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Announcements Consumer

LFJ Hosts a Special Digital Conference on “Investor Insights into Consumer Legal Funding” 

Litigation Finance Journal has announced an upcoming roundtable discussion on third-party legal funding. A panel of institutional investors will discuss their thoughts on Consumer Legal Funding as an asset class. This special event will be held April 13 from 11:30 am-12:30 pm EST. Tickets can be found here.  This digital conference will be moderated by Dan Avnir, Managing Director of Bryant Park Capital. Featured panelists include Ben Kaplan, Co-founder of C9 Partners, Don Plotsky, Co-Founder of Uinta Investment Partners, and Michael Morris, Managing Director of Northleaf Capital Partners.  Topics to be covered will include:
  • The unique challenges of investing in litigation
  • How do institutional investors vet fund managers?
  • Expected returns, risk/reward profiles, and manager best practices
  • Predictions for the future of the industry
There will also be a Q&A with attendees after the panel discussion. Tickets are available now.  Please note: The event will be recorded, and all who purchase a ticket will receive a link to the recording. 
Commercial

COVID as a Factor in Securities for Costs

An order for securities for costs is meant to ensure that defendants can receive remuneration from an unsuccessful plaintiff. Monies are verified or set aside until the case is completed. If a securities for costs order is not met, a case may be dismissed. For the courts, deciding whether this is necessary can be a balancing act that weighs the hardship of a defendant who cannot recover costs, versus the financial burden to the plaintiff. LCM details one case that illustrates the precarious nature of this balancing exercise. The case is Grocon Group Holdings Pty Limited v Infrastructure NSW (2020) NSWSC 1194, which involves accusations of deceptive and misleading conduct during the bidding for the Central Barangaroo Development. INSW requested that Grocon be ordered to put up security for costs. The law says that to ask for securities for costs, the defendant is responsible for demonstrating that the plaintiffs may not be able to pay the costs if necessary. INSW used Grocon’s own financial reports that demonstrated more liabilities than assets. Grocon declined to provide evidence to the contrary. Interestingly, the judge did say that the impact of COVID might have influenced his order for securities for costs if Grocon had submitted evidence to that effect. Another recent case referenced by the judge held that if a business is significantly disrupted due to COVID, a securities for costs order could hurt the business even further—and is therefore not in the interests of justice. Security for costs orders are largely left to the judge’s discretion. A judge does have the discretion to decline to order securities for costs if there is a legitimate financial reason. But in this instance, the judge wanted evidence that Grocon was in financial peril—and not merely unwilling to put up securities for costs. Ultimately, the judge ordered Grocon to pay security for costs.
Commercial

Burford CEO Purchases Company Stock

It’s always a good idea to keep an eye on which CEOs are buying shares of their own stock. Christopher Bogart, CEO of Burford Capital just made a sizable stock purchase—GBP 46,000. Simply Wall St explains that this marks the second time Burford insiders bought company stock this year, after a stock purchase of GBP 242,000 occurred earlier this year. Yet these stock purchases may not be as telling as they seem. While it’s a good sign to see company insiders purchasing shares, many analysts find the circumstance a less meaningful indicator of a company’s wellbeing when the stock price is historically low, as is the case with Burford shares currently. It is noteworthy, however, that no Burford insiders sold any shares. Strong insider ownership is generally a good sign for any company. It’s also indicative of a company’s dedication to shareholders.
Commercial

Pioneering Litigation Funder Now in Legal Battle in TARS Scandal

Timothy Scrantom was once considered a pioneer in the litigation funding community. These days, the chatter is less flattering. Scrantom, as well as Kenneth Elder and others, are ensconced in a legal battle to prevent them from seizing control of Total Asset Recovery Service. Legal Newsline reports that Ferraro Law Firm believes Scrantom and Elder are in league with Huddleston Capital VIII, a firm that recently pursued action to gain control over the existing TARS cases. The case itself suggests that life insurance companies failed to hand over unclaimed policies to the state—as dictated by abandoned property laws. What followed was a convoluted series of events involving failed qui tam litigation led by Elder and litigated by Ferraro Law, and the formation of TARS in 2009 for the purpose of pursuing escheat and insurance litigation. TARS ultimately hired Scrantom as a consultant at the behest of Elder, but not before relationships soured between both men and Ferraro Law. Now, Ferraro Law suspects that Elder and Scrantom are in league with Huddleston Capital—and states as much in their lawsuit. Though these are mere allegations at this point, Huddleston reps have sent default notices and collection letters to TARS.  Elder and Scrantom have thus far not responded to the lawsuit. And it remains unclear what evidence Ferraro has at its disposal, though given the complex nature of events, this case is likely to drag on for some time.
Commercial

Therium Funds Kazakhstan Oil Claim

A recent shareholder update from Victoria Oil & Gas PLC brought new details about the claim, which included steps taken after a small COVID outbreak, and a vetting process for the West Medvezhye license. Victoria Oil & Gas PLC also offered updates on its decade-long legal skirmish with the Republic of Kazakhstan. The dispute itself stems from alleged actions and omitted facts that were withheld by the Kazakhstan government. Ultimately, this led to the loss of the investment in an Atyrau Oblast oil field—Kemerkol Field. Near the end of last year, VOG informed the Kazakhstan government of its intention to move forward with a legal claim. This, after good-faith attempts were made by VOG to reach what they term a fair and amicable settlement. VOG now intends to pursue investment arbitration under the terms of the Energy Charter Treaty. Noted third-party funder Therium is fully funding VOG in this action. That could make for a sizable payday, given that VOG is seeking damages for monies invested, assets seized on-site, as well as the revenue VOG expected from the project.
Commercial

Podcast Episode Covers Dispute Funding for Companies in Financial Distress

David Prager of Duff & Phelps, Howard Brod Brownstein of The Brownstein Corporation, Tatiana Markel of BakerHostetler, and Ken Epstein of Omni Bridgeway engaged in a virtual discussion on dispute funding for financially distressed companies. This two-part podcast was produced by Turnaround Times.  Below are some key highlights from part 1 of the Turnaround Time podcast, which can be found here.   DP: What makes litigation funding such a breakthrough opportunity? HB: I’m a turnaround pro, so I get called in when a company has some degree of distress—the company may not even know how much distress until we start to dig. If there’s distress, there is neither the appetite nor the resources available to prosecute claims. It’s a potential asset for the company—but they may not have the wherewithal to realize. In the context of bankruptcy, there’s an inability to pay obligations. Litigation funding provides an opportunity to create a level playing field. Companies can recover assets, pursue cases, etc. DP: As you counsel your clients, when do you bring funding into the mix? What’s exciting to you about this structure? TM: I work at a big law firm. Litigation funding and contingency were not really something Big Law firms did—and traditionally don’t do. Five to ten years ago we talked about litigation funding, but only recently have we begun doing these deals in earnest. Our firm is a risk-averse midwestern firm. Litigation funding allows us to bridge the gap between large cases with huge potential recoveries, and the firm’s reluctance to accept that much risk. The sweet spot is a large-damages case, but it will take a long time and be costly. All in all, I’m a fan of litigation funding—we’re grateful for the industry. DP: We talk about plaintiff work—a small guy with a claim as a wronged party. Is that the limit of litigation funding, or are you looking at other things? KE: There is single case funding, and then portfolio case funding where you can fund a law firm, or several contingency cases. There’s also client-side funding, you can provide funding to a trust—which provides a lower risk profile.  DP: There’s been discussion about ethical issues with fee sharing, or confidentiality issues. What are your main ethical concerns? TM: From the perspective of what a funder needs to consider when assessing a deal—from an attorney perspective—attorney-client privilege. When assessing a case, a funder needs to review the underlying documents. While privilege doesn’t attach to discussions with a funder, but funders don’t need to see privileged documents. The laws in that are a bit unsettled. DP: So what safeguards do we take? Sign an NDA. Funders have their own form, which is similar and ironclad, to provide for the common interest. This confirms the intent for documents to be confidential.
Commercial

The Problem with Origination Credit—and How In-House Clients Can Address it

The gender gap in the legal industry is easy to recognize, thanks to Burford’s 2020 Equity Project study. But recognizing the problem is only half the battle. Origination credit continues to be a sticking point—as women consistently receive less than their fair share. This fuels a cycle of inequity that can reverberate through a law firm and beyond. Burford Capital reveals its 2020 Equity Project study surveyed General Counsel and senior in-house lawyers. Of the respondent pool, a staggering 52% had no idea how origination credit was awarded at the firms they utilized. Why does that matter? Because money flows in via those GCs, which gives them considerable power to influence the firms they hire. The problem began when male lawyers inherited clients from their predecessors. Senior male partners mentor male lawyers more often than female lawyers. This leads to female lawyers receiving lower-then-average compensation almost 80% of the time. And 67% of senior female lawyers state that they’ve experienced gender bias that has impacted their business development. The simple act of asking about origination credit can bring needed attention to the issue. More than 150 GCs wrote to their law firms in January of 2019, demanding that they close the gender gap. These included Microsoft and Coca-Cola, among other heavy hitters. That’s a positive step forward—but the progress must be more widespread in order to inspire lasting change. It’s been speculated that more GCs don’t ask about the gender gap or origination credit simply because it doesn’t occur to them. It’s also likely that many law firms don’t share what they consider insider information. If this issue is to be adequately addressed, habitual changes must be implemented.
Commercial

Could Avalanche Overtake DeFi in Crypto Market?

You don’t have to know everything about cryptocurrency to know that it’s changing the  investment landscape in major ways. Avalanche, a competitor to crypto giant Ethereum, enjoyed a robust opening followed by steady gains. Now speculation abounds about how big Avalanche can grow, and who might be edged out in the process. News BTC details that Ethereum’s climbing fees have caused an exodus to Avalanche for blockchain access. Meanwhile, Avalanche is expanding its reach to include Initial Litigation Offerings. Third-party legal finance is a new entry into the cryptocurrency space—one with deep pockets. Litigation Finance, industry-wide, controls roughly $10 billion in assets, most flowing from high-end investors into a more accessible and transparent market. There’s a synchronicity to this development, given that the essence of litigation funding is to level the playing fields in a variety of industries. Avalanche continues to innovate and expand as the company positions itself to overtake industry leaders.
Announcements Commercial

Mill City Ventures completes nearly $8M in first quarter financings

Mill City Ventures III, Ltd. ("Mill City")(OTCQB:MCVT) announced today the total financings for the quarter were nearly $8M. The amount includes a previously announced loans of approximately $2M. Mill City Chief Executive Officer Douglas M. Polinsky stated, "We have continued to be opportunistic in various financings presented to the Company. We have expanded the scope of our loan profiles and have continued to position the Company to achieve higher returns through our ability to perform due diligence quickly and fund in short order.  Presently, we expect our current loan portfolio to drive results unmatched in any other quarter in the Company's 13-year history." The Company completed a litigation funding loan for $1.8M for an adjudicated settlement relating to people harmed by the California wildfires originating from Pacific Gas and Electric power lines that were downed by trees. The opportunity was introduced to the Company by Witnex, Inc., a litigation finance consulting firm that has assisted in the financing of approximately $1B in plaintiff claims. The loan is secured by the future fees anticipated to be collected. In addition, the Company completed a $3M bridge loan to a real estate investment company that owns and manages nearly $500M in apartment buildings in and around college campuses throughout the United States. The Company also made a $510,000 loan secured by an interest in the previously announced $1.3M in settled claims. Finally, the Company completed an additional $200,000 loan to a current borrower, a financial technology company, which designs and develops products and services for the transaction processing industry. We continue to work diligently with NASDAQ to meet applicable listing requirements. Forward-Looking Statements
Forward-looking statements in this release are made pursuant to the "safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements reflect current beliefs and underlying assumptions, and are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements, including without limitation continued demand for short-term specialty non-bank loans, increased levels of competition, new products or offerings introduced by competitors, changes in the market rates of loans, and other risks. About Mill City Ventures III, Ltd.
Founded in 2007, Mill City Ventures III, Ltd., is a specialty finance company providing short-term non-bank lending. Additional information can be found at www.sec.gov. SOURCE Mill City Ventures III, Ltd.
Commercial

Commercial Disputes in Mining

Omni Bridgeway’s most recent podcast features commentary by Junior Surivar of McCarthy Tetrault, and Jon Drummer of Paul Hastings. The episode is part two in a series detailing litigation relating to mining disputes. Geoff Moysa hosts.

Below are some highlights from the podcast:

JS: There’s been a noteworthy spike in disputes addressing the finer points of royalties, where before, most disputes related to shareholders and joint ventures.

GM: Why?

JS: New partners can impact how royalties are seen by everyone. The precise interpretation of royalty agreements can be subject to multiple readings. Any time partners shuffle, there’s a chance that royalty agreements will be reread and reinterpreted.

Royalty agreements are generally entered early in a partnership. As situations change over time, the intention of the original agreement may be lost or changed dramatically. When a new party enters the arrangement, everything changes.

JD: Agreed. Intent versus the written document can lead to multiple interpretations.

GM: How likely is it that these disputes can be solved with negotiation?

JS: When there are differences of opinion or interpretation advanced in good faith, negotiation can go a long way.

JD: Yes, and expedited negotiations fast-tracked for results are common.

GM: What about multiple royalties or layers of objections? Have there been increases in disputes from specialized mining royalties?

JD: Not really. But there are many reasons partners might revisit royalty agreements for reinterpretation. There is a rise in mining royalty companies, which leads to all involved parties looking at the value of their royalties more seriously.

GM: Are disputes arising from M&As?

JD: That’s been a trend, yes. There’s been a rise in cases on environmental issues, as well as health and safety concerns, and others on securities disclosure laws. We expect that to continue.

JS: In Canada, we are seeing that on the environmental issues, but in Ontario, changes to the Class Proceedings Act make it more challenging to certify a class. This leads to funders or plaintiffs being less willing to invest in a class action.

Commercial

Litigation Funding as a Stock Market Alternative

As investors remain wary of the stock market, they’re left wondering how to invest effectively. Litigation Funding may prove an attractive alternative for investors depending on their risk tolerance. Litigation funding is uncorrelated to stock trading, and largely insulated from economic conditions. Business Day explains that litigation funding is a strong choice for investors owing to its high-alpha/low-beta risk-return. As an asset class, litigation funding maintains a global presence. More than half of all international investments in litigation funding comes from the US, UK, and Australia. The global market value of the legal funding industry is believed to be around $100 billion.  One of the most attractive aspects of third-party legal funding as an investment is the asymmetrical return profiles. Essentially, the possible payout is far greater than the possible losses—even if the entire investment is lost in an unfavorable verdict or judgment. Funding agreements between third-party funders and clients are generally non-recourse. So claimants aren’t required to pay funders back if their case is unsuccessful. If the case succeeds, however, funders receive an agreed-upon percentage, an award, or a multiple of the monies provided. Success is not guaranteed, and wait times between investments and payouts can take years. Three to five years is common for a commercial dispute to reach completion. But every suit will eventually conclude with either a judgment or a settlement, thus it is ultimately a binary outcome. Profitability via investments in litigation funding rest largely on vetting cases. Considering the merits is merely the beginning—whether or not a defendant can make good on a judgment should also be heavily considered. What we do know is that demand for litigation funding from clients shows no sign of slowing.
Commercial

Are Plaintiffs at the Mercy of Litigation Funders?

The core benefit of Litigation Finance is clear—to provide increased access to justice to those who could not otherwise afford it. It’s a noble, necessary, and attainable goal. So why the rush to over-legislate the industry? The Australian suggests that lawyers and funders alike are focused solely on profit as plaintiffs fall by the wayside. Foreign investment in Australian litigation finance firms is massive. Some say that currently, legal funding is the most profitable asset class in Australia. Given what COVID is doing to the economy at large—that makes sense. One case, in particular is held as an example of plaintiffs losing out while funders and lawyers rake in profits. Employees of Appco Group Australia were offered a settlement that a judge openly mocked. The 1,172 claimants asked for an estimated $65 million and were instead given $1.9 million—half of which would go to litigation funders. This left less than $1 million to be divided among nearly 1,200 plaintiffs. Courts then had to determine whether to approve the settlement or allow funding to be withdrawn. Justice Michael Lee instructed lawyers to do better by their clients, accusing them of trying to rid themselves of a case that was neither as speedy or profitable as funders and the legal team had hoped. A case against ISG Management claiming that they cheated workers out of sick time and other employee entitlements left claimants in similar straits. A class action morphed into cross-claims against thousands of workers who could now be held liable for overpayments made over many years. Every court case carries risks for defendants and plaintiffs. That’s the nature of litigation. At the end of the day, Litigation Finance needs to be profitable in order to continue helping clients. While there may be some merit in the push for increased legislation, feigning outrage that a business seeks to be profitable doesn’t help anyone.
Consumer

USClaims Becomes a Skyline Partner of the New York State Trial Lawyers Association (NYSTLA)

USClaims is proud to announce that it is now a top sponsor of the New York State Trial Lawyers Association (NYSTLA). With its $100,000 commitment at the Skyline Partner level, USClaims joins with 5-Star Legal Funding to support one of the strongest trial lawyer associations in the country. This momentous partnership furthers USClaims' mission of making Litigation Funding Simplified ™. Donna Lee Jones, President of USClaims, summed up the importance of this partnership:  "Now more than ever, we must support trial lawyers in their never-ending battle of protecting clients' rights.  USClaims recognizes that litigants continually face hurdles in the path to justice.  USClaims is here to help the 3000 trial attorney members of NYSTLA overcome those hurdles."   This strong support for NY trial lawyers was echoed by Robert Gentili, co-founder of 5-Star Legal funding:  "5-Star has always had the passion to help over the past 15 years.  Working together with USClaims, we now have unlimited resources and stand united with NY trial attorneys and their clients."  USClaims is the only litigation funding company committed to NY trial lawyers at the Skyline Partner Level. About USClaims:  USClaims (www.USClaims.com) provides pre-settlement litigation funding nationwide, and has been in continuous operation helping attorneys and their clients since 1996 – the longest of any pre-settlement litigation funding company in the United States.   Its flagship offering is non-recourse financial support to personal injury victims, many of whom have endured tremendous suffering from wrongful conviction, motor vehicle accidents, unsafe premises, medical malpractice, defective products and other wrongful harms.  This financial support provides injured plaintiffs the means to pay their personal bills, including for surgeries, and endure the often long and arduous litigation process.  USClaims also provides specialized lending to personal injury law firms to help them grow their practices.  Through its unparalleled service, USClaims aims to change the perspective of the pre-settlement funding industry and, most importantly, to become a major asset to trial attorneys.   USClaims accomplishes this goal by low rates with no hidden fees, non-compounding rates, a 2x cap on the funded amount, in-house attorney underwriters, and funding within 24 hours of approval.   USClaims has repeatedly been voted one of the best litigation funding companies in the country, and supports trial lawyer associations nationwide.
Commercial

New Zealand Pursues New Regulations for Litigation Finance

As litigation funding grows in popularity in New Zealand, so do calls for legislation. Currently, there are no existing laws in New Zealand that specifically apply to the practice, nor is there a statutory class actions regime. Omni Bridgeway explains that defendants and claimants alike would benefit from more clear and detailed regulations for the industry. New laws could provide guidance and policy directives on common issues impacting collective actions. It would make sense that New Zealand look to Australia for guidance when developing a legislative regime. Providing justices wide latitude during the proceedings and requiring court approval for settlements have worked out well. In Omni Bridgeway’s submission to the Commission, they suggest that New Zealand allow both opt-in and opt-out class actions. A closed class system is generally believed to have advantages to an open-class system. Specifically, it demonstrates that claimants are engaged and serious about the case. This is significant since a common complaint about litigation funding is the fear that funders will pursue nuisance cases that lack merit. Champerty laws exist in New Zealand, though they remain unenforced. Omni Bridgeway listed the idea of abolishing champerty laws, among other proposed changes. These include adding several provisions to the licensing requirements—including minimum capital requirements, standards for disclosure and reporting, and specific requirements regarding conflict management. Funder’s fees remain a contentious issue, with many funders deriding laws that ensure 50% of gross recoveries go directly to claimants as excessive. It’s been suggested that any cap on funder fees could dissuade funders from taking on collective actions. Still, legislators have suggested that this figure is too low and that funders should never get more than 30% of any award in the cases they fund. The position advanced by Omni Bridgeway is echoed by independent research on various regulatory models.
Commercial

A Liquidator’s Guide to Mitigating Risk

Liquidators are sometimes ordered to pay costs, which is not a situation any want to be in. Liquidators have a duty to examine what led up to the liquidation, and to bring and defend a legal case if applicable. But if they lose, costs can be awarded against them personally. LCM Finance details that normally, liquidators are indemnified from having to pay costs. But if the company is unable to do so, the liquidator can be held liable. This has happened in several noteworthy cases. In Lonnex Pty Lit, liquidators were required to pay costs after appeal. The court ruled that the costs incurred were unreasonable and that the liquidators should not be entitled to indemnity. In Australia’s Residential Builder Pty Ltd, a court found that the liquidator pursued an appeal for their own reasons, and not for the good of creditors. As such, the court determined that liquidators cannot hide behind an insolvent company. In Azmac Pty Lit, a court ruled that unreasonable and unnecessary conduct rife with self-interest should result in a liquidator personally paying the costs of proceedings it initiated. What should liquidators do to avoid a similar fate? LCM suggests starting by diligently investigating matters in a timely way. Next, seek out advice from counsel or another experienced professional, or the courts on the advisability of continuing a claim. In addition to full compliance with court rules—that will go a long way in helping liquidators avoid an order to pay costs. Of course, liquidators should estimate all costs and weigh them against the likelihood of recovery. Perhaps most importantly, liquidators should feel ready to settle the claim if it can be done in a reasonable way. Accepting reasonable offers, acknowledging valid disputes, and reasonably assessing assets can do the rest.
Commercial

Claimant Expresses Disappointment over PFAS Settlement

A settlement in a case over PFAS contamination has claimants enraged. In 2015, residents were told by a local newspaper article that their water supply had been tainted by PFAS. The chemical had been used in foam used to combat fires. Not unexpectedly, property values plummeted and local businesses suffered. SBS.com details that people throughout the Williamtown community had been experiencing a spate of health problems believed to be connected to the poisoning. These include increased instances of ovarian, testicular, and breast cancer. The community determined that collective action was the best way forward. Omni Bridgeway (formerly IMF Bentham) funded the case. Shortly after the Williamtown case was announced, similar class actions in Oakey, QLD, and Katherine NT were announced. The Williamtown case took years to reach a settlement. In February 2020, all three lawsuits were settled for $212 million. That may seem like an impressive figure, but only $86 million went to the claimants in the Williamtown case. Of the $86 million, lawyers were paid $9 million for their work. Omni Bridgeway, the case’s funders, received about $21 million. The remaining $55 million was shared among claimants, leaving one defendant, whose house and property are now worthless—$100K. That left some claimants upset and clamoring for legal protection. Others took a more optimistic stance, saying that 36% of something is better than 100% of nothing. It’s easy to understand why some claimants felt disappointed in such a low payout figure, yet it's important to keep in mind that the case never would have made it to court had it not been for the funds provided by a litigation funder.
Commercial

Third-Party Funding and Construction Claims

Third-party legal funding has been in use in the United States, the UK, and Australia for over a decade. Now we see it moving into the Middle East and Asia. This may be illustrated most clearly in the construction field, where cross-jurisdictional cases are now making use of the practice. LCM explains that in recent years, construction disputes have seen a 300% rise in registered cases—even before COVID led to reduced profit margins, late payments, and missed deadlines. Legal funding is making a mark in the construction industry—not just as a means to fund cases, but to turn legal departments into a profitable arm of their respective businesses. Portfolio funding agreements are on the rise in construction, which lowers costs while reducing risk. This type of funding arrangement allows businesses to take the financial risk out of pursuing a valid case by removing those costs from balance sheets, thus generating income with no financial outlay. Several factors are driving the push to expand the reach of legal funding. Singapore and Hong Kong have recently passed legislation that essentially welcomes the practice, while the Dubai International Financial Centre represents the expansion of the arbitration infrastructure. In India and the Middle East, awareness of Litigation Finance is growing. Increasingly, CEOs are using funding as a means of creating liquidity from seemingly dormant legal assets. As the use of portfolio funding agreements grows, some may wonder if single-case funding is on its way out. That seems unlikely. In construction alone, the number of high-value construction cases in the Middle East demonstrates that there will always be a market for funding individual cases. In the Middle East, joint ventures, insolvency, and bankruptcies are already spiking, owing to the impact of COVID. Demand for litigation funding has increased across all claimant types—and that trend is likely to continue.
Commercial

Nanoco Group Optimistic in IP Action Against Samsung

Manchester tech company Nanoco Group has expressed confidence in its legal action against Samsung. The tech business is pursuing a case for IP infringement against the electronics leader. Nanoco has also revealed signing a litigation funding agreement with an as-yet-unnamed American litigation funder. The Business Desk explains that a Markman hearing, also called a claim construction hearing, was held on March 26th. In it, the court was tasked with determining legal definitions of five patents that Nanoco accuses Samsung of infringing. A written report on the hearing is expected to be released prior to June 1st. The Patent Trial and Appeal Board’s anticipated ruling on Samsung’s request for IPR’s is expected next month. This process, which runs parallel to the infringement case, will vet the validity of the patents in question and can take a year if initiated.   A trial date has been set for October of this year.
Commercial

Largest Ever Capital Pricing by Burford

Burford Capital, an AIM-traded litigation funder, priced its PPO of $400 million on Monday. The fundraise is planned for use in the general fund, and is to include repayment of existing debt. Sharecast details that the $400 million pricing was increased by $50 million from what was announced earlier, a change that enables more versatility for investors. CEO Christopher Bogart affirms that this is the largest capital raising in Burford Capital’s history. Notes are being guaranteed on an unsecured basis by subsidiaries Burford Capital plc and Burford Capital Finance LLC. The offering is expected to close on April 5th.
Commercial

Key Takeaways from LFJs Podcast with Elena Rey of Brown Rudnick

Earlier this week, LFJ released its latest podcast episode, featuring Elena Rey of Brown Rudnick. Elena discussed her effort to introduce model documentation to the litigation funding industry, including the founding of the Litigation Funding Working Group, which brings together litigation funders, insurers, legal experts and others to help formulate model documentation for use in the UK, EU and elsewhere. Below are some key takeaways from the podcast: JF: Can you highlight the specific benefits of model documentation? How do you see this impacting the industry going forward? ER: I think the big benefit of model documentation is that it will speed up the development of the secondary market. On a practical level, the Working Group has become a platform where issues facing the market can be discussed such as the relevance of consumer credit legislation, DBA arrangements, and funder fees. JF: With regard to the Working Group, how will this documentation be originated? Who’s on the working group, what will the process be for taking suggestions—and also, how do you expect this documentation to come into widespread use in the industry? ER: The group consists of professional funders, both the core members of our fund and others, like Harbor, Therium, LCM, etc., as well as private equity funds, distressed debt funds, and other litigation funders. Also insurance providers and a number of leading law firms and barristers. The drafting process is based on our experience. The draft is revised as everyone provides feedback and that is worked through. The goal is to provide a balanced draft that reflects feedback from the whole market. That is really important to us.  JF: How much room for flexibility is there in model documentation? It seems like funding arrangements can be so bespoke. ER: Any funding opportunity is bespoke. The idea is to provide a solid and helpful boilerplate provision, which has been tested by discussion in the Working Group, reviewed by lawyers and counsel, and players in the market from different angles. Parties can use it in their negotiation process so they can focus on the finer points. It streamlines the negotiation process and allows the deal to be closed. JF: Which aspect of funding do you see this having a bigger impact on—financial terms or the legal side, in terms of communication between parties? ER: I think it’s both. We’re obviously targeting to improve the legal terms. But hopefully this will benefit the negotiation process. The boilerplate language can be used to address commercial issues. When the parties know they’re protected, the negotiation goes more smoothly. We think it’s important to streamline the negotiation process because deadlines are often tight. JF: How far along in the process are you? What has the response been from the Working Group? What’s the ETA for when this documentation will be complete? ER: The response has been amazing! We launched in October with 15 core members. We now have about 80 Emails on my recipient list. The first set of provisions will focus on insurance. The first draft of the Working Group should be finalized in the next few weeks and could be available to the market by the end of the year. For the full podcast interview, visit this link.
Commercial

Mastercard Class Action Claims 46 Million Britons Overcharged

A class action against credit giant, Mastercard, could net UK claimants a cool GBP 300 apiece. The two-day Competition Appeal Tribunal hearing is scheduled for March 25th. As the case awaits certification, Mastercard maintains that it does not agree with the claim and that it intends to fight back. Reuters reports that the claim against Mastercard could reach GBP 19 billion. Whether or not the case is certified impacts more than just the UK consumers who stand to gain. The decision regarding certification will impact several other proposed class actions that are awaiting the results. The 2016 action alleges that Mastercard overcharged for interchange fees—which are paid by sellers to credit card companies in order to accept credit cards—and that stores raised prices to cover those fees, thus overcharging consumers. The case is expected to demonstrate that these fees were illegal. Innsworth Capital is funding the class action to the tune of GBP 60 million. This includes a payment of over 15 million pounds to cover Mastercard’s legal costs if the case is unsuccessful.
Commercial

The Value of Financial Transparency for Funders

Security for costs is still a contentious issue in the Litigation Finance community. An English Court of Appeal ruling was clear in its message that third-party litigation funders should be ready to provide evidence of their ability to cover an adverse costs order. Omni Bridgeway details that in Rowe & Ors v. Ingenious Media Holdings, defendants asked for security for costs from the litigation funder. The claimants, in turn, asked for a cross-undertaking to cover the cost of providing that security. Lord Justice Popplewell determined that while any funder should be properly capitalized to meet an adverse costs order, a properly run funder should almost never be required to put up security for costs. Popplewell’s observations should be welcomed by most funders. He explains that sophisticated claimants should already know to avoid funders who could, potentially, be required to put up security for costs. Generally, this only happens if the funder is undercapitalized, lacks transparency in financial matters, or fails to prove an ability to cover adverse costs. It could be argued that financial transparency is more important than ever for funders, as competition for cases grows. Multiple new entities are entering the legal funding landscape, owing to the potential for large awards and lack of correlation with the larger market. Publicly available financial statements can go a long way toward establishing funders as competent, honest, and well-collateralized, thus negating the need for a securities order. While regulation impacting funders varies depending on the jurisdiction, groups like the ALF and ILFA have worked diligently to develop ethical guidelines for the industry. While these are not legally binding, they do formalize what third-party funders and their clients deem to be the most important principles of their work. This includes being able to demonstrate an ability to meet all commitments involved in funding cases.
Commercial

Burford Numbers Show Best Year Ever for Recoveries

A report released by Burford Capital this week reveals that the funder has had its best year ever for recoveries. At the same time, profits shrank from the previous year. Burford suggests that the pandemic didn’t have the detrimental impact on business that was originally suspected. Bloomberg Law details that Burford’s largest case, revolving around an oil company in Argentina, has stalled. New business, the funders say, comes from striking deals directly with companies. This differs from the thinking during the earliest days of Litigation Finance when partnerships with Big Law were considered the path to growth for funders. David Perla, Burford’s co-COO, explains that 2020 numbers are strong—especially when factoring in the Petersen/Argentina case bringing in nothing. Perla affirms that the numbers are evidence that Burford knows how to choose winning cases. The Petersen investment has, in the past, returned nearly $250 million for Burford, though its claims are listed at $773 million. Similar cases yielded $425 million last year for the world's largest funder. Perla is also unconcerned by the reintroduction of a disclosure law. The bill, which failed to gain support previously, would mandate disclosure of third-party funders in any multi-jurisdictional litigation, or any federal class action.
Commercial

South African Third Party Funding is Still Largely Unregulated. What’s Next?

Compared to the rest of the continent, South African laws regarding third party litigation funding are advanced. Compared to the rest of the developed world, however, the country is lagging behind. Legislation is minimal, and court decisions are decided on the basis of precedent rather than law. Could that be changing? Pinsent Masons details that a 2004 Supreme Court of Appeals case went a long way toward developing law on TPF in South Africa. The decision acknowledged that funding is sometimes necessary to gain access to justice. It also held that third party funders should never be allowed to abuse the legal process by funding frivolous, retaliatory, or abusive claims. Clear, unambiguous contracts are an essential component of what’s expected from South African funders. A 2020 case in the High Court laid the groundwork for what constitutes a fair and reasonable TPF arrangement. These included:
  • Funders may not interfere with lawyers or their duties to their clients.
  • Clients (not funders) must control litigation decisions.
  • The agreement is necessary to provide meaningful access to justice.
  • Funders may not be overcompensated for assumed risk.
  • TPFs should protect the interests of clients.
Courts also considered how and when funders should be allowed to terminate a funding agreement. It was determined that funders could lawfully end an agreement—but that the choice to do so shouldn’t be made without input from the client’s legal team. Clients need not disclose to courts that their case is being funded by third party funding. But, if there’s an accusation of unfair treatment, courts may require that the funding agreement be made available for scrutiny. Communications between clients and funders are still privileged. Finally, the court determined that a third party funder could be held liable for costs. This is particularly true if they become co-litigants.
Commercial

Podcast: Akiva Katz & Bow Street

Bow Street has a unique take on Litigation Finance. Instead of funding cases from the outset, Bow Street finds and buys litigation assets in cases where guilt has already been adjudicated. That means the main focus is on the damages. As reported in Livemarkets, Akiva Katz and Howard Shainker created a hedge fund poised to earn in any economic environment by combining a research-driven approach with an eye for impactful events. The goal is to earn returns between 25% and 40% annually. Below are some highlights from the podcast interview:  AK: It’s tough to find in today’s market opportunities that others have not found before you. Where are those inefficiencies? One is inactive engagement. It’s actually in getting your hands dirty—which isn’t that scalable. That’s why we only do three to five investments a year. Another is complexity. Investors swim to what is simple. Complexity scares folks. To the extent that people in my seat are willing to dig in—there’s real reward there. The litigation claims business basically met those two criteria. AK: The litigation market in the US is tepid, low level in terms of reward. To the best of our understanding, the European markets were dominated by lawyers. That means lots of guys running around making the ambulance chaser proposition. We take 20% of the upside and bear the cost of taking your case. That always seemed wrong to us as investors, since we’re in the business of pricing risk. Our view was, we could increase our exposure by coming in with a balance sheet. That would be appealing to clients at the other end who don’t want to be involved in a year’s long protracted legal process. DC: What makes a better claim versus a claim that’s less attractive? AK: The single most important differentiating factor that we exercise has everything to do with attention to detail and documentation. The single place we take risks is on documentation. We’re not going to lose a case, because there’s been a guilty plea. But there’s risk if we don’t submit our entire documentation package and the court finds a technicality on which to award the case to the defendant. That risk is amplified by the fact that we pay full price for claims. We are cash out of pocket the day the claim comes to court. DC: Can you talk about insurance underpinning the capital? I can’t understand how that works. AK: It’s important to remember that it works as a function of the asset value. The way it works is like any other insurance policy. We’re taking out a nine-year policy  to cover all our capital. No matter what judgment comes down, that insurance company covers the value of our claims and cost. So why don’t we do that always? We can’t, or we would. That option being available to us is a function of the value we created. All that insurance policy tells you is that we’ve created something that’s worth multiples of what we’ve paid for it.
Commercial

Therium Funds COVID-Related Claim Against Insurers

Therium, a global leader in Litigation Finance, is funding a legal action against insurers who failed to honor business interruption policies. The funding arrangement means that businesses may join the claim at no upfront cost. London Loves Business details that Provenio Litigation has filed the class action on behalf of policyholders seeking claims for COVID-related business interruption. While insurers asserted that business interruption policies didn’t apply to global occurrences, the UK Supreme Court disagreed. In January 2021, the court came down on the side of policyholders. Mark Goodwin of Provenio Litigation affirmed that the Supreme Court decision provides the necessary clarity to right the wrongs perpetrated by insurers.
Commercial

Woodford Investors Launch Legal Action to Recover Losses

Claims of direct losses and loss of opportunity are some of the accusations being levied regarding the collapse of the Woodford Equity Income Fund. The claim, led by RGL Management group, is against Link Fund Solutions as well as Hargreaves Lansdown Asset Management.

Daily Business Group details that there are several rival claims addressing losses linked to the failure of WEIF. If successful, RGL will get 25% of any award given. In other pending claims, Harcus Parker is taking 42% and Leigh Day is taking 30%.

Link Fund Solutions was the authorized corporate director of WEIF. According to RGL, this obligated Link to ensure that the fund complied with what investors had been told. Link was also responsible to ensure appropriate liquidity and diversity in the fund. RGL’s claims state that Link failed to manage and administer the fund appropriately. LBAs have been sent to Link and Hargreaves Lansdown—formally beginning the legal process.

Estimates suggest that at least 300,000 investors have been impacted by the collapse of WEIF. Anyone who invested in the fund can register their interest with RGL regardless of the investment amount. Because the case is using third-party litigation funding as well as ATE insurance, there is no fee required for claimants to participate unless and until the case is successful.

Commercial

Indonesian Farmers Win Montara Oil Spill Class Action

At last, at least 15,000 seaweed farmers in Indonesia will be compensated by the oil company responsible for one of Australia’s largest oil spills. West Timor farmers were devastated by the spill, which covered more than 240 kilometers of seaweed crops nearly 12 years ago. Harbour provided third-party funding for the action. The Sydney Morning Herald reports that the court ruled that the rig, PTTEP Australasia, failed to properly seal the well, creating a high risk of a blowout. Shortly after the spill, seaweed crops died. Justice David Yates stated that the courts could not ignore the obvious. Daniel Sanda, the lead plaintiff, has been a seaweed farmer for over 20 years. After traveling to Australia to testify, he explained that he had earned a comfortable living before the spill. After the spill, the seaweed turned white and then died—along with many fish. To date, his business has not fully recovered. PTTEP was ordered to pay Sanda for his losses for five years following the spill. If every farmer who joined the class action is eligible for remuneration, damages to the oil company could be in the millions. The case, backed by Harbour, is the first funded class action for cross-border pollution involving an Australian company with foreign claimants. Richard Ryan, principal lawyer, has stated that he is very proud of the win. Meanwhile, PTTEP maintains that the spill should not have caused enough concentrations to kill plants, and is considering its options for appeal.
Commercial

Founder of Homebuyers Fightback Starts CrowdJustice Fundraiser

A CrowdJustice appeal has been launched to cover legal fees, as homeowner John Gaskell seeks justice for a home beset by problems. While Gaskill points to issues involving heating and insulation, plumbing, and disability access compliance, the developer describes these issues as ‘cosmetic.’ Cambridge Independent explains that a report by HouseScan supports Gaskell’s claims that the home fell well short of existing regulations. Since September 2019, Gaskill has been at odds with the developer. What could have been addressed in weeks has now been a headache for the new homeowners for over 18 months. CrowdJustice is similar to other fundraising, sites except that, unlike IndieGoGo or GoFundMe, CrowdJustice focuses on funding legal expenses. Unlike third-party litigation funders, supporting an appeal on CrowdJustice does not net any reward for those who help fund claims. Gaskell is clear in saying that this case and his work with Homebuyers Fightback is not just about his specific situation. Indeed, there’s a public interest in addressing systemic failures of quality control in new home construction. Defending all home buyers from unscrupulous business practices and those who would evade liability is essential to ensure consumer confidence. Several MPs have backed Gaskell’s efforts to bring accountability to the industry and develop a home buyer’s charter.
Commercial

CEO of Taurus Capital Discusses Litigation Funding

Elad Smadja, CEO of litigation funder Taurus Capital, explains the basics of litigation funding. Taurus is actively pursuing investments in South Africa. Below are some key takeaways from the discussion, available in full on CNBC Africa: Q: What is Litigation Funding? A: It’s a fascinating asset class. It’s non-recourse funding provided to a plaintiff in order to pursue meritorious litigation in exchange for a percentage of the claim. When you have a plaintiff who wants to sue an entity of means, like a large commercial claim or a government institution, individuals don’t often have the means to file a claim. So they approach a litigation funder who can provide funds, and in return, the funder gets a portion of any proceeds resulting from the case. The downside is that if the claim is not successful, there’s no recourse for the funder. Q: It sounds very risky to me. A: And it is. It’s either a very large payout, or it’s zero. Obviously, we do a lot of due diligence work. We approach experts, vet the legal merits. There’s a lot of expense involved in doing that. Plus financial due diligence—to ensure that the defendant can make those payments at the end of the day. When investors come into a fund, one or two losses would be sad, but hopefully, the winners will make up for it. The winners should largely outperform the losers.  Q: Who are you pitching this to? A: This is not man-on-the-street pension money. If you have a low-risk appetite, this is not for you. Q: Sounds like bitcoin. A: *laughs* I don’t want to say it’s like Bitcoin. The main selling point is the non-correlated nature of this asset class. Ultimately, other investments rely on an underlying economic climate. Funding doesn’t.  Q: What kind of time frames? These things can drag, right? A: Yes, these things can take a long time. We bake that into our equation. Large-scale litigation can take a lot of turns, it can take years and years. So it’s similar to private equity in that regard.