’s breach of antitrust laws, for providing Google Shopping preference over competitors. Now the Swedish price comparison company, PriceRunner, has filed its own $2.4B claim against Google for cultivating anti-competitive behavior that allegedly disenfranchised PriceRunner’s business. CNBC.com reports that PriceRunner views the claim against Google as part of a pattern of anticompetitive behavior that has caused significant consumer suffering and has stifled entrepreneurial innovation. Furthermore, PriceRunner suggests that Google has not complied with the European Union’s ruling on abusing its search engine’s dominant position.  PriceRunner was recently acquired by the fintech firm Klarna. Similar to purchasing a litigation claim, PriceRunner’s new owners want Google to pay for PriceRunner’s lost revenue in the United Kingdom, Sweden and Denmark. The theme of reverse regulatory arbitrage is seemingly what PriceRunner hopes to profit from regarding this claim. 
Case Developments Commercial

Billionaire Seeks Litigation Bankruptcy Protections 

Guo Wengui, a notable Chinese billionaire with close connections to Republican advisor Steve Bannon, has filed for Chapter 11 bankruptcy protections. Recently, a court ordered Wengui to pay $134M in restitution after being accused of avoiding debt collection. Wengui stresses that his debts are not related to any business expenses. Wengui shares that his debts nearly all stem from litigation expenses attributed to claims and judgments against his various enterprises.  Politico.com reports that a judge has sought to seize Wengui’s yacht, previously anchored in New York. Wengui argues that he is not an owner of the yacht, but authorities have tracked the vessel, which was moved from New York Harbor down to the Bahamas. Wengui was given five days to pay a fine associated with the yach’s departure from New York against court order. Releasing a statement on social media, Wengui suggests he must file for bankruptcy given his debts may be close to $500M. He further claims that currently his net worth is somewhere between $50,000 to $100,000.  Mr. Wengui amassed a real estate fortune before going broke, according to Politico.com. Wengui’s relationship with Donald Trump advisor Steve Bannon is subject of watercooler discussion, this after Bannon and Wengui partnered to launch the G-TV media company.
Commercial

LexShares’ Litigation Funding Marketplace Review

With the pandemic beginning to ebb, the numbers are in and point to an increase in litigation funding across global markets, with some lawyers reporting up to 70%+ uptick in business. Correspondingly, litigation funders are seeing a near 60% uptick in business during the same period. Disclosures are still a hot topic for the industry, with only two high profile discovery disclosures during 2021.  LexShares recently released their industry outlook profiling the fourth quarter of 2021. Research figures suggest that over 20% of attorneys plan to explore the benefits of litigation investment in the near future. The single case is still the bread and butter of litigation finance, claiming over 50% of overall litigation business revenues. That said, asset class diversification of ligation investment is prospering, with portfolio and counterparty organization a major target for many funders.  LexShares attributes non-conformity to disclosure regulation as a positive situation, while the industry solidifies jurisdictional clarity. LexShares points to a more opaque scenario in terms of attorney compensation with the rise of litigation finance. Some suggest that partner salaries are the major beneficiaries of the industry's success.    Check-out LexShares’ full research, which outlines key facts and figures pertaining to litigation investment.
Commercial Legal Innovation

Claimants in Brazil Seek Faster Rewards 

Four years and three months; that is the average time it takes to be rewarded with justice in Brazil, according to research data released by Brazil’s National Council of Justice (CNJ). Four years to win a claim can then lead to a lifetime of seeking to execute any monetary judgements. Four years is a long time for the potentially guilty to shift cash and assets across Brazil and abroad, in a bid to exhaust any potential victims.  Fecomercio.com recently profiled the idea of claimants having the opportunity of selling their claim, or having a third party investor cover legal costs on their behalf. The benefits of this are twofold, 1): The claimant does not have to worry about funding the claim throughout the judicial system, and 2): Oftentimes, when the claimant is funded by a reputable third-party, the potentially guilty cave to pressures related to facing the heavy hand of justice.  Fecomercio.com is right to suggest that litigation funders are tasked with the responsibility of evaluating the merits of cases that come before their review. More and more, technology is being engaged to assess the validity of a claim being investable. As litigation finance continues to flourish, it may become a powerful cross-border exercise in linking technologies, where appropriate. 
Commercial

The Czech Republic’s First Litigation Funder

The Czech Republic is beginning to embrace litigation finance with the announcement of the country's first litigation investment firm, LitFin. According to Ondřej Tyleček, a partner at LitFin, the agency plans to model itself after other successful European Jurisdictions such as Germany and the United Kingdom.  Pravniprostor.cz recently profiled LitFin’s journey in the Czech Republic. Basically, LitFin is taking a successful blueprint for litigation finance and promoting the concept with hopes of exponential rewards. LitFin seems to be funding personal injury claims, which the firm itself represents (legally) in some cases. LitFin suggests that their investment in the space is a legacy play, with hopes that access to justice in the Czech Republic will increase, given the company’s funding initiatives. As litigation funding is a novel practice in the Czech Republic, LitFin’s emergence may help usher in standardized regulation. We’ll have to wait and see. 
Consumer

Politician Alleges “Lawsuit Abuse” Against Consumer Legal Funders

Is there “lawsuit abuse” happening in Iowa and elsewhere? If so, is Consumer Legal Funding to blame? One former trucker and current Iowa state senator alleges exactly that—and Governor Kim Reynolds is on board. Several bills are in the works to limit award sizes and prevent litigation funders from increasing access to justice for those who have been hurt in traffic accidents. Transport Topics News details that Republican state senator Adrian Dickey (owner of a transport company and board member of Iowa Motor Truck Association) wants to outlaw the use of litigation funding to sue trucking companies. But isn’t there a conflict of interest when the owner of a trucking company introduces a bill which protects his own company from well-funded lawsuits?  According to “experts,” consumer legal funding is on the rise and puts defense attorneys at a disadvantage. While it’s true that the funding industry is growing, it’s equally true that funders seek out cases with merit. Funding a weak case is financially irresponsible and would deplete cash reserves that could be used to support stronger, more meritorious claims. At present, Dickey’s bill SF 2085 has not moved forward. Some felt the bill required a clarifying amendment defining the ‘litigation funding’ it hopes to ban. If passed, the bill would make Iowa the only US state to outlaw third-party legal funding, leaving many average citizens without recourse should they require legal representation. Governor Reynolds spoke out in favor of the bill that advocates for a $1 million limit on awards in cases involving trucking accidents and medical malpractice. But who does this bill protect? Not legal professionals, and certainly not those who have been injured by medical malpractice. The question then becomes, who is advocating for them?
Commercial Fundraising

Funders Continue Raising Large Capital

The litigation funding boom continues. LionFish (owned by RBG Holdings) recently agreed to a GBP 20 million funding deal. Balance Legal Capital recently raised GBP 130 million for a new fund—tapping eight institutional investors. With this, Balance’s total assets under management have surpassed the GBP 20 million mark.

Legal Futures UK explains that Balance now has access to even more co-investment capital from investors. Robert Rothkopf, managing partner, stated that this is the second multi-investor fund launched in two years. He went on to say that this demonstrates an ongoing and fervent demand for the services the company provides.

LionFish, which is part of RBG Holdings PLC, funds cases run by lawyers outside RBG. Its recent deal with a sizable alternative investment firm means that the firm will fund 75% of all cases over the next two years. LionFish then would be eligible to collect a significant share of returns after the return hurdle is met. This could provide the potential for high returns well beyond LionFish’s initial investment.

LionFish will also have sole discretion on the cases they pursue, and exercise great capital flexibility. This allows the funders a more diversified risk portfolio while moving away from the current investor sales model. Managing director Tets Ishikawa explains that the new arrangement will allow for greater funding investment without returning to deployment-focused management with lower margins.

Burford Capital has made over AU $1.1 billion in new funding commitments, deploying roughly AU $841 million. Case realizations have remained lower than expected, however, due to court delays and stoppages caused by COVID. Still, as Chief executive Christopher Bogart details, writing over a billion dollars in new commitments during a pandemic is an impressive feat. It also bodes well for future returns, as these cases come to fruition.

Commercial Regulatory Issues

Should We Be Concerned About Funder/Law Firm Partnerships?

As the litigation funding industry grows, many newcomers are flocking into the sector. This in turn has led to a number of mergers and new partnerships between funders. But what about partnerships between legal firms and litigation funders? Is this a conflict of interest? Will clients be limited in their choice of funders? MONDAQ reports that there are strong arguments to be had on both sides of the issue. While it can be true that clients may feel some pressure to accept funding from those associated with their legal firm of choice, these partnerships can also increase the client’s chances of getting appropriate funding for their case. This, of course, increases access to justice. Most clients are looking for fast access to funding capital, and to fully understand the terms they’re agreeing to. If clients are getting this, choice of funders will likely take a backseat. Some jurisdictions may still maintain prohibitions on champerty and maintenance, which then have to be excised or diminished in order to allow legal funding to operate effectively.
Commercial Regulatory Issues

Singapore Introduces Path to Conditional Fee Agreements

Singapore recently passed a Legal Professional (Amendment) Bill that permits CFAs (conditional fee arrangements) in international arbitrations. This change, introduced by the Legal Professional (Amendment) Act 2022, is said to improve the options to share risk among the involved parties. Burford Capital explains that these reforms represent a natural progression of Litigation Finance in international arbitration cases, which was adopted into law in Singapore in 2017. The legislation is similar to what was passed in Hong Kong last year, which uses outcome-related fee structures for arbitrations. Singapore is poised to become a destination jurisdiction for certain types of cases—and this legislation promises to expand that. To wit, Singapore is currently on par with London as a preferred locale for arbitration. Runaway legal costs have increased demand for flexibility in payment structures and risk tolerance. The new legislation promises to give Singapore a more competitive standing, as many surrounding jurisdictions already allow a greater array of risk-sharing options. This will also be a benefit to those pursuing arbitration—affording parties access to better legal representation and minimizing legal costs. That begs the question: Who is best able to take on the risks associated with these cases? Litigation Finance professionals can provide funding as they take on the risk associated with the cases they choose to fund. Funders are adept at evaluating cases for funding, ensuring that the most meritorious cases have their day in court. Those funders who already maintain a presence in Singapore are perhaps best suited to take advantage of this new legislation.
Announcements Consumer

Oasis Financial Becomes Libra Solutions as Offerings Grow

Oasis Financial announced today the change of its parent company name to Libra Solutions. The change was filed on January 10, 2022, and the company formally launched the new name February 23, 2022. “The name Oasis Financial is synonymous with pre-settlement funding, and it will remain the name of the country’s preeminent pre-settlement funding solution,” said Greg Zeeman, Chief Executive Officer of Libra Solutions. “But our recent growth and acquisitions significantly expand our ability to support current and new customers and necessitated a name change. We are much more than pre-settlement funding, and it is time for a name to match.” The growth of the Oasis Financial portfolio began in 2017 with the acquisition of Key Health, a California-based leader in medical lien funding. In 2021, Oasis Financial acquired Probate Advance, the largest provider of inheritance funding, and that same year, Oasis Financial joined forces with MoveDocs, a Nevada-based provider of medical lien management technology. Together, the portfolio offers solutions for heirs with inheritance in probate, personal injury plaintiffs awaiting settlement, and the attorneys and healthcare providers dedicated to helping them recover. “We chose the name, Libra Solutions, as a reflection of what we do,” said Zeeman. “Libra is Latin for ‘scales,’ as in the scales of justice. Our product portfolio helps balance the scales of justice for those involved in long, drawn out legal processes – providing financial options to help wait it out, and technology to help speed it along, so everyone has a chance for a fair outcome.” About Libra Solutions Libra Solutions works closely with customers and industry advisory groups with one focus – to help level the playing field in slow-moving legal processes. With origins dating back to 1996, we were founded by attorneys, healthcare providers, and innovators who saw that the legal system was not working for many. Today, our solutions have helped hundreds of thousands of clients, their attorneys, and medical providers achieve positive outcomes through funding and technology to speed and transform cumbersome processes. Libra Solutions continues to innovate, leveraging technology and financial strength to help plaintiffs, heirs, and those who serve them succeed. As of December 2021, Libra Solutions has helped over 750,000 clients, their attorneys and healthcare providers overcome slow moving legal systems. To find out more, visit www.librasolutionsgroup.com.
Commercial

Third-Party Funding Utilized by Resolution Professionals in India

Insolvency is a growing problem for businesses, especially in light of the COVID pandemic. Recently, an indebted company in Faridabad, India, was able to raise enough interim funds to cover the operations budget, despite being in the midst of insolvency. Economic Times India details that during the Corporate Insolvency Resolution Process, RPs must pay processional fees, for maintenance of machinery and workspaces. When companies cannot meet these expenses, RPs are increasingly relying on third-party interim finance. This concept is called debt-in-possession, and has become increasingly popular in Australia, Canada, the UK, and the US. LegalPay, one such funder, targets mid-market businesses for interim funding in India. Recently, LegalPay provided funds to allow Yashomati Hospitals to continue to run through the insolvency process. This type of funding is gaining steam throughout the region, where insolvency laws have recently expanded to welcome the use of third-party legal funding. As one legal professional put it, investors are willing to invest when there’s certainty toward recovery—especially for manufacturing companies or those involved with infrastructure.
Commercial Deals

How Litigation Finance Can Help with COVID Claims

Despite our best efforts, COVID is still raging. Precautions, closures, delays, and supply chain issues persist. What can businesses do to mitigate the effects of COVID? Omni Bridgeway notes some important things companies and legal teams need to consider as COVID continues to impact us. First, we need to appreciate that limitation periods may be expiring. Companies that have set aside legal claims like various commercial disputes, breach of contract, and even IP matters may find that deadlines to file may be nearing expiration. That said, legal funding may allow these businesses to pursue claims without adding debt to balance sheets. Funders can also help determine which cases are viable to pursue, and which aren’t. Opportunity exists for those who strike while the iron is hot. COVID has introduced unprecedented opportunities for mergers, public offerings, expansion, and attracting new talent. Third-party funding can provide businesses with the funds they need to pursue these opportunities. Funders can also assist in enforcing awards from slippery sources. While COVID is not a legal excuse for violating contracts, courts have come to accept that the definition ‘ordinary course’ has changed due to the virus. No business should be expected to operate as if COVID was a non-issue. Still, funders can determine whether a case exists when clients believe they’ve been harmed by COVID-related conduct.
Commercial People Moves

Validity Finance Welcomes Michelle Eber

US-based legal funder Validity Finance is pleased to announce the addition of Michelle Eber to its team. Validity Finance details that Eber will handle patent cases, including vetting new cases for funding and the management of existing cases. Formerly of Baker Botts, Eber has a degree from the University of Texas Law with honors, and graduated magna cum laude from the University of Pennsylvania. She is reportedly thrilled to join the team, and looks forward to helping clients maximize the value of IP assets.
Announcements Case Developments Commercial

UK Competition Appeal Tribunal Certifies Collective Action Against Shipping Companies For Overcharging Customers

The UK Competition Appeal Tribunal (CAT) has certified a collective action against multiple maritime car carriers who operated an illegal cartel to manipulate car shipping prices. Certification clears the way for the class action filed by consumer rights champion Mark McLaren, who has instructed has instructed Scott+Scott UK LLP as solicitors on behalf of consumers and businesses who purchased or leased new cars or vans, to proceed to trial. Over 17 million cars are said to have been affected by a price-fixing scheme run by the named international shipping firms. If the collective action is successful, anyone who bought or leased an affected vehicle will be automatically entitled to compensation. Customers affected include those who bought from Ford, Vauxhall, Volkswagen, Peugeot, BMW, Mercedes-Benz, Nissan, Toyota, Citroen and Renault between October 2006 and September 2015. The claim value is up to £60 per new car bought or leased and class members will be able to claim in respect of more than one vehicle. Anyone who wishes to register their interest can do so here: https://www.cardeliverycharges.com/ The proceedings against Nissan Motor Car Carrier Co. Ltd, Kawasaki Kisen Kaisha Ltd, Nippon Yusen Kabushiki Kaisha, Eukor Car Carriers Inc and Compañía Sudamericana de Vapores S.A. were filed in February 2020, following the European Commission’s decision in 2018 to fine these shipping companies €395 million for fixed prices and rigged bids for roll-on, roll-off (“RoRo”) transport of vehicles. The claim, estimated to be worth £150 million, seeks to recover damages for individual customers and businesses who overpaid for their car as a result of higher delivery charges. This differs from earlier claims filed in relation to the RoRo cartel that represented car manufacturers. Scott+Scott is a specialist dispute resolution firm at the forefront of the evolving collective action regime in the UK judicial system. Scott+Scott is working with an experienced barrister team led by Sarah Ford QC of Brick Court Chambers. Woodsford Litigation Funding is funding the collective action. Mark McLaren said: “The CPO is a crucial step in our case, and we are delighted at the CAT’s decision to authorise our claim to move forward. We look forward to securing compensation for the millions of UK consumers impacted by the cartelists’ illegal behavior” David Scott of Scott+Scott UK LLP said: “This is an important judgment for class members, but also for the UK collective actions regime as a whole.  When granting the collective proceedings order, the Tribunal correctly noted that collective proceedings such as this claim are important for ensuring that wrongdoers like the shipping companies modify their behaviour.” For additional information or to register interest please visit https://www.cardeliverycharges.com/
Commercial Fundraising Legal Innovation

Validity Launches New Fund to Support the Wrongfully Convicted

When people serve hard time for a crime that they did not commit, the entire societal fabric suffers. And when the innocent are eventually vindicated, oftentimes they face a difficult re-acclimation process back into normal life. Validity Finance has stepped in to help right these wrongs with a groundbreaking new fund.  Announcing the new fund this month, Validity plans to help cover living expenses and legal financing to pursue civil claims for the wrongfully convicted. Sometimes decades after being initially incarcerated, just the idea of freedom is the only hope a human being can dream of. The thought of a long fight for remuneration may seem too onerous to take on. Validity aims to help ease such pains with its new exoneree fund.  To help get selected individuals off the ground, Validity will provide up to $100,000 for those who have been vindicated after five or more years of incarceration. The fund aims to work with state, county or city governments to right the wrongs.  Read more about Validity's new exoneree fund by clicking here. 
Announcements Consumer

Alliance for Responsible Consumer Legal Funding (ARC) Teams Up with Money Management International (MMI) to Offer Customers Access to Financial Resource Site

The leading trade association for the consumer legal funding industry, Alliance for Responsible Consumer Legal Funding (ARC), a nonprofit organization, announces the relaunch ARCFinanciallyFit.com (Financially Fit), a website providing consumers with tools to achieve financial wellness, bolster emergency savings, and better prepare for a rainy day. ARC teamed up with the nonprofit Money Management International (MMI) to offer an easy-to-digest web platform. ARCFinanciallyFit.com presents the best expert resources to help consumers combat a financial crisis, form healthy spending habits, and prepare for the future. The site also offers free one-on-one budgeting help through partnership with MMI, one of the largest and longest-serving financial counseling agencies in the country. “Unfortunately, most Americans are living paycheck to paycheck, and if that income stream gets interrupted, they start to spiral,” said Eric Schuller, President of ARC. “When an emergency is thrust into a consumer’s life, like a car accident or a personal injury, they usually need some help in getting through those difficult times. By providing resources like ARCFinanciallyFit.com, ARC Members can be an ally to consumers on their journey to long-term financial wellness.” A 2021 survey by PYMTS.com found that up to 70% of millennials live paycheck to paycheck. This further illustrates a significant financial gap many Americans face in the event of an emergency situation, such as an automobile accident or sudden injury. The same study found that even a significant number (39%) of those earning over $100,000 a year are living paycheck to paycheck. “Consumers reach out to us because they are in a bind financially and they are in need of assistance,” said Charles W. Price, CEO of Capital Now Funding, an ARC Member. “Offering our clients a resource like ARCFinanciallyFit.com enables us to continue helping clients long-term, not just for their short-term financial needs. Financially Fit is an excellent resource and one we hope consumers will utilize to help them regain their financial footing.” “Our entire mission is to help those in need,” added Reid Zeising, Founder and CEO of Cherokee Funding, another ARC Member. “We are committed to access to care for all, and the ability for plaintiffs to meet short term financial needs while awaiting a fair settlement. When settlement does come, we believe ARCFinanciallyFit.com will provide essential nonprofit guidance and resources to our clients, and we look forward to sharing this important resource with them.” ”Regardless of age or income level, financial emergencies often lead to feelings of embarrassment and shame among impacted individuals,” said Jim Triggs, President and CEO of MMI. “Research has shown that stigma and fear of judgment prevents many consumers from taking action, but confidential and compassionate help is just a click or phone call away. Our experienced, certified, and empathetic counselors welcome ARC Member customers to lean on MMI as they navigate the financial challenges that come with life’s unexpected twists and turns.” About ARC The Alliance for Responsible Consumer Legal Funding (ARC) is a diverse coalition of consumer legal funding providers, consumers, academics, community activists, policy makers, and other supporters. It was established to preserve legal funding as a choice for the many Americans who have suffered an unexpected economic loss due to an accident and have a pending legal claim. Legal funding can help families pay for immediate personal needs such as rent, mortgages, car repairs, utilities, and groceries while they wait for their claims to settle fairly. ARC promotes practices and regulations that lead to informed decisions between individuals and their attorneys, so that families have more options—not fewer. ARC advocates at the state and federal levels to recommend regulations that preserve consumer choice. ARC member providers handle the majority of all legal funding transactions in the United States. About MMI Money Management International (MMI) is changing how America overcomes financial challenges. MMI helps create, restore, and maintain a life of financial wellness through empowered choices. For over 60 years, our clients have achieved financial confidence through nonprofit programs that educate, motivate, and liberate. MMI inspires action by delivering expert professional guidance and timely solutions aligned with our client's goals. Experiencing a financial challenge? Find your solution 24/7 at 866.980.2227 and MoneyManagement.org.
Announcements Case Developments Commercial

Court decides that groundbreaking £150m class action on behalf of UK car buyers can proceed

London’s specialist competition court, the Competition Appeal Tribunal, has today given the green light to a class action on behalf of millions of motorists and businesses, who bought or leased a new car between October 2006 and September 2015, to claim against 5 shipping companies that imported cars into Europe.

The European Commission (EC) has already found that the maritime car carriers fixed prices, rigged bids and allocated the market for roll-on, roll-off (“RoRo”) transport.  According to the EC, the carriers had agreed to maintain the status quo in the market and to respect each other’s ongoing business on certain routes, or with certain customers, by quoting artificially high prices or not quoting at all in tenders for vehicle manufacturers.

The class action, which benefits from significant financial backing from Woodsford, follows on from the EC decision. It is one of the first of its kind to be filed in the UK and is estimated to be worth around £150m in damages for car buyers.

The Tribunal has authorised the claims to continue as collective proceedings, meaning that millions of motorists and businesses who bought or leased a new car between October 2006 and September 2015 could be in line for compensation because of the additional cost passed on in the price of their vehicles by the higher transport charges which resulted from the operation of the cartel. These individuals and businesses will now automatically be represented at court, unless they choose to leave – or opt out – of the claim.

The Tribunal confirmed that a special purpose company led by Mark McLaren, formerly of The Consumers' Association, will act as the Class Representative. He is represented by the London office of international law firm Scott + Scott, and barristers from Brick Court chambers, funded by Woodsford.

Woodsford’s Chief Investment Officer, Charlie Morris, commented: “This is an important milestone in the promotion of collective redress in the UK, which allows consumers and small businesses to achieve compensation for the wrongs committed by big business. Woodsford, a business dedicated to holding corporates to account and delivering access to justice, is proud to support Mr. McLaren, who is now much closer to obtaining compensation for the millions of consumers and businesses who have been overcharged.”

Steven Friel, Woodsford’s Chief Executive Officer, commented:  “This is a huge success for consumer redress in the UK, and I am proud of Woodsford’s significant part in it. This victory in Mark McLaren’s case relating to car delivery charges follows hot on the heels of a similar victory in Justin Gutmann’s case relating to train fares. Both are backed by the team here at Woodsford, which is now clearly established as the most successful ESG and litigation finance business in this area of UK collective redress. My only regret is that big corporate defendants, even after they have been found to have acted unlawfully, continue to use their significant legal and financial resource to fight technical arguments, with the goal of delaying compensation payments to consumers. The cartelists in this case should not have objected to certification of this class action. Now that the Court has thrown out their futile objections, they should settle the case and allow UK consumers to receive the compensation they are owed.”

Individuals and businesses who bought or leased a new car or van in the UK between October 2006 and September 2015 should visit cardeliverycharges.com.

About Woodsford

Since 2010 Woodsford has been helping to hold corporates to account for their egregious behaviour. Whether it is helping consumers achieve collective redress, ensuring that inventors and universities are properly compensated when Big Tech infringes intellectual property rights, or helping shareholders in collaborative, escalated engagement up to and including litigation with listed companies, Woodsford is committed to ESG and access to justice. Working with most of the world’s leading law firms, our strength lies in the combination of our legal experience, investment, business and technical expertise, together with significant financial resources.

Woodsford is a founder member of both the International Legal Finance Association (ILFA) and the Association of Litigation Funders of England & Wales (ALF).

Litigation Finance News
Commercial Special Features

Key Takeaways from LFJ’s Special Digital Event–Litigation Funding in 2022: What to Expect

This past Tuesday, Litigation Finance Journal hosted a panel discussion and Q&A with a global swathe of litigation funding experts. The subject was key trends facing the industry in 2022, and the panel did not disappoint by delivering in-depth responses across a broad array of subjects.

The event was moderated by Peter Petyt (PP), Co-Founder of 4 Rivers Services. Panelists included Tets Ishikawa (TI), Managing Director of Lionfish in the UK, Stuart Price (SP), Co-Founder of CASL in Australia, and Molly Pease (MP), Managing Director of Curiam Capital in the US.

Below are some key takeaways from the discussion:

PP: Stuart, I’d like to get your view on this: Is there an ideal portfolio that a funder might invest in, in terms of the numbers of cases, the types of cases, the size of cases?

SP: I think that’s an interesting question, Peter. I come at it from a first principles perspective and it’s portfolio theory 101, so we’ve got to salute a problem within the law firm that they’re looking to solve, and we’re trying to tailor a solution for them. I think ultimately portfolio theory says you need diversification...you need to have the ability that you can spread the risk across multiple cases, so really depending on the nature of what the problem is, you may structure a portfolio to be thematic...and when I say thematic, it might have an insolvency or flavor or class action securities flavor because that’s a problem that you’re trying to solve. But really, the art and design and pinning together of portfolio funding is probably understanding what the problem is, and I think starting from that you need to have the diversity across a number of cases. I’d look and see on a portfolio, you certainly shouldn’t have more than ten percent in one case. I think logically that follows that you have to have at least ten cases then, that concentration and manage properly. But I think that defining the ideal portfolio is a very difficult component because you’ve got to start at first principles. I think the duration is important to consider, long and short, and dated assets, jurisdiction and common issues that may arise when you get a contagion risk in particular cases. You’ve got to consider the return profile and ideally you want to mix those factors all together and ensure that you’ve got the diversification, ensure that you’ve got an appropriate funding source to actually meet what the client ultimately is wanting, and put that all together and deliver something that’s tailored, I really push back against us as litigation funders defining what the product law firms or corporates want. We should listen to what their problems are, and tailor something to their requirements.

PP: Molly, obviously Curiam has been around for a while now, and I’m assuming you’re seeing an increase in uptake on portfolio funding from law firms, more inquiries, more interesting opportunities being presented to you?

MP: Yes, it’s definitely become more prominent than it was four years ago when we started. I really think there is not an ideal portfolio. I think it’s so dependent on the circumstances and there are so many different ways to do it, that can all work out well for all the parties involved. You could have a portfolio that is a collection of cases all for one claimant, and maybe they have one case that’s very very strong and very likely to succeed, and has significant enough damages to be able to cover a number of other cases, or are maybe a little bit more of a long shot or have more binary risk or whatever it is. So they may see some benefit in being able to pursue all of the cases, and maybe have the handful of cases that aren’t as strong free ride a little bit off the really strong case. So that could be an instance where you have a small portfolio, but it might make a lot of sense in that context, versus the other end of the spectrum where you could have a law firm trying to pool together a number of different cases for different clients across different practice areas that really have quite a bit of diversification. And that’s probably a little bit more work to figure out the appropriate pricing on that. But I think it’s certainly doable, and I think at every point in between there are portfolios that make sense. So I agree with Stuart, that you just have to understand the situation, what the law firm and the clients are trying to accomplish. I think there’s almost a portfolio that makes sense of all different types. So it’s very broad and I think there’s a lot to consider.

PP: Yes, I can see that there isn’t necessarily an ideal portfolio, you need to look at each one as a separate entity. Tets, I was wondering what your views were, being someone from the investment banking background on pricing for portfolio funding? Clearly, if you can get it right, the costs of capital for portfolio funding structure should be significantly better than just looking at single case funding. Shouldn’t it?

TI: Absolutely. I mean I started in fixed income but I was actually doing credit portfolios and that’s just heavily involved in a lot of the early days of the credit indexes, which are now part of the standard credit benchmarks. When we were constructing those portfolios, we were saying basically a combination of both the principles of 101, of keeping it diverse but also at the same time having to be relevant to the actual market that you want, which in this case is the client base. In terms of pricing, of course diversification is always going to work, but I don’t think diversification necessarily means looking through different types of cases. What you have to also factor in, is also the alignment of interest and the areas of expertise that the law firm has. So you can have a firm that’s specialized in one type of law, the diversification comes just from the cases themselves because each case is so sufficiently different that the fact that they’re in the same area of law doesn’t necessarily mean that they’re correlated. And that in itself brings down pricing. But what does also help bring down pricing at least on an academic level, and whether this translates to another market is another matter, but on an academic level when you have diversification and you have strong skills which back it up and an alignment of interest by the people running the claims, then absolutely pricing should be reduced to reflect those risk mitigants.

PP: What we want in the market are well-funded, well-capitalized, well-run funds. And certainly, there’s been some issues recently. In the UK, Affinity went into administration, Augusta had to shed half of its staff, move to other premises, restructure its lending agreement with lenders. Vannin got subsumed into Fortress, so clearly there were some business model issues, probably has something to do with working capital during the time it takes for cases to resolve. Stuart, I don’t know what your view is on this, but I would have thought there’s a need for consolidation at some point, amongst the funder market, what’s your view?

SP: Consolidation in the traditional sense of funders or businesses—I think is probably not likely. I think you’ll have a bit of exits from the industry. You will have groups of people leaving one funder and joining or establishing another funder. So I think you will have an aggregation and consolidation, but not in the traditional sense of a mergers and acquisitions approach. I don’t think that necessarily is the nature of this market—unless you’re getting together two very large funders or two very established funders, and taking a global view on the market.

PP: We’ll see. I think you’re right that there will be movement between funders, there’ll be split-off groups and I think there might be some traditional, good old fashioned M&A at some point. But it’s an evolving market so we’ll see. 

Let's move onto blockchain crowdfunding platforms—do you as panelists see this as being an interesting way of raising money for you funds?  

TI: We don’t actually manage money, so we don’t really think about raising capital. As a business model, I think it’s a slightly different business model to be raising money. So I don’t have a particular view on that. Having said that, I don’t really understand blockchain. That’s not to say ‘therefore it’s bad.’ Just that I don’t have the intellectual capacity or the ability to understand it as things stand. But yeah, it’s certainly been very successful in other markets at raising capital. And if it means raising cheaper capital and it means raising and passing some of that benefit onto the end users of litigation, then I don’t think that can be anything but a good thing.

LFJ will be hosting more panel discussions with audience Q&As throughout the year. Please stay tuned for information on future events.