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Commercial

Scandalous Allegations in Class Action Against Australian Government

A boy sent to Christmas Island in spite of being only 14 is now leading a class action against the Australian government. He is one of at least 100 children prosecuted during a 2-year period beginning in 2010. Ali Yasmin was judged to be an adult after using wrist X-rays, a now-discredited method of determining age. The class action is being funded by an undisclosed litigation finance firm. Yasmin et al are represented by Ken Cush & Associates. The Guardian details that Yasmin’s conviction for smuggling asylum seekers was overturned eventually, but not before he spent more than two years in an adult prison. The Australian Human Rights Commission had already determined that multiple breaches of international human rights laws had been committed. Solicitors for the Australian government are calling the allegations ‘vague’ and needlessly sensationalized, despite breaches detailed in the AHRC’s 2012 report. Yasmin also asserts that nearly 100 days of his prison stay were an unlawful breach of the Migration Act and its requirement that detention only be applied to minors in extreme circumstances. This case illustrates yet again the power of litigation funding to increase access to justice to the marginalized. Without financial backing, class actions like this would be unlikely to move forward.
Commercial

New Talent Flocks to Litigation Finance

New year, new job. Litigation Finance has been expanding as an industry for over a decade. Investment size is growing, more and more clients are seeking out funding, and big names in law, tech, and finance are clamoring to get in on the action. Westlaw reports that Delta Capital Partners Management LLC has brought in a new president. Peter Cornell is formerly of Clifford Chance, and joins the Chicago-based private equity firm this year. A new legal finance firm, Contingency Capital, has hired Jeff Cohen—formerly of Greenwich, Connecticut firm Southpaw Asset Management. Cohen joins the New York firm as a partner and managing director. Some say that legal finance came into its own with the formation of the International Legal Finance Association—an advocacy organization made up of funders from around the world. If these two hires are any indication, prominent law firm and investment professionals are eager to join the growing industry. 
Commercial

What’s Ahead in 2021 for Litigation Funding

As COVID, politics, and financial uncertainty continue into a new year, savvy predictions are the order of the day. With that in mind, CEO of Validity Finance, Ralph Sutton, shares his predictions for third-party legal funding in the coming year. Bloomberg Tax details that in 2020, Litigation Finance saw increased transparency as well as the formation of the industry’s first international association. Portfolio funding and monetization of cases grew in number and sophistication. And of course, returns have been exceptional across the industry. COVID has brought about much in the way of innovation. Communications have become more reliant on digital, long-distance tech. Privacy and security infrastructure has been expanded due to the absence of face-to-face meetings. Mediation also replaces litigation more often, when possible. Litigation Finance is poised to increase its engagement with large corporations and in-house counsel. The ongoing need for liquidity brought about by COVID will likely continue as businesses and firms require ready access to operating or expansion funds. Right now, litigation funders are flush with cash. Investments in the industry are staggeringly high, which means competition for high-profit cases may become robust. More funders will likely find themselves with fewer strong cases to choose from, creating a market where greater risk-taking is necessary. In the coming year, more mergers are expected, as well as the addition of complementary business to existing funding firms. Litigation funders might do well to add economic experts to their repertoire. Ditto claims management professionals, asset recovery specialists, and tech experts, who might all add value to existing litigation funding firms. Ultimately, relationships will play a key role in the success or failure of litigation funders in 2021. Building trust, a reputation for fair dealing, and strong client relationships will make all the difference.
Commercial

Sydney’s Family Court of Australia Can Cost Clients Millions

In Australia, Litigation Finance may have found a new niche—Family Court. Some would say that the Sydney registry of Australia’s Family Court is already highly adversarial. The court is known for wealthy divorcing couples playing out their acrimony in a public setting. Legal teams often seem to encourage this. The Sydney Morning Herald details one couple whose legal fees topped $6 million in less than five years. The wife in that couple ultimately signed away 30% of her settlement in exchange for third-party litigation funding. She claimed that her ex’s lawyers made multiple ‘ludicrous’ applications meant to drain her resources. One family law attorney, Daniella Ruggero, decried the normalization of litigation funding in Family Court. She explained that many family lawyers advise their clients to seek out litigation funding because it gets them an upfront payment for legal fees. It’s been asserted that the Sydney registry is weighed down with protracted legal skirmishes between wealthy divorcing couples—and that they’re using time and resources at the expense of less-wealthy litigants. Runaway legal fees are a growing concern in Australian courts. Jacoba Brasch QC, president of the Law Council of Australia, has said that the law does not allow fees that are not fair, proportional, or reasonable. She affirms that the Law Council takes allegations of overcharging very seriously. Still, one man unknowingly retained a lawyer who had been sanctioned by a judge for running up unnecessarily high legal fees on spurious matters. An assessor found that the man had been charged nearly twice what he should have. Another client was charged nearly $60,000 in legal fees in under two months—which included time spent on matters a judge called ‘immaterial.’ John Walker, chair of the Australian Association of Litigation Funders, explains that Litigation Finance is unlikely to become a major player in Family Law. Most litigants would find the 15-25% fees that funders charge to be excessive and outside their budgets.
Consumer

Lawyer Accused of Misappropriating Litigation Funding Faces Charges

The Attorney Grievance Committee for the First Judicial Department brought disciplinary charges against Don Anthony Carlos Jr. He had been admitted to the State Bar of New York in 1993. The case, listed at Justia explains that Carlos has had an office at the Second Judicial Department for some time. In late 2018, Carlos was suspended from the practice of law. This came after a joint motion alleging the misappropriation of escrow funds, tax evasion, and giving false testimony while under oath. The suspension was initially expected to last two years. At the time of this suspension, Carlos had already received three official admonitions—including misuse of escrow funds, lax bookkeeping, and failing to file retainer statements. The following year, Carlos was served with seven charges. These allege that prior to his suspension from the practice of law, Carlos forged his client’s signatures on documents without their knowledge. The documents included agreements with third-party litigation funders. He was also accused of using someone else’s notary stamp without authority or permission—falsely notarizing the signatures of his clients. It was further alleged that Carlos misappropriated the fraudulently obtained funds meant for client litigation for personal use, and that he mishandled as many as eight personal injury cases. When served with notice of a sanction hearing, Carlos declined to appear. The Referee noted that Carlos had received adequate notice of his obligation to appear, but chose not to do so. It was at this point that disbarment was suggested by the AGC. The Referee agreed. The recommendation for sanction was ultimately granted, and Carlos is effectively disbarred. His name is therefore stricken from the State of NY list of attorneys and counselors-at-law, and must not practice law in any jurisdiction. As of January 5th, Carlos must also relinquish secure cards and other proprietary security items.
Commercial

Akhmedov Divorce Rancor Continues with Funding from Burford Capital

The largest divorce settlement in history is still unsettled. While the ex-wife of Russian billionaire Farkhad Akhmedov was awarded over $600 million in the divorce, she has received next to nothing from her ex-husband. To combat this, she enlisted help from Burford Capital, a publicly-traded legal funder. Baltimore Sun reports that Akhmedova is currently suing her son in a London court for almost $100 million. This includes a significant amount of cash, as well as assets such as art and property. Because Farkhad refused to pay the settlement, Akhmedova’s legal team opted to pursue monies via the couple’s oldest son. Temur Akhmedov is a resident in the UK, which means his assets may be seized to uphold a London court ruling. The Akhmedova lawyers have asserted that Temur was instrumental in helping to hide his father’s assets from his mother—a charge that he strenuously denies. London has long been perceived as a haven for wealthy Russians, many of whom have homes there and even stash their assets in London banks. A “superyacht” owned by the elder Akhmedov was ordered to be handed over to Akhmedova, but the order was refused. This led to the yacht being seized and held in Dubai. Ultimately, Shariah law prevented the enforcement of Akhmedova’s claim to the yacht. Temur has insisted that he was not involved in attempts to hide money from his mother or her legal team. However, the courts appeared to find this suspicious. An assertion that he moved $100 million in paintings to a boat for sheer aesthetic pleasure was scoffed at. Farkhad maintains his refusal to pay the court-ordered judgment against him. Among other things, he specifically mentioned that one-third of all monies given to Akhmedova would go to litigation funder Burford Capital as part of their funding agreement.
Announcements Consumer

New Securitization Fuels Growth for Golden Pear Funding OpCo, LLC

Golden Pear Funding OpCo, LLC announced Kroll Bond Rating Agency (KBRA) assigns a rating to one class of notes from PEAR 2020-1, LLC - an $80 million litigation finance asset backed security (ABS) transaction. The PEAR 2020-1, LLC transaction represents Golden Pear’s first rated security collateralized by litigation finance receivables. “Golden Pear continues to experience tremendous growth and has emerged as a leader in the consumer litigation finance industry. We are excited for this milestone and look forward to continuing to serve our clients and partners,” says Gary Amos, CEO at Golden Pear Funding OpCo, LLC. “Access to the securitization market increases our liquidity and supports our financial performance in this next stage of growth,” says Daniel Amsellem, CFO at Golden Pear Funding OpCo, LLC. The offering was oversubscribed, which represents a recognition of Golden Pear’s strong fundamentals as well as a desire by institutional investors to invest in the growing litigation finance industry. Golden Pear has funded over $675 million in aggregate advances since its inception in 2008. The company’s growth and differentiation in the consumer litigation marketplace have been achieved by industry-leading innovation and a focus on service for both attorneys and their clients. About Golden Pear Funding OpCo, LLC: Golden Pear is one of the largest specialty finance companies in the United States funding legal matters and purchasing medical receivables from physicians and medical centers. The company empowers its clients navigate the legal system and provides them with financial solutions that work. Golden Pear is backed by a partnership of several private equity firms that allow for the stability and continued institutional growth of the firm.
Commercial

Legislative Changes Lead to Increase in Class Actions

It cannot be denied that as acceptance of Litigation Finance increases, class actions increase in number. This is viewed by most as a positive, as it demonstrates that the practice is affording access to the legal system. Increasingly, class actions involving pension fund-related investment losses are cropping up across the US and Europe. IPE Magazine explains that as institutional investors become more active, they’ve also become more litigious when big losses occur. As European investors are seeing more sizable losses for a number of reasons, they are seen as the driving force behind this new wave of litigation. Jeroen can Kwawegen, a partner in New York firm BLBG, explains that European pension funds are markedly different from those in the US. In Europe, pension funds focus on sustainability, environmental concerns, and investing in social programs. In a sense, these class actions are a kind of corporate governance tool to enforce responsible behavior and to recover losses. Some say that litigation is an effective way to engage with a company when informal options are exhausted. But this ‘punishment litigation’ is not always appropriate or effective. After all, investors may not want to break off their relationships with a company—yet it is essential that the misconduct not become repetitive. The recent REST settlement illustrates that litigation can have a positive impact beyond the claimants involved. When the Retail Employees Superannuation Trust settled, they agreed to a net-zero carbon footprint by 2050, along with increased transparency and a more careful assessment of climate change risks as they pertain to investment. Neil Purslow, CIO at Australia’s Therium Capital, states that the REST settlement is unlikely to unleash a flurry of similar cases in other countries. While the Litigation Finance community is well-funded and poised to invest in meritorious cases, it’s unlikely that Australia will see the same type of investor cases.
Commercial

Brexit Propels Ireland to Become Litigation Destination

As anticipated, Brexit has led to uncertainty—even chaos in some industries. In the legal landscape, Ireland is in a perfect position to capitalize on its status as an EU member state. Ireland’s legal system and laws are largely similar to those of Britain, which allows it to offer similar legal remedies with the same basic enforcement. Business Post details that Brexit has brought welcome changes as well, like the formation of the Ireland for Law Initiative. Considered a focal point of Brexit strategy, it endeavors to make Ireland the jurisdiction of choice for business-related litigation. Many speculate that this will include creating conditions under which third-party litigation funding may be used. Ireland, however, will be competing with common law courts in places like Netherlands and France. With this in mind, government investment in the court system will be a vital part of Ireland’s legal future. A Review of Civil Justice Group has released a report detailing a variety of proposals that are currently being vetted and prioritized for possible implementation. Among these are provisions for Litigation Finance. Currently, Ireland prohibits the practice of third-party legal funding, but that’s a remnant of medieval law. As litigation funding has taken off in most of the developed world, Ireland seems poised to adopt the example set by London in allowing the practice. There is a multitude of reasons Ireland would benefit from allowing Litigation Finance, including increasing access to justice. Legal funding can also be used for risk management in a business context, or to provide resources for class actions. Many feel that beginning with legal finance for liquidators and administrators makes sense, as the practice was first implemented in the insolvency sector. The EU Bar Association and the Irish Society for European Law made a joint recommendation to provide provisions for the use of litigation funding. If Ireland intends to compete on the global legal stage, embracing litigation funding will be essential.
Consumer Special Features

Consumer Legal Funding Going into 2021

The following article was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC).  As we put 2020 in our rear-view mirror, let us look at what took place in the space of Consumer Legal Funding. The American Bar Association (ABA) adopted the Best Practices for Third-Party Litigation Funding. In it, the ABA lays out a set of guidelines that attorneys should follow when working with Consumer Legal Funding companies. This will ensure that consumers, attorneys, and funding companies will be protected, and the product will be offered properly. The New Jersey State Bar Association (NJSBA) board voted to support the ABA resolution on litigation financing. To ensure consistency across the country, ARC updated our set of Best Practices to be in line with the ABA set of Best Practices on the industry. This will ensure that a consumer in Maine will have the same set of Best Practices as a consumer in Oregon. As a follow-up to the new set of Best Practices, the ABA held a virtual CLE to explain how they would be implemented. ARC participated and explained how our Best Practices are beneficial for consumers and the industry as a whole. In addition to the ABA, the New York City Bar Association published its report on use of Litigation Funding for Consumers. In the report, they publish a set of guidelines that should be followed in a contract with the consumer, including stating that the agreement is a non-recourse transaction, ensuring acknowledgement by the consumer’s attorney, and affirming non-compensation to the consumer’s attorney. The California Bar Association also published its opinion on the industry, which was consistent with what was stated by the ABA and the New York City Bar Association. Additionally, the state of Utah introduced and passed legislation to regulate Consumer Legal Funding. The legislation—which was passed nearly unanimously—insists on clear notice and disclosure to the consumer as to the terms and conditions of the contract. The consumer’s attorney will be made aware of the transaction and that there are no rate restrictions on the product, thereby allowing the free market to dictate rates. Each company will have to report on an annual basis the rates they do charge to the state. As we roll into 2021, we are hoping that other State Associations will follow the lead of the ABA, NJSBA, the New York City Bar Association and the California Bar Association in setting up practical guidelines for the use of Consumer Legal Funding. We also hope that other State Legislatures follow what Utah, Nebraska, Ohio, Maine, and Oklahoma have done in passing sensible legislation that provides consumer protections while allowing the industry to operate in a free market environment. Eric Schuller President ARC
Commercial

Is India Ready to Embrace Litigation Finance?

Litigation Finance has exploded in popularity over the last decade. This was caused by a number of factors, and cemented by the impact of COVID. Litigation Finance is now a powerful industry with major financial strength behind it. But it hasn’t yet reached every corner of the globe. Could India be the next frontier? India Legal Live explains that Indian law expressly prohibits advocates from funding litigation or arbitration. While funders do lack decision making powers in the cases they fund elsewhere, India’s existing laws may frown on funders looking for contingency fees when deciding which cases to bankroll. Some refer to India’s current financial climate as a ‘liberalization’ of policy, as foreign investors are welcomed and India moves toward becoming a destination for international arbitration. Still, the use of third-party litigation funding is scarce. Current contract law in India contains provisions to prevent lopsided bargains. It may be assumed that claimants have greater financial need than defendants, and may therefore be more likely to be exploited by funders. Contract law might then have to be updated or clarified before litigation funding can gain more mainstream acceptance. A recent court case determined that litigation funding agreements must be carefully scrutinized to ensure fairness. This came after an affirmation that litigation funding does increase access to justice for those who cannot otherwise afford it. There are already countries in which litigation funding arrangements must be approved by courts. India may adopt similar legislation. Confidentiality is another contentious issue. Every nation holds confidentiality to be a necessary part of lawyer/client relations. It’s vital to ensure that confidentiality is maintained even as courts maintain a close eye on funding arrangements. Omni Bridgeway’s Tom Glasgow is optimistic about the future of Litigation Finance in India, saying that opportunities to aid in de-risking litigation are plentiful. As part of the ILFA Working Group, Omni Bridgeway hopes to be instrumental in bringing international best practices to India.
Commercial

Sarah Tsou Speaks About Patent Litigation Funding

Sarah Tsou is an investment manager with funding leader Omni Bridgeway, where she specializes in patent litigation. In IP Watchdog’s recent podcast, Tsou explains the modus operandi most commonly used to defend against patent suits. Well-monied defendants can drag out even a meritorious patent suit for years—depleting the resources of patent owners. The proliferation of litigation funding now means that patient owners with strong cases can enter into funding agreements—increasing the chances of seeing justice done. Tsou also expounds on:
  • Finding and vetting cases
  • Tips for building a patent portfolio
  • Patent litigation funding for in-house legal teams
  • Risk sharing
Below are some highlights from the podcast. Tsou: My experience taught me that having a really good understanding of remedies, so not just damages, but also injunctive relief and the kinds of pressure those remedies can put on litigants is really important. Tsou: Across the company, our rejection rate might be something like 99% on the patent cases that we get. I think our philosophy is that we have to find the good cases. It takes time, it takes in-house experience, it takes trusted relationships from good law firms that we know, who are showing us good cases and good companies that we know have valuable assets—and it’s just putting in the work upfront. Because one common saying in funding is that in patent cases, ‘there are a million ways to die.’ Tsou: One of the important requirements for our funding is that the law firm needs to be able to take some risk. And that usually means some kind of contingency arrangement or hybrid arrangement where they only get a portion of their fees, say 50%, along the way. In exchange for that risk, they get a substantial percentage of the reward. That way we know we’re working with a law firm that’s just as aligned and sharing in the risk as we are. Tsou: Be prepared for litigation and the things that can come up beyond cost. Have realistic expectations. The more that a company can start thinking about patent litigation as something that’s not going to be a billion dollar claim, because there are very few claims that result in a billion dollars, or having a realistic expectation for the time it’s going to take, and how much money could actually be received at the end of the day...the better off they’ll be.
Commercial

Four Hot Litigation Finance Trends for the Coming Year

This year has been unique in terms of obstacles, uncertainty, and hardship. Record layoffs and business closures have caused disruption around the globe, and the legal world is beset by delays juxtaposed with a tidal wave of new litigation. Thankfully, it has also brought about a rise in the use of litigation funding. Law.com details four vital trends in Litigation Finance to keep an eye on in 2021. The first of these concerns transparency. Right now, there’s a disconnect between the right to confidentiality and the need to keep third-party funding transparent and above board. We can expect new legislation and recommendations that outline clear guidelines and legal expectations that apply to funders, lawyers, plaintiffs, and courtrooms. At present, laws regarding the use of third-party legal funding lack cohesiveness. Different countries, and indeed, different US states will have their own laws governing funding, how it may be used, who can be involved, and what disclosures must be made. Standardization is desired, and 2021 will likely show progress toward that aim—even though such moves are currently in legislative limbo. As more funding entities emerge, consolidation becomes likely. The recent merger of IMF Bentham with Omni Bridgeway turned industry heads. New, specialized firms may find themselves acquired by bigger, monied entities. This may be an overall advantage to an industry that is still a mystery to much of the public. Court delays are still ongoing, and the increase in court matters will only make the backlogs worse. As such, it’s expected that settlements, mediation, and out-of-court arbitration will become more commonplace. Remote working is likely to continue even after the pandemic as employers see that productivity goals can be met from home. Litigation Finance proves to be a game-changer in the legal world. It’s also got the financial backing it needs to meet the increasing demand.
Commercial

Is Covid-19 an Impetus for Litigation Finance in India?

India is currently one of the world’s top five economies. That’s good news. But like most top economies, Covid is causing disruption and discord. The pandemic may also lead to a flurry of new litigation as it has in much of the developed world. Will India be joining the likes of Germany, Australia, UK, Singapore, and others in their acceptance of litigation funding? Bar and Bench explains that with trying financial times comes a need for creative solutions. Litigation Finance is not as well established in India as it is elsewhere, but the practice is poised to catch on. The recent success of the Indian economy has made it a desirable destination for international investors. In 2016, the Indian Government was involved in over $9 billion in arbitration disputes relating to infrastructure. As businesses find themselves with dwindling resources and limited access to credit, the idea of third party funding becomes increasingly attractive. Indian courts seem to be moving ever-closer to widespread acceptance of litigation funding. In one case, the Privy Council approved the practice of one party funding a case for another in exchange for a share of the reward. This is predicated on the arrangement being fair and the case being meritorious. A later case established that champerty rules did not apply in India, and that there was no public policy prohibition against the practice. Still, the acceptance and use of the practice in India promises to be complex. Public policy, for example, is not a written law, but a generally understood set of principles. The ‘right to sue’ is more complicated in India, and issues of conflict of interest and even confidentiality are more convoluted. This may impede or slow the widespread use of litigation funding as legal precedents are set to refine the practice. Finally, there’s the question of qualifications for third-party funders. Australia and elsewhere have stringent rules about who can provide funding and how they must conduct themselves. India seems headed toward a similar regulatory path.
Commercial

Does the Japanese Legal Landscape Herald the Coming of Litigation Finance?

A recent announcement from Anderson Mori & Tomotsune indicates the formation of a “foreign law joint enterprise.” In essence, the firm is taking on partners who are registered lawyers from the US, UK, and Mainland China. All are fluent in Japanese. LawFuel details that this is expected to enhance and strengthen the ability of the firm to take on cross-jurisdictional cases. This push toward globalization and inclusivity is a bold step forward for the firm, which has been in business since 1952. As client needs become more complicated and far-reaching, firms are evolving to keep up. Might this mean that other western practices are on the rise in Japan? Litigation funding has yet to be adopted by the Japanese legal system. But the increase in globalization may well bring about a rise in third-party litigation finance. Only time will tell. 
Commercial

Litigation Finance: Experiencing is Believing

Litigation Finance is increasing in use and acceptance as an innovative, ethical option when money is scarce. According to the 2020 Legal Finance Report, use of third-party litigation funding is up 105% since 2017. Burford Capital explains that as more firms and companies utilize litigation funding, the more folks are talking about the good it can do. In just a few short years, the practice has evolved from a niche option to a widely sought solution for a variety of common financial woes. One thing is certain: the need for education. While use of litigation funding is up, lawyers are increasingly admitting that they know very little about the practice. Third party funding isn’t just for class actions against deep-pockets. Modern benefits of legal finance include monetizing legal assets to offset the impact of the pandemic, or to fund a portfolio of cases without adding to balance sheets. Are legal professionals, as they claim, largely ignorant of all that litigation funding can do? Or do they recognize the need for education so they can make the most of this evolving option?
Commercial

Why CFOs Should Look to Legal Funding—Without Delay

In these trying and potentially volatile economic times, CFOs may have every reason to worry. They also have reason to innovate, adapt, and find creative solutions to maintaining balance sheets. Global Bank and Finance explains that with job losses hitting record highs (over 800,000 jobs lost during the pandemic), insolvencies and liquidations are also way up. Some suggest that nearly 2/3 of businesses are currently at risk of folding. Nearly 15% of UK businesses have suspended trading. Still, it doesn’t have to be that way for everyone. CFOs should be looking for assets that can be liquidated. Unrealized litigation, for example, can be monetized. Breach of contract, lack of payment, fraud—any viable claim can be turned into a liquid asset with help from funders. By covering the costs of bringing a vetted claim, funders create solutions that let litigation move forward without tying up capital. Successful cases make money for funders, while unsuccessfully funded cases do not impact the firm—because funding is provided on a non-recourse basis. While funders seek out meritorious cases with a good chance of recovery, the right commercial dispute can be worth millions. Savvy CFOs would do well to seek out potentially profitable claims that can be monetized. Economically tenuous times don’t impact Litigation Finance as one might expect, because this asset class is uncorrelated to the market. Currently, funders are well-monied and looking for cases to fund.
Commercial

Australian Joint Committee Seeks Further Regulation of Litigation Funders

Massive new oversight is needed to reign in the litigation funding industry—that’s the conclusion according to a report from the parliamentary joint committee on corporations and financial services. An array of recommendations has been suggested, though it did not include Frydenburg’s most severe requirements. Independent Financial Advisor details some of the recommendations suggested by the committee. These include the appointment of independent fee assessors to vet fees and agreements involving firms, funders, and class participants. Oversight is also recommended with regard to who may fund cases, and what percentages they will be allowed to take before a settlement can be accepted by the court. Essentially, the new regulations are meant to stem what the committee sees as excessive, unreasonable, or disproportionate fees to funders—often at the expense of those who were actually wronged. It’s also meant to reduce the desirability of Australia as a hot spot for international or cross-jurisdictional litigation. As of now, no regulator has taken legal action against a funder. But that may change if the committee gets its way and new regulations are adopted. Many believe there is a lack of symmetry that needs to be addressed in order to maintain public confidence in litigation funding.
Announcements Commercial

Odyssey Marine Exploration Prepared for Strong 2021 with Increased NAFTA Funding and 2020 Successes

Odyssey Marine Exploration, Inc. (NASDAQ:OMEX), a deep-ocean exploration pioneer engaged in the discovery, development and extraction of deep-ocean minerals, has secured up to an additional $10 million to support its pending North American Free Trade Agreement (NAFTA) claim against Mexico and provided an update on the successful execution of Odyssey’s 2020 business plan objectives.

The NAFTA claim relates to the unlawful denial of the environmental permit for subsidiary Exploraciones Oceanicas’ (ExO’s) offshore phosphate project. Odyssey’s existing litigation funder, Poplar Grove, LLC, has agreed to provide up to an additional $10 million to fully support the NAFTA claim under substantially the same terms as our prior agreement. Poplar Grove is managed by Drumcliffe LLC, a private investment management firm that oversees a high-value litigation funding portfolio representing more than $14 billion in claims.

“Drumcliffe’s sole focus is to finance and support the recovery of value for the victims of global fraud, corruption and wrongdoing. The strength of the First Memorial filed by Odyssey in this case reinforces our belief in a successful outcome and supports our decision to invest additional capital to fund the case through the hearing and anticipated award,” explained James C. Little, CEO of Drumcliffe.

“One of our key objectives for 2020 was advancing the realization of value from the significant investment we have made in our ExO Phosphate Project in Mexico,” stated Mark D. Gordon, Chairman and CEO of Odyssey. In September, we filed a strong and compelling First Memorial in the NAFTA case. It was the culmination of many months of work by our legal team at Cooley, supported by our internal project development and research team, to gather documentary evidence and 20 expert reports and witness statements that demonstrate the merits of the case, the strategic size and grade of the resource, the operational viability of the project, and the project’s value. We are extremely confident in our case and, with the addition of the expanded funding commitment from Poplar Grove, we are prepared to take the case through to its final conclusion to realize the more than $2 billion value of this asset.

“In addition to making substantial progress on the ExO Phosphate Project, the Odyssey team has continued to move the business forward by advancing the development and value of our diversified mineral project portfolio and positioning the company for significant successes in the coming 18 months. Our achievements, despite being in the middle of a once-in-a-century worldwide pandemic, are a tribute to our dedicated team of professionals who tirelessly work to live our core values and achieve the ambitious goals we set for ourselves. Investors’ confidence in our business plan and the progress we continue to demonstrate enabled us to achieve a major goal of securing multi-year operational funding,” added Gordon.

Realizing the Value from the ExO Project:

Odyssey’s most significant project is the ExO Phosphate Project in Mexico, which is one of the largest and highest quality phosphate sands deposits in the world. It is currently the subject of $2.36 billion claim against Mexico under NAFTA. In early September, Odyssey’s legal team filed the First Memorial in the case alleging that Mexico’s prior political administration wrongfully denied environmental approval of the ExO Phosphate Project in breach of NAFTA.

In 2012, ExO was granted a 50-year mining license by Mexico (extendable for another 50 years at ExO’s option) for the deposit that lies 25-40 km offshore in Baja California Sur. The company spent more than three years preparing an environmentally sustainable development plan with the assistance of experts in marine dredging and leading environmental scientists from around the world. Key features of the environmental plan included:

  • No chemicals would be used in the dredging process or released into the sea
  • A specialized return down pipe that exceeds international best practices to manage the return of dredged sands close to the seabed, limiting plume or impact to the water column and marine ecosystem (including primary production)
  • The seabed would be restored after dredging in such a way as to promote rapid regeneration of seabed organisms in dredged areas
  • Ecotoxicology tests demonstrated that the dredging and return of sediment to the seabed would not have toxic effects on organisms
  • Sound propagation studies concluded that noise levels generated during dredging would be similar to whale-watching vessels, merchant ships and fisherman’s ships that already regularly transit this area, proving the system is not a threat to marine mammals
  • Dredging limited to less than one square kilometer each year, which means the project would operate in only a tiny proportion of the concession area each year
  • Proven turtle protection measures were incorporated even though the deposit and the dredging activity are much deeper and colder than where turtles feed and live, making material harm to the species unfeasible
  • There will be no material impact on local fisheries as fishermen have historically avoided the water column directly above the deposit due to the naturally low occurrence of fish there
  • The project would not be visible from the shoreline and would not impact tourism or coastal activities
  • Precautionary mitigation measures were incorporated into the development plan in line with best-practice global operational standards
  • The technology proposed to recover the phosphate sands has been safely used in Mexican waters for over 20 years on more than 200 projects by ExO’s operating partner, illustrating the hypocrisy of the denial of the environmental permit for the project, especially when one considers that Mexico approved much higher impact dredging projects in areas that its own environmental agency deemed “environmentally sensitive areas” during this same time period.
Notwithstanding the factors stated above, the Mexican Ministry of the Environment and Natural Resources (SEMARNAT) unlawfully rejected the permission to move forward with the project, even after the Federal Court of Administrative Justice (TFJA) unanimously ruled that this rejection was unlawful and ordered SEMARNAT to re-take its decision in 2018. To date, SEMARNAT has not been able to present any proof that supports a legal basis for rejecting this project, and its actions have deprived the Mexican people from realizing the tremendous societal and economic benefits this project would deliver. ExO is once again challenging the unlawful decision of the Peña Nieto administration before the TFJA. The case is being heard before the same tribunal that previously ruled that Mexico acted unlawfully in their rejection of the environmental approval of the ExO Phosphate Project. In addition, Mexico is facing an arbitration before an international tribunal for breaching the investment protection provisions under NAFTA. ExO is seeking compensation of over $2 billion on the basis that SEMARNAT’s wrongful repeated denial of authorization has destroyed the value of its investment in the country and is in violation of the following provisions of NAFTA:
  • Article 1102. National Treatment.
  • Article 1105. Minimum Standard of Treatment; and
  • Article 1110. Expropriation and compensation.

The First Memorial in the NAFTA case was filed in September. It is supported by documentary evidence and 20 expert reports and witness statements.  In summary, this evidence includes:

  • MERITS:  Testimony from independent environmental experts that the environmental impact of ExO’s phosphate project is minimal and readily mitigated by the mitigation measures proposed by ExO.  Witnesses also testified that Mexico’s denial of environmental approval by the prior administration was politically motivated and not justified on environmental grounds, and that Mexico granted environmental permits to similar dredging projects in areas that are considered more environmentally sensitive than ExO’s project location.
  • RESOURCE:  An independent certified marine geologist testified as to the size and character of the resource.
  • OPERATIONAL VIABILITY:  Engineering experts testified that the project uses established dredging and processing technology, and the project’s anticipated CAPEX and OPEX was reasonable.
  • VALUE:  A Phosphate market analyst testified that the project’s projected CAPEX and OPEX would make the project one of the lowest cost phosphate rock resources in the world, and damages experts testified the project would be commercially viable and profitable.

This NAFTA arbitration is being administered by the International Centre for Settlement of Investment Disputes (ICSID) and it is expected that a redacted version of the First Memorial will be available to the public shortly. Once the Memorial is made available by ICSID, Odyssey will provide a link to the filing on its website, www.odysseymarine.com.

The NAFTA hearing is scheduled to take place in January 2022 unless settled earlier by the parties.

Increasing Portfolio Value

Odyssey increases the value of its mineral portfolio in multiple ways: adding new projects to the portfolio through development or acquisition, gaining or increasing equity ownership in mineral projects through investment or a leveraged contracting model, and by de-risking projects and moving them up the value curve toward full operating production.

During 2020, in addition to the ExO phosphate project, Odyssey worked on further developing the value of two highly prospective subsea mineral projects, CIC and Lihir Subsea Gold. The company is also actively developing new projects through its proprietary Global Prospectivity Program, with the goal of identifying new, highly valuable and societally significant subsea resources.

CIC: Odyssey is a member of the CIC Consortium, which is seeking an exploration license in an island nation’s Exclusive Economic Zone. The CIC Consortium was founded and is led by Odyssey co-founder and former CEO, Greg Stemm, and includes Royal Boskalis Westminster NV and Odyssey Marine Exploration.

Through a wholly owned subsidiary, Odyssey Marine Minerals, Odyssey has already acquired 15 million shares (representing approximately 12% of current outstanding shares of this project) through the provision of services related to resource assessment, project planning, research and project management, and Odyssey has an option to acquire an additional 5 million shares.

Lihir Subsea Gold: The project’s license area is adjacent to Lihir Island in Papua New Guinea where one of the world’s largest known terrestrial gold deposits is currently being mined and processed by Newcrest Mining. The license area includes at least five prospective exploration targets in two different mineralization types: seamount-related epithermal and modern placer gold. Odyssey owns approximately 80% of the Bismarck Mining Corporation, Ltd, the Papua New Guinea company that holds the exploration license.

While the COVID-19 pandemic delayed plans for additional offshore exploration work in 2020, presentations to the public were made in December 2020 in compliance with and in support of the regulatory process in PNG. Upon renewal of the exploration license, work will begin with the goal of conducting offshore validation work in 2021. “We are extremely excited to complete the exploration program to verify and quantify the mineralization of this potentially valuable resource and to fully understand the environmental setting in which it lies. We were on the cusp of executing this program in 2020 when the pandemic hit, making marine operations impossible to execute. The renewal will allow us to execute the same exploration program that was approved in the last license period,” said John Longley, President & COO of Odyssey.

About Odyssey Marine Exploration Odyssey Marine Exploration, Inc. (Nasdaq:OMEX) is engaged in deep-ocean exploration using innovative methods and state-of-the-art technology to provide access to critical resources worldwide. Our core focus is the discovery, development and extraction of deep-ocean minerals. Odyssey also provides marine services for private clients and governments. For additional details, please visit www.odysseymarine.com.

Forward Looking Information Odyssey Marine Exploration believes the information set forth in this Press Release may include "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Certain factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 30, 2020. The financial and operating projections as well as estimates of mining assets are based solely on the assumptions developed by Odyssey that it believes are reasonable based upon information available to Odyssey as of the date of this release. All projections and estimates are subject to material uncertainties and should not be viewed as a prediction or an assurance of actual future performance. The validity and accuracy of Odyssey's projections will depend upon unpredictable future events, many of which are beyond Odyssey's control and, accordingly, no assurance can be given that Odyssey's assumptions will prove true or that its projected results will be achieved.

Cautionary Note to U.S. Investors The U.S. Securities and Exchange Commission (SEC) permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in this press release, such as "measured", "indicated," "inferred" and "resources," which the SEC guidelines strictly prohibit us from including in our filings with the SEC. "Inferred mineral resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. U.S. investors are cautioned not to assume that part or all of the inferred mineral resource exists, or is economically or legally mineable, and are urged to consider closely the disclosures in our Form 10-K which may be secured from us or from the SEC's website at http://www.sec.gov/edgar.shtml.

Commercial

Omni Bridgeway’s Exceptional 200+% Return

Could anyone have predicted these insane Omni Bridgeway returns? Omni Bridgeway isn’t making a profit currently. For the previous five years, revenue has trended downward at a rate of more than 30% per year. Simply Wall St explains that revenue growth is expected when companies aren’t making a profit, but that hasn’t been the case here. Yet the share price has risen at a rate of around 25% per year over the last five years. Unexpected? For sure. Throughout 2020, insiders at Omni Bridgeway have been making significant purchases. Most analysts take that as a positive sign. Still, this doesn’t necessarily translate to high shareholder earnings. Looking at the TSR (total shareholder return) is a vital part of determining potential value. This figure looks at discounted capital, spin-offs, and dividends—presuming that dividends are reinvested. From 2015-2020, the TSR at Omni Bridgeway was a whopping 234%, even better than the 25% share price return. Still, Omni Bridgeway’s investors suffered a loss of nearly 8% this year, including dividends. Long-term shareholders did better, gaining more than 25% over the last five years. Obviously, market conditions can impact share price—but litigation funding is also largely uncorrelated with the market.
Commercial

Global Class Actions—Looking Ahead

A recent panel, the Global Legal Groups Class Action Symposium, looked at US and EU collective litigation, examining trends. Of particular interest are new global class action laws and how inter-jurisdictional issues will be handled in the future. ICIG details the various issues facing Litigation Finance today. Incentive payments to representatives in a class action can be a sticking point in some instances. Modest incentives may be permissible, but some firms believe they are best avoided. The United States is also experiencing the development of a new class of negotiations which may bring the US class action process closer to what’s happening in the EU and elsewhere. In the European Union, class actions are not considered to be a traditional part of the legal world. However, the new Collective Redress Directive may change that. Influenced by Australia and the US, the EU may be moving toward a more Americanized or pan-European style of collective bargaining. The Collective Redress Directive differs from US class action law in a few major respects. First, damages can be sought as well as injunctions, and only a qualified entity can bring a claim. Litigation funding is permitted under the new law, but must be completely transparent. Disclosure requirements in general will be more stringent, and cases may be thrown out of court during the early stages. Market sophistication and a willingness to litigate in other jurisdictions has fueled the globalization of class action markets. Boundaries are being tested and test cases abound. Litigation funding increases access to justice across the board, leading to more (and often larger) cases that spur a desire for increased regulation. Trends in collective action litigation include environmental and social issues, and those related to governance. The growth of class actions on the global stage is bound to continue, which is great news for third-party litigation funding.
Announcements Commercial

International Legal Finance Association Statement On Australian Parliamentary Committee Inquiry On Litigation Funding

Today, the International Legal Finance Association (ILFA) — the global voice of the commercial legal finance industry — issued a statement in response to Australia's Parliamentary Joint Committee on Corporations and Financial Services Inquiry on Litigation Funding and the Regulation of the Class Action Industry. The Committee issued its findings and recommendations to the full Parliament today. "Australia's current balanced approach between securities law, class action procedure, and legal funding provides a model for the world, and reinforces its strong position as a destination for global investment. However, today's report attempts simultaneously to water down Australia's securities law, and to apply new regulatory burdens to class action procedures and legal funding. The Committee's recommendations would place undue burdens on shareholders seeking access to justice by driving up compliance costs and increasing the cost of capital. There is no evidence, in Australia or elsewhere, that class actions or litigation funding needs the kind of intrusive regulation proposed by the Committee. It appears that the Committee has relied on dubious claims from those opposed to these free market activities in proposing these regulations. It is, of course, for each jurisdiction to determine the rigor of its own regulatory regimes.  But jurisdictions that impose onerous barriers on the enforcement of shareholders' rights risk seeing global capital flow elsewhere, impacting the level and vitality of commercial activity. The deliberations of the Committee and its recommendations have been infected by an entirely false premise that "exploding" numbers of shareholder class actions have caused "skyrocketing" D&O insurance premiums which threaten the future of ASX companies. Misconceptions about legal finance have been deliberately advanced by a small group of vocal opponents. These falsehoods threaten to upset the balance between law, procedure, and the funding of these fundamental market activities by those pursuing justice in the legal system and undermine regulatory review processes that should be grounded in facts, not hyperbole. The legal finance community operates responsibly and within well-established best practice frameworks, including those required for ILFA membership. ILFA is committed to playing an active and constructive role to promote transparency and confidence in the marketplace by striking an appropriate balance between protecting stakeholders and fostering growth and innovation." ILFA represents the industry's interests before governmental bodies, international organizations and professional associations and serves as a clearinghouse of relevant information, research and data about the uses and applications of commercial legal finance. Details of the false premise referred to above are to be found at paragraphs 17.12 to 17.24 inclusive and paragraph 17.119 of the Report by the Joint Committee. For additional information, including ILFA's industry best practices and member obligations, please visit www.ilfa.com
Commercial

Why Litigation Funding is Catching On

Nick Rowles-Davies doesn’t mind being called an “ambulance chaser.” Maybe that’s because after chasing down an ambulance, his Sydney-based Litigation Finance firm, LCM, helps the injured parties seek justice. That’s the nature of litigation funding, and it’s working for a lot of people. LCM explains that Litigation Finance involves buying claims for ongoing cases with the hope of making money from an eventual settlement or court award. That means it’s an excellent investment for anyone looking to steer clear of traditional markets. It’s also a life-changing tool for those who have been wronged by a large company or entity and don’t have the financial means to fight back. At its core, litigation funding works to increase access to justice for everyday people. The industry itself has grown by leaps and bounds in recent years—since the last global financial crisis to be exact. Tough economic times call for creative problem solving, and Litigation Finance fits the bill. In addition to funding large cases like class actions, third-party funding can be used to fund entire portfolios of cases, diversifying risk for investors. Or it can be applied to insolvency cases, so funders can reap a portion of whatever is collected. Litigation Finance attracts more sophisticated, high-end investors like institutional investors, sovereign wealth, and hedge funds among others. Funding cases requires extensive vetting, and many funders use complex algorithms and new tech to decide which cases to back. For success in litigation investing, due diligence is essential. The industry is global, with new markets opening up to the practice regularly. Around the world, funders like Burford Capital, LCM, Omni Bridgeway, and Therium Capital are leading an industry that shows no signs of slowing. Rowles-Davies believes that the current state of Litigation Finance has only just scratched the surface of what’s possible.
Commercial

Williamtown Class Action Members Compensated

An impressive $57 million settlement was distributed among members of the Williamtown Contamination Class Action earlier this week. This comes as part of a settlement from February of last year, in a case involving PFAS contamination of homes, farms, and other businesses. Omni Bridgeway, which funded the action, explains that their involvement in the case allowed class action members to fight for what they deserved—rather than merely asking to be treated fairly. The average award per household was about $100,000, with some affected parties receiving more or less depending on the actual damage suffered. Dentons, one of the largest law firms in the world, distributed the settlement after four years of intense litigation. Reporting from the Newcastle Herald is credited with raising awareness about the case. Justice Lee called the outcome ‘excellent,’ as it seems to fairly compensate those who were harmed by the contamination and its aftermath. Omni Bridgeway points to the case as an example of Litigation Finance working exactly as it should.
Commercial

Reflections on the State of Litigation Finance

Recently, two portfolio managers at Burford Capital shared their thoughts on 2020’s 4th quarter, the continued impact of COVID, collections, and challenges in cash management. Nicholas Cooper and Patrick Wackerly explain year-end financing and more. According to Burford Capital’s own research, roughly half of in-house counsel expect a shrinking of legal budgets, and more than half have stated that they’ll be looking for discounts from outside counsel. Even in boom times, firms tend to push client collections this time of year. But this year carries unique challenges. There’s a difference between desperation and simply salvaging what there is to salvage. Client discounts, once a go-to measure, are now being eschewed in favor of more lasting solutions. Demand for financing to carry firms through the end of the fiscal year is higher than ever. This is due to several factors: --Legal financing is not a traditional loan --Clients will not be aware when firms utilize third-party legal funding --Funders, like Burford, take on the risk so firms don’t have to --Third-party funding is reliable, time-saving, and economically sound. Savvy firms and businesses alike understand that taking a little help when you need it can spare significant hardship down the road.
Litigation Finance News
Commercial Special Features

Key Takeaways from LFJs Q4 2020 Commercial Litigation Funding Roundup

On Thursday December 17th, Litigation Finance Journal hosted a special 1-hour panel discussion on the major events impacting the commercial litigation funding industry. Panelists included Omni Bridgeway CEO Andrew Saker (AS), Therium Co-Founder and CIO Neil Purslow (NP), and LCM CEO Patrick Moloney (PM). The panel was moderated by Ed Truant (ET), founder of Slingshot Capital. Below are some highlights from the discussion. ET: Why did each of you decide to pursue a global growth strategy as opposed to solely focusing on domestic markets? PM: We looked at things from a very practical perspective at LCM, we looked at where the most economic activity was happening. Where there’s more economic activity there’s more disputes. Therefore, we looked around the globe toward the larger economies than where we started back here in Australia. We were cautious and disciplined about moving into new jurisdictions. So very much driven economically and by opportunity. NP: When we started Therium about 12 years ago, we recognized the potential then that the industry would become a global industry. And from an early stage, we were seeing funding opportunities coming from other jurisdictions as well as the UK. Our global footprint reflects a view of the market that there are benefits to being bigger in funding. From a case point of view, it’s better to have more depth of financial resources. From an investor point of view, greater diversification is better. From an underwriting point of view, being able to draw on expertise across jurisdictions and to have the benefits of a global perspective is also helpful.  ET: What were some of the business challenges you faced when you entered new markets? AS: Most of our expansion was done through organic growth. It was where we perceived first-mover advantage. That required us to address a number of key risks, market awareness of the industry was perhaps first and foremost. There were some jurisdictionally specific issues in Canada where we needed to seek some insurance regulatory approvals. But otherwise, it was all about establishing boots on the ground, finding the right people which is more than half the problem. And ensuring that you’ve got access to the local contacts and networks that you need for establishing a successful business. ET: Other than lack of sleep, what are some of the other negative aspects of going global? AS: Lack of sleep is perhaps the biggest issue, but the benefits far outweigh any of the costs. Having such a global team, a global approach, different cultures that are being fully integrated, compensate for any of those downsides. But it’s an interesting dynamic market that’s continuing to grow. PM: I think that’s right. I think...there’s a necessity to become global. In the respect of at least publicly listed and traded. NP: The thing that’s interesting is, relatively speaking, how easy it is to operate across jurisdictions in this industry, and I think it’s because--to a very large extent--the skillset that you need is so transferrable. So it’s actually been very positive. ET: What’s the implication given COVID? Are you thinking differently about your organizations going forward in terms of travel and face-to-face meetings and that type of thing? AS: I think it’s an evolving thought process. Initially, at the front end of this crisis, we all saw the benefits of staying at home and working remotely and using technology to compensate. There was a great deal of enthusiasm and everyone bought in. As this has dragged on, there’s been different views about the merits of that and the efficacy of it all. To some extent, it does vary depending on your location. We’ve been very fortunate here in Australia to have a slightly different experience from our colleagues in Europe and the US.  ET: The next major topic I want to tackle was this concept of corporate social responsibility and litigation finance in environmental social governance, or ESG. CSR is becoming a pretty powerful trend in global investing, so I wanted to explore the implications for the litigation finance asset class. What are you hearing from your shareholder base about CSR and ESG in terms of their importance, and what pressures are those shareholders putting on public companies these days? PM: From LCM’s perspective, I suppose we have had two experiences. One, the public markets through the securities exchange here in Australia, and then more recently the London stock exchange, are probably two quite different experiences. So I think investors out of the UK and Europe have been far more focused and have an expectation far more than I recollect that we’ve had here in Australia, and that’s not to say that these issues are not present in Australia. It’s probably more of a timing thing, but we’re very conscious of it. What we need to wrestle with is, as a relatively small listed entity, is what capacity we have to wade into this. So we’re very conscious of it and we do have principles associated with that. AS: Definitely, it’s an increasingly important area of relevance to all our shareholders. What we have found as we’ve shifted from the ASX300 to ASX200 is that there are more ESG-specific type funds that are interested in a stock that’s compliant with ESG obligations, and as a consequence of that, we initiated our own process to have a formal ESG policy. It’s a work in progress and something that we’re developing with internal stakeholders and well as external stakeholders. It’s a value that resonates throughout the whole company. NP: ESG and CSR considerations are becoming increasingly important for privately funded investors as well. And we get quite a lot of questions from them about how we’re thinking about this. On the CSR side, the way we’re approaching it—we tend to think of litigation finance as ultimately about investing to facilitate access to justice. And for the most part, obviously, we’re doing that as an investment in the expectation of a return. But there is a wider need in society for access to justice and legal advice where those situations can’t be funded on a commercial basis. And we have felt that it’s important as an investor in the legal world that we play our part in that area too. It’s for that reason that we set up Therium Access 18 months ago. ET: Let’s move on to the third topic, industry growth, and implications for innovation. At a macro level, the industry arguably is growing in three main ways: growth in the number of jurisdictions allowing litigation finance, increasing penetration within existing markets, and then growth through product innovation. So let’s take a closer look at product innovation as a growth factor. Perhaps each of you can comment on what your business has done to innovate in the litigation finance market within the last 2-3 years.   PM: At LCM, we’ve tried to look at business development in a very different way to how the industry might have looked at this previously, so we look at the available market in two ways. One is those who use litigation finance for necessity, and those through choice, so I think the larger part of the market which remains sort of un-penetrated and unaddressed by our industry globally is providing it to large sophisticated well-capitalized corporates. And I think that’s a very interesting part of the market for us, I think it’s an interesting part of the market for the industry as a whole. I think that’s where a lot of our focus has been in the last 2-3 years. ET: Neil, how about you in terms of innovation at Therium? NP: Certainly we’ve seen a lot of innovation in the development of product. Or perhaps to put in another way, in deployment techniques. Our core business is built around an ability to assess and to price litigation risk. But the way in which that investment has been delivered and the way it’s been structured has become a lot more varied in recent years. We put a great deal of resources into developing those techniques, whether it’s portfolio funding of different types, corporate portfolios, law firm funding, or claim monetization. These aren’t new areas, we’ve been at this for a long time. But certainly, our level of sophistication in how we do them has increased dramatically in the last few years. I think also in terms of sophistication, we’re working with an AI firm called Solomonic, to bring a more data-driven approach to our investment process as well. I think that’s another theme. The last point on this: I think the market is in an interesting point now where funders are starting to drive certain parts of the litigation landscape. So instead of being passive recipients of cases from law firms, funders are now playing an important role in shaping litigation trends and what case types do and don’t develop.  AS: From a non-product perspective, I think the evolution of the fund management model is growing, it’s something that has had roots in the last five years, but is now being more warmly embraced by the litigation funders as well as PE investors.  Looking forward, as Neil mentioned, a more active role for litigation funders in the investments is something that I think will grow. We are looking to try to shift our focus from being an agent to being a principal and actually owning claims, judgments, and awards. There are various other strategies we’re looking at, including downside risk management, cracking the holy grail we all talk about of defense-side funding. And then potentially even moving into law firm ownership, to take advantage of this shift that seems to be evolving around the world.
Consumer

Involuntary Bankruptcy Petition on the Horizon in Tom Girardi Case

Creditors of the firm Girardi Keese, and Tom Girardi himself, plan to file an involuntary bankruptcy petition by the end of the week.   Law.com reports on a recent remote hearing to discuss the appointment of a trustee. Judge Thomas Durkin (Northern District of Ill) has previously frozen the assets of Girardi and his law firm, suspecting that they may have stolen settlement money from clients. Attorneys for one litigation finance firm explained that the involuntary bankruptcy petition would negate the need to appoint a trustee. California Attorney Lending has a judgment against Girardi of more than $6 million, though they remain defendants in an earlier lawsuit brought against Girardi Keese, alleging embezzlement of settlement monies owed to families impacted by the crash of Lion Air Flight 620. Judge Durkin opted not to appoint a trustee, though he did insist that the asset freeze stay. Jay Edelson is the acting co-counsel to several of Girardi’s clients. He recently expressed his concerns about the 8,000-10,000 clients Girardi represented in another class action—possibly involving a 2015 gas leak in Aliso Canyon near Los Angeles. In court, Edelson explained to the judge that his firm is concerned about the clients in question and wants them to be fairly compensated for their losses. Girardi is a prominent attorney whose wife, Erika Jayne, appears on the “Real Housewives of Beverly Hills.” The two ostensibly filed for divorce recently, though some have speculated that this is a ruse to protect or hide the couple’s assets. One lawyer, Boris Treyzon, informed a judge of Girardi’s request that he take over several Girardi Keese cases. Durkin declined this arrangement, saying he would not allow settlement or recovery to move forward without a trustee to supervise. Meanwhile, unnamed litigation funders have offered their assistance to Girardi. A judge has not precluded Girardi from receiving funds to pay for a forensic evaluation of his finances.
Commercial

Managing the Workflow of Legal Departments

There’s an economic crisis afoot, which means managing costs and workflow is more vital than ever. Instead of telling in-house legal teams to ‘do more with less’, savvy businesses are investing in their legal departments. This allows them to better manage workflow, reduce spending, and optimize the company’s bottom line. Thomson Reuters Legal details that making a case for investment at this time may fall on deaf ears. It suggests that rather than explaining why investing is a good idea—detail instead why not investing can cause significant damage. Poor workflow, for example, is often the result of a lack of prioritization or an uneven distribution of assignments. Enhanced optimization can be a key way to address this. By streamlining, employing consistent practices, using trackable management, and filing regular reports with management, the benefits reveal themselves in short order. Automation via specialty software can connect with existing software to create a new level of efficiency. When a business is reticent to make the necessary investments, third-party legal finance is an option worth considering. Funds can be used to shore up in-house legal departments without adversely impacting balance sheets. Legal funding is a versatile, effective way to keep budgets in line while continuing to make improvements and handle pending matters effectively. Beware the cries of ‘that’s how we’ve always done this,’ when advocating for investment in and updating of in-house legal departments. Innovation is the path to a better future. Corporate legal departments have changed a lot in recent years—moving from a cost-burden to a kind of hub for communication, collaboration, and information centralized for easy access. This can be enhanced by modern tech like live updating of documents for faster contract creation and negotiation, or with software that leads to greater transparency and better communication between staff, clients, and management.
Commercial

Key Takeaways from the IP Dealmakers Forum

Week two of the IP Dealmaker’s Forum included a variety of panels and events revolving around three main points of discussion. These included diligence, licensing, and venue. The forum also expounded on the importance of litigation funding in an array of IP matters. Above the Law details that litigation funding is a modernization of the traditional contingency model. In many types of patent litigation, diligence is key. Litigation funders can help with this, as their experience in varied IP-related matters will provide valuable insight. Litigation funders are well-versed in IP litigation and routinely invest in their diligence capabilities. In addition, the Litigation Finance industry is well-monied and standing by to help. It’s vital that litigants be proactive in the diligence process. This includes giving funders all the relevant information, allowing them to fully vet the risks of a specific investment. Also advised is a willingness to discuss these risks fully with their funders. These aspects of diligence benefit all involved. Firms get a no-cost opinion from experienced funders while funders are able to protect their (and their investor’s) capital from risk. Patent owners can obtain an informed and experienced analysis of their case to decide how best to proceed. Venue is also a vital consideration and another aspect that may be best discussed with litigation funders early on in the process. Some might suggest that, theoretically, it shouldn’t matter where a case is filed. But that’s simply not the reality. Licensing was the third major consideration discussed at the forum. Much IP licensing is based on potential damages from infringement. Large verdicts have become increasingly common in the IP landscape, even outside the business world with university researchers and non-practicing entities gaining huge settlements or awards. Part of the frustration with licensing stems from tech companies failing to look seriously at their licensing until a lawsuit is on the horizon.
Commercial

Did the Recent Mastercard Case Open the Floodgates?

The case of Mastercard Inc et al v Merricks has captured considerable attention. Lawyers, funders, claimants in cases that have been stayed pending this decision—and at least 46 million claimants all awaited the Supreme Court’s ruling. Omni Bridgeway explains that collective proceedings in England became opt-out in 2015 as part of a bid to find more equitable solutions. This led to worry that, as some say has happened, commercial firms might fund cases strictly for profit. That was of particular concern in this case, given the high number of claimants as well as the size of the potential award. In the Mastercard v Merricks case, claimants are made up of those who made purchases with Mastercard over the 16-year-period covered by the action. Also involved are the 800,000 or so businesses that accepted the payments. All told, the class action seeks GBP 14 billion. Merricks, the representative plaintiff, has a meritorious cause of action. Specifically, the case here follows a finding of liability as the European Commission already declared that Mastercard breached its duty when they set their fees. But how can Merricks establish everyone’s individual losses on every mundane transaction over 16 years? In truth, he doesn’t have to. Seeking an aggregate award would only require data and methodology that affirms an appropriate amount of damage. At the same time, it may seem impossible to find a methodology that is fair to everyone. The Supreme Court ultimately held that defendants should not be let off the hook because proving exact damages is a herculean task. They also affirmed that collective actions are permissible even if they’re made up of claimants who could have filed their cases individually. Some have claimed that this ruling opens the floodgates to a bevy of new collective actions. It is true that class actions may have an easier path, but that only increases access to justice for ordinary people.