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Commercial

Insolvency 2020: Takeaways from Burford Capital Webcast

Legal finance products may seem daunting to those who lack experience with them. However, understanding the negotiation, documentation, and disclosure processes can be as simple as listening to the experts. Burford Capital managing directors Emily Slater and Greg McPolin demystify the process at the ABI Insolvency 2020 Virtual Summit. The pair detail the two main types of structures by which cases are financed, as well as the basics of litigation funding. By better understanding the options, clients and firms can develop an arrangement that meets the needs of lawyers and clients. Understanding the difference between the structures is a vital part of the process. Third-party litigation funding is provided on a non-recourse basis. That means high risk for the investor and security for plaintiffs and their legal team. “Fees and expenses” refers to the costs of pursuing the case. This might include legal fees, court filing costs, expert testimony, research, or enforcement of terms. “Claims and award monetization” is a way to bring in capital based on the promise of a share of future awards or recovery. To understand the impact of litigation funding in insolvency cases, we need only to look at General Motors. During the bankruptcy, when money was short, GM secured $15 million in non-recourse funding from Burford. Ultimately, this funding allowed for a settlement of $231 million, ending almost a decade of litigation. In another instance, a Fortune 100 company was faced with an opt-out class action alleging price-fixing by directors. If the conspiracy was proven true, potential damages would be enormous. Burford stepped in with $75 million in capital that clients could access long before the resolution of the case. Non-recourse funding can provide a complement to an existing contingency arrangement, providing liquidity long before the resolution of a case. This allows companies to pursue high-value litigation even when funds are short.
Commercial

Investment Review 2020: Yieldstreet

Yieldstreet is touted as a Financial Tech company that leverages the power of the internet to make a unique contribution to investment. Its focus on alternative investments includes placements in Litigation Finance, marine vessel acquisition, deconstruction, and real estate, among others.     Photo Credit: https://www.bptrends.com/ Kake details that Yieldstreet only worked with accredited investors initially. But with the Yieldstreet Prism Fund, anyone can invest in a variety of asset classes with a minimum investment of $5,000. These include commercial, consumer, legal, art, and real estate. Keep in mind, however, that these illiquid investments are not appropriate for anyone looking for a quick return. Noted strengths of Yieldstreet as an investment company include ease, convenience, and high yields. Investments are always backed by collateral, which offers more safety. If a loan goes bad, it’s standard for Yieldstreet to take steps to recoup the principle and interest, even if the recoupment requires legal action. YieldStreet also offers access to unique financial opportunities that other investors cannot access. Downsides to using Yieldstreet include management fees of up to 2%, which is significant. Then there are ongoing fees for every investment, which can add up for retail investors. Also, once invested, funds are illiquid until the project is completed.  That being said, Yieldstreet boasts a very impressive annual return of over 12%. Investments are held in a way that, even if the company went bankrupt, new fund managers could still be appointed. Investments in real estate or litigation balance high risk with high returns, taking into account long timeframes and unpredictable outcomes. Smaller investors and those hoping for a fast return are probably not good candidates for Yieldstreet, but those looking to reap the benefits of a strong risk/reward profile are unlikely to find a simpler, more efficient way to invest. Photo Credit: https://www.bptrends.com/
Commercial

Banker Accused of Illegally Sharing Confidential Files with Russian Oligarch’s Ex

Ross Henderson, formerly at Goldman Sachs, has been accused of handing over confidential financial documents to Tatiana Akhmedova, the former wife of a Russian oligarch, and her litigation funders: Burford Capital. He is now facing a criminal investigation led by the Swiss police. The Daily Mail reports that Henderson, who is from Britain, began a business relationship with the late Mr. Akhmedov in 2014. A year later, Henderson was fired by Akhmedov. A year after that, the Akhmedov divorce ended in Mrs. Akhmedova being awarded one of the largest divorce settlements in English history. As of last year, an English high court confirmed that Henderson gave hundreds of confidential files including bank statements, records of privileged conversations, and confidential emails to Akhmedova and Burford. While this was determined to be a breach of confidentiality, a justice argued that the information was still admissible in English High Court. As the former Mrs. Akhmedova has still not received the court-ordered settlement, speculation remains that the Henderson investigation is connected to recovery efforts led by Burford Capital. The funding agreement between Burford and Akhmedova gives Burford up to 30% of the GBP453 million settlement. All this comes months after a Dubai court ordered a contested super yacht be grounded, so it could not be recovered by Akhmedova. Burford is now utilizing the services of Arcanum Global to recover assets.
Commercial

Potential Conflicts of Interest in Litigation Funding

Conflicts of interest are a concern if law firms find themselves entwined with litigation funders, according to one former president of the Irish Law Society. The potential exists for lawyers to feel torn between third-party funders and the clients they are sworn to serve. This is especially true in the UK, where funders and lawyers become “close.” Law Gazette explains that this may be why litigation funders are not permitted to fund cases in the Republic of Ireland. This is contrary to the rest of the world, who have largely welcomed the practice. Some have even adjusted their laws in a way that ensures transparency while welcoming litigation funding. This past June, noted funder Burford Capital announced it was buying shares in a dispute resolution firm based in London, sparking further debate about conflicts of interest. 
Commercial

Chris Young, General Counsel for Omni Bridgeway, Talks Risk

What’s the key to success in a field beset by risk? According to Omni Bridgeway General Counsel Chris Young, it's patience. He explains that litigation is highly speculative, and each case requires multiple layers of investigation and research. Omni Bridgeway is a firm that invests rather than lends funds to litigants—because they only see a payout when the funded case is successful. Vanguard explains that the expertise of the investment team is essential to Omni Bridgeway’s success. The company has grown by leaps and bounds of late. Since Chris Young joined in 2017, the size of deals considered has been raised to $150 million. Omni Bridgeway funds individual cases, class actions, and diverse legal portfolios. Young, who holds a BA from Yale and an LLM from New York University School of Law, calls himself a “deal lawyer” who goes after large payouts. Of course, risks are higher the larger the deal—and some companies looking for funding are already in financial turmoil. Omni Bridgeway must then assess whether a client may file for bankruptcy, undergo major restructuring, or liquidate. All of that becomes part of a larger risk assessment. Insurers are now underwriting litigation funding risk, which is a major step forward for the industry. Insurers will also conduct due diligence research, sometimes using their own outside counsel. This leads to safer deals that lessen at-risk capital. At the same time, insurance for litigation funding investments requires fastidious research and detailed underwriting. Chris Young affirms that the investors he works with flock to Litigation Finance because of the high potential returns—and the fact that litigation funding is not tied to the larger markets. He describes his team as ‘creative, responsive, and focused on clients.’
Commercial

COVID Related Class Actions—How to Prepare

As the coming tide of COVID-related class action suits looms, many countries are adapting and growing the legal processes by which these cases are governed. The US and Canada have seen filings for class actions skyrocket, with Australia, Germany, the UK and China all expected to follow suit. And where there are class actions, there are litigation funders. ICLG details that industries hardest hit by class actions include retailers, tech companies, event and ticketing companies, manufacturers, and financial institutions. In Canada, negligence-related cases involving nursing homes and transportation providers, and insurance cases are most prominent. Australia is overwhelmed with class actions and has enacted new laws to stem the tide of litigation funders helping citizens who have been wronged by governments or big business. Specific types of class action litigation are expected to intensify in size and number. Consumer cases regarding overpricing, scheduled subscription payments, and breach of contract will no doubt be common. As will commercial litigation over force majeure, warranties, and indemnification. Securities litigation will likely also rise, as well as insurance claim denial cases. Employment liability with be another huge litigation type as safety and privacy issues come to light. Preparedness and discrimination suits are expected to rise, as will whistleblower and retaliation claims. Privacy litigation may also grow as more and more people are working remotely or taking online classes. Data breaches and cyber insecurity are already fueling class action filings. Those looking to minimizing risks would do well to perform a risk analysis that includes reviewing agreements and public disclosures. Communicate with employees, vendors, and shareholders if applicable. Plan and implement safety procedures at every level, including increasing options to work from home. Some recommend that you stave off lawsuits by implementing a class action waiver. Your legal team can advise on this. Taking precautions now can save millions in time and legal fees down the road.
Commercial

2020 Canadian Readers’ Choice Awards: Litigation Funders

Who do Canadians think is tops in their respective legal fields? The 2020 Canadian Readers’ Choice Awards answer that very question. The list of suppliers, vendors, and legal-adjacent businesses was voted on by nearly two-thousand readers who revealed their favorites in 38 separate categories. Canadian Lawyer reveals the top three litigation funding organizations used by Canadian legal professionals. They include BridgePoint Financial and Nudorra Capital Inc—both located in Toronto, and Omni Bridgeway in Montreal. BridgePoint Financial has been in the litigation finance market since the early 2000s. It boasts a strong commitment to client needs and has been involved in precedent-setting cases. BridgePoint is involved in education initiatives and prides itself on offering value-added funding solutions. These include funding for law firms, settlement and inheritance loans, and class action cases. Nudorra Capital offers litigation loans that are fast, easy, and offer competitive rates and an application process that doesn’t require a law degree to understand. Nudorra offers legal loans for insurance claims, personal injury claims, family law divorce cases, and several types of insurance claims. It has offices all over Canada. Omni Bridgeway is a world-renowned leader in litigation finance, covering an array of legal specialties. Dispute resolution finance is Omni Bridgeway’s claim to fame. It has proven expertise in enforcement and recovery, common law, and civil matters. One of the longest-running litigation funding entities, Omni Bridgeway has been around since the 80s, which means this is the second global financial crisis it has navigated.
Commercial

Directors Accused Under Insolvency Act Lose Dismissal Attempt

Two former directors of a now-dissolved company lost an attempt at the dismissal of their case. The directors had sought for the cases against them to dismissed, on the grounds that a litigation funder should not benefit financially from the claim.   Pinsent Masons explains that the court looked at the actual wording as well as the presumed intention of the agreement between the litigation funders who bought an interest in the recovery, and the liquidator who sold the rights. The court has affirmed that litigation funders who buy claims against directors or insolvent companies have the right to benefit financially. This decision comes after an earlier one that the statutory rights of an action conferred to an officeholder—such as a liquidator—could not be assigned. This 2015 law was implemented at a time when directors of insolvent companies rarely saw cases taken to fruition because of the time and expense needed to do so. Litigation funding has changed that landscape significantly. The directors in this action asserted that their case should be dismissed or stayed owing to the fact that the company is no longer in existence—saying if funds could not go back into the company and then to creditors, the claims should not move forward. Courts were unimpressed, saying that the wording of the law in question negates the argument that the actions can be included. They also noted that the company does not have to be directly involved in order for money to move to creditors or those who bought a stake in the payout. This was largely an expected decision by the High Court. But it’s one that is sure to please creditors and litigation funders alike. It’s also a wake-up call to unscrupulous directors, reminding them that a lack of company funds will not protect them from legal action.
Commercial

Southern Response Appeal Dismissed by NZ Supreme Court

Opt-in or opt-out, that’s the issue at the center of an appeal in the case of Southern Response v. Ross. In New Zealand, where the case was heard, opt-in class actions are the norm. The case, supported by third-party legal funding, began with an allegation that Southern Response did not provide complete and accurate information about repairing earthquake damage to homes. LawFuel reports that Rule 4.24 of the High Court Rules 2016 allows representative proceedings without specifying whether they be opt-in or opt-out. The courts could have ordered one or the other. Southern Response asserted that opt-in was customary, and changing this should require comprehensive legislative oversight. The Court of Appeal ruled that the original claim should be pursued on an opt-out basis. The case then moved forward to the Supreme Court for another appeal. Southern Response also claimed that because opt-out is not the norm, it’s impossible to demonstrate the effectiveness of that approach—ostensibly to protect the interests of participating class members. Essentially, they’re saying that because it isn’t typical, there’s no way to say if it will work. This defeatist theory left the Supreme Court unmoved. The court also determined it unnecessary to hold off on the case until comprehensive legislation can be passed. The court stated that sufficient laws exist to clarify any sticking points. The court also rejected claims that potential plaintiffs who remained unaware of the case could be subjected to rules to which they did not agree—such as a litigation funding agreement. Finally, the court was unmoved by the suggestions that they did not have the power to approve settlements in representative proceedings. Ultimately, the Supreme Court determined that the lower court decision was apt—an opt-out order is more effective for this case. It’s also the procedure requested by the plaintiffs—which New Zealand courts try to accommodate whenever possible.
Commercial

Guidelines for Emerging Contingency Practices

Trends in the legal or business world often begin as adaptations to some outside event or circumstance. The early stages of COVID brought about a trend of firms moving away from billable hours and toward contingency fees. Another growing trend is the use of Litigation Finance to manage balance sheets and continue to pursue viable litigation without tying up liquid assets. When law firms opt to ignore trends, they can miss out on advantageous developments.

Burford Capital explains that developing a contingency practice can be a forward-thinking move that anticipates coming economic realities. If you’re considering starting a contingency practice, consider the following:

--An internal buy-in combined with early goal setting will motivate and inspire the team. Consider tolerance to risk, a loose timeline, and a clear vision of what you want to achieve.

--Communication and Education. Investor confidence is vital to any new business venture. Also, consider an outreach team who can find plaintiff-side contingency work. Shareholders may be reticent to build a contingency practice. Educating them on the benefits as well as potential ethical concerns is essential.

--Underwriting. Infrastructure to vet cases and develop contracts is an irrefutable part of establishing a contingency practice. A team that can assess risk and estimate time frames and potential awards is indispensable. Legal finance professionals are ideal for this.

--Partners. Contingency practices can wreak havoc on expected partner payouts if there’s no plan in place. Good communication can help assure partners that they’ll still be compensated fairly.

--Risk Sharing. Partnering with a legal finance entity is a bold step that can reap major benefits. Their expertise and ability to scale up a practice is a vital part of getting a new practice up and running. A trusted partner in risk-sharing can mean the difference between an adequately functioning practice and a booming one that’s ready for anything.

Commercial

Adapting to COVID D&O Risk

It cannot be denied that insurance for directors and officers is skyrocketing, whether it’s for private or public companies or even non-profits. The market is expected to remain hardened, as pressure to raise rates grows exponentially. COVID and its impact are only adding to the problem. What can be done? Insurance Business Mag suggests that a rise in securities class actions as well as reliance on litigation funding has led to insurers offering less coverage, while making underwriting guidelines more stringent. The effects of COVID reach around the globe, necessitating greater disclosures from companies who now may need to detail how their business will deal effectively with the pandemic. Prolonged work stoppages and shutdowns have created widespread financial stress. As expected, service-based and entertainment-related businesses have been hit hardest. Even following CDC best practices guidelines may not be enough to reopen safely. Adding lines of credit or utilizing legal funding has worked for many companies, while others continue to struggle. Ultimately, communication is a key aspect of survival in a COVID landscape. Frank and open discussions with employees, shareholders, suppliers, and customers can go a long way toward putting people at ease and finding solutions before financial woes become insurmountable.
Announcements Commercial

Therium adds to London Investment team with the hire of Ben Smyth

Global litigation funder, Therium Capital Management, announced today that Ben Smyth has joined the firm’s investment team as an Investment Officer. Ben joins Therium following a decade at UBS Investment Bank, where he was most recently Head of Benelux and Nordics within the bank’s Financial Institutions Debt Capital Markets (DCM) advisory group.  In this role, Ben advised some of the largest Banks and Insurance companies in Northern Europe, on optimisation of their liability profile. Prior to UBS, Ben was an Associate Director at ABN AMRO Bank N.V, where he was responsible for DCM across Benelux, UK and Ireland. His career to date has seen Ben originate, structure, and execute multiple credit transactions globally, spanning Europe, North America and Asia Pacific. Ben was awarded a distinction, Graduate Diploma in Law from BPP University and graduated with a first class (BA Hons) degree in Economics from Durham University. Neil Purslow, Co-Founder and Chief Investment Officer of Therium, said: “We are delighted that Ben is joining our high calibre investment team. Ben’s investment banking experience and strong financial knowledge will complement our highly experienced investment team who each handle all aspects of the funding process.” Ben Smyth said: “I am very excited about joining Therium’s top quality investment team.  My role will encompass origination, negotiation, due diligence and case management – which is unique amongst the leading global litigation funders. This approach accounts for Therium’s high standing in the market and the low rate of turnover of staff in its investment team, and it will allow me to build enduring relationships with clients. I look forward to helping Therium build on the firm’s impressive track record and strong reputation, with the support of a fantastic leadership team whose focus on top quality execution is relentless.” About Therium Capital Management: Therium is a leading provider of investment capital to the legal industry and one of the largest, having raised over $1 bn since 2009.  With investment teams in the UK, USA, Australia, Germany and Norway, Therium has funded litigation and arbitration claims exceeding $40 billion including many of the largest and most high profile funded cases in the UK and internationally, including arbitrations under rules of the LCIA, ICC, UNCITRAL, LMAA, AAA, CIETAC, ICSID, Stockholm Chamber of Commerce and the Energy Charter Treaty.  Therium has been Top Ranked by Chambers and Partners and Leaders League with investment officers across the UK, Europe, USA and Asia Pac recognised as leading individuals in litigation finance. Last year to mark the firm’s tenth anniversary, Therium Access was launched as a not-for-profit venture to fund a wide range of access to justice projects and cases – supporting the most vulnerable in our society and helping to bridge the widening justice gap. With its own board composed of eminent figures from the legal community and a dedicated grants officer, Therium Access has made over £1.3 m in financial commitments over the last 18 months to over 26 different organisations. As the first initiative of its kind, Therium has been shortlisted for several awards for launching this ground-breaking initiative, including the FT Innovative Lawyer Awards 2019 and the Lexis Nexis Awards 2020. Therium also invests in AI and software projects to accelerate the advancement of the industry. As a founding member of both the ALF, ILFA and the Litigation Funding Working Group, Therium is also committed to shaping the future of legal finance and setting high standards for the industry.
Commercial

LCM’s Litigation Funding Agreement Upheld by Court of Appeal

The Court of Appeals recently upheld last year’s Supreme Court ruling regarding a litigation funding agreement in a case against the Gladstone Ports Corporation. That case is being funded by Litigation Capital Management. The SCQ ruling rebuffed allegations that litigation funding agreements may be unenforceable due to champerty restrictions, or because such agreements are contrary to existing public policy. Yesterday's appeals court ruling ensures that the judge’s order stands. LCM finance explains that the Supreme Court of Queensland held in their interlocutory decision that litigation funding agreements are not unenforceable. Champerty, a 13th-century law, forbids non-lawyers from purchasing an interest in a legal case. Modern third-party legal funding does not permit funders to hold sway over decisions in the cases they fund. LCM’s argument included the assertion that champerty is obsolete as a concept of law, and that the court should make that clear in its ruling. Much of Australia has already abolished champerty laws, but Queensland has yet to make it official. The plaintiff’s legal team advanced the idea that even if champerty was still the law, these laws don’t necessarily apply to whether or not a specific funding contract is enforceable. Modern courts, after all, can use their powers to prevent abuse of the legal process or to refuse to enforce any contract that goes against public policy. In order to reach his original decision, Justice Crow’s research led him to the underlying question: What specific malfeasance is meant to be avoided by disallowing the funding agreement? GCP asserted that the funding agreement gave funders LCM an improper amount of control over the case. Justice Crow did not agree. Ultimately, Justice Crow determined that funding agreements were not prejudicial, did not impede justice, and did not involve attempts at unlawful conduct. The upholding of this ruling is excellent news for litigation funders everywhere.
Commercial

Litigation funding in the UK Grows in Influence

Even as the industry grows and adapts to changing times, some folks still question the staying power of Litigation Finance. It’s here to stay. Third-party legal finance is well-funded, having raised over a billion dollars in 2020. This may be because of its attractiveness to savvy investors seeking opportunities that are not correlated with the market at large. The Lawyer reports that the sophistication with which funders now choose cases is growing and evolving. Complex algorithms, teams of experts, and other methods of case selection have driven litigation funding forward and gained the attention of hedge funds managers and venture capitalists. Overseas funders are buying shares of small legal firms, allowing them to take more and larger cases on contingency. Legal professionals are expecting to see more situations like Burford Capital’s recent buyout of Keller Lenkner London’s fund. Litigation funding as an investment is insulated from the market and can lead to much larger payouts than more traditional investments. At the same time, there is more risk due to the non-recourse nature of the funding contracts. An investor in funded cases may accept a low potential success rate because even if only one in four cases ends in a payout—that award may be so large it covers the rest of the investments that didn’t pay at all. Mass litigation, AKA class actions, are also becoming more common. Backed by funders hoping for large paydays, the move toward mass litigation is well-funded and likely to keep unscrupulous corporations on their toes. As this all happens, there are concerns about ‘dirty money’ infiltrating the global economy using London courts as a battleground. Given London’s long reputation for fair adjudication, this is concerning for many in the industry. Legal pros share ongoing concerns over the perception of leniency.
Commercial

Litigation Finance Continues to Expand its Reach

Litigation Finance has exploded since the pandemic spurred massive shutdowns and kickstarted a flurry of litigation. The practice of third parties funding meritorious legal action in exchange for a share of the award is expected to become better understood and more utilized in 2021. Bloomberg Law explains that while much of the rest of the world is taking steps to regulate litigation funding, the United States has eschewed regulation, for the most part. We’ve seen guides for best practices, but very little in the way of state or federal law impacting the practice. In fact, what little legislation there has been, has embraced litigation funding rather than inhibited it—like striking down antiquated champerty laws, for example. That said, the industry, on the whole, is moving toward transparency and disclosure at all steps of the process. The International Litigation Finance Association is a newly formed group of prominent litigation funders dedicated to ensuring that the industry is well-understood and that its goals are clear. The main purpose of litigation funding as a concept is to increase access to justice by removing financial barriers for plaintiffs. COVID has amped up this need even more—as business closures, contract breaches, and other factors leave citizens in financial peril. Law firms are also making use of the practice, using funds to cover litigation fees and costs, in order to free up capital for expansion. As third-party funding grows in acceptance, it also has become more diverse. Portfolio funding allows law firms to monetize existing cases, diversify risk, and add more certainty to cash management plans. About 75% of legal finance practitioners have seen an increase in requests for funding. Of those who applied for funding, 61% were able to gain funding for their cases.
Commercial

The State of the Litigation Finance Industry in 3Q20

Investor interest is high and funders are raising massive capital even amid the global COVID crisis. That’s a great sign for an industry that barely existed 15 years ago. The pandemic has brought with it massive shutdowns, layoffs, court delays, and lockdowns all over the world. Yet, litigation funding continues to prove its worth. LexShares details that in addition to changes brought about by COVID, other factors are helping the industry evolve. The elimination of Ethics Rule 5.4 in Arizona may lead to a formal rebuke of outdated champerty laws. It negates the idea that only lawyers should profit from the practice of law. The formation of the ILFA, a professional organization for the Litigation Finance industry, was welcomed by the legal world. Court closures were expected to reduce the need for third-party funding. But in fact, arbitration outside the courtroom has skyrocketed in popularity. This has led to remote arbitrations progressing even faster than normal. Clearly, arbitration will remain popular for the foreseeable future. One cannot deny the impact of an industry that has raised a billion dollars in capital in a single year. Some may believe this a singular occurrence, while savvy investors understand that the industry will continue to blossom, as the broader Legal Services market remains robust.  The emergence of publicly traded legal firms in the UK may herald similar arrangements on the US side of the pond. Should this happen, the use of third-party legal funding is expected to become even more prominent.
Commercial

Preparing for the Coming Litigation Wave

The rise in litigation owing to the COVID-19 pandemic cannot be overstated. A spike in claims relating to the virus, as well as renewed interest from litigation funders has led to widespread changes in the legal and business world. This trend follows a previous drop in litigation as courts scrambled to adapt to remote work, Zoom meetings, and other COVOD-related factors.

The Lawyer details that the trends seen in the industry today are similar to those of the 2008 financial crisis. Specifically, a rise in claims spurred by financial urgency. Cash poor businesses can use third-party funding to take cases off of balance sheets. Yet businesses are also wary of legal funding because it arms class action suits that can cost time and money.

Sean Upson, a partner at Stewarts, explains that budget planning has taken center stage at many companies—which to some means forgoing litigation regardless of its merits. But Upson suggests making litigation part of a company’s profit plan. Virtual trials can be less time-consuming in terms of staff hours and require no travel.

Some companies are reticent to utilize litigation funding. This is not, as one might think, related to a lack of control over the litigation. In fact, funders are not permitted to make decisions regarding litigation or potential settlements. Likely this is due to administrative requirements regarding disclosure and cooperation, PR, and other burdensome regulatory requirements.

Litigation funding is merely one of many tools that in-house legal teams can use to balance budgets—but it’s a solid option that all companies should consider.

Announcements Commercial

Dampier Gold Secures $730,000 in Litigation Funding; Shares Up 5%

Dampier Gold (ASX:DAU) secured A$1 million ($730,000) in funding for its legal proceedings against Vango Mining (ASX:VAN) in the Supreme Court. Auracle Group agreed to subscribe for an initial share placement of A$300,000 and provide a loan of up to a further A$700,000, subject to the approval by Dampier Gold shareholders, according to a Wednesday news release. The proceedings, which started May 26, included claims for Dampier Gold’s beneficial interest in the K2 gold project in Western Australia, a joint venture between the company and Vango Mining. If the dispute cannot be resolved through mediation, Dampier Gold said it will seek to have the proceedings listed for trial in 2021. Dampier Gold shares closed 5% higher Wednesday. Price (AUD): $0.07, Change: $0.00, Percent Change: +4.84%
Commercial

Will Litigation Funding Regulations Make Legal Action Harder on Claimants?

The battle between regulating litigation funding and ensuring that those who need it are not deterred is ongoing. New rules adopted in Australia require litigation funders to obtain Australian Financial Services Licensing.   An article in the Australian Financial Review details that new regulations on the practice may make it more difficult for private citizens to pursue damages when they have a grievance. The Labor Party seeks to strike down the regulations, while Senator Perin Davey believes that the intention of the rules is honorable and should be preserved. Still another leader suggested that the license requirements could be waived if the funder commits to giving 70% of the award to class participants. The goal seems to be recognizing the value and necessity of litigation funding, while ensuring a fair outcome to litigants.
Commercial

Global Class Actions Meet Corporate Governance

The legal landscape is always changing, and watching for trends is vital for savvy firms and investors. Currently, a convergence of two forces is leading to widespread changes in the industry. First, class actions and other types of collective redress cases are increasing in popularity and validity. Also, corporations are becoming increasingly responsible toward communities, the environment, and stewardship of investor interests. Omni Bridgeway explains that around the world, standard principles are being informally adopted by multiple markets. Now that collective redress and class action suits are more viable than ever, there’s an expectation of a rise in claimants and new cases surrounding environmental and social issues—as well as cases relating to a business’ responsibility to investors. For a long time, the United States was a leader in class action filings. The rest of the world is catching up quickly though, owing in no small part to third-party legal funding. The European Union released a proposal detailing provisions encouraging consumers and investors to address unlawful deeds even in cross-border situations. The Netherlands Collective Damages Act came into law. It allows for surrogates to bring damages on behalf of wronged parties in international class actions. The new law also allows courts to award damages without requiring a settlement to be reached. This means that the looming threat of court-awarded damages can be the impetus to get parties to the bargaining table. Class action cases involving the environment, social issues, or governance can be well-served by litigation funding. International class actions can be costly and take years to conclude. An influx of non-recourse funding may be exactly what’s needed to bring a case to completion without adding financial strain. As the legal industry develops and adapts to changing circumstances, it’s clear that the role of litigation funding will continue to change with it.
Announcements Commercial

Court Issues Carriage Decision in Ukraine Airlines Flight PS752 Class Action

The Ontario Superior Court of Justice has awarded carriage of the proposed class action to the Arsalani Plaintiffs. On January 8, 2020, UIA Flight PS752 took off hours after the IRGC fired and struck US bases in Iraq. Minutes after takeoff, IRGC missiles struck Flight PS752, causing it to crash to the ground. There were no survivors. The proposed class action is on behalf of the passengers and the passengers' families. It alleges the Islamic Republic of Iran, the Islamic Revolutionary Guard Corps (IRGC) (collectively the Iran Defendants) and Ukraine International Airlines PJSC (UIA) are liable in negligence: the Iran Defendants continued to operate and control the airport, aircraft and airspace in exchange for flyover fees after it launched missiles at the US military bases in Iraq and the UIA did not ground the Aircraft. Regarding state immunity of the Iran Defendants, the Court agreed that state immunity is not absolute, it can be lifted in this case through the commercial activity exception. In a lengthy and well reasoned decision, the Court reviewed the numerous carriage factors that favoured the Arsalani Plaintiffs. The Honourable Court awarded carriage to the Arsalani Plaintiffs finding "it is in the best interests of the class, having regard to access to justice, judicial economy, and behaviour modification." "We are grateful for this important court decision as we seek justice and compensation for our loved ones" said Omid Arsalani, whose sister, brother-in-law and niece perished on Flight PS752. "With the help of our team, we will continue to work through the courts to seek justice and compensation" said Tom Arndt, of TWA Law, a leading class action lawyer representing the class members. The Court found that third party litigation funding and indemnity were the most important factor favouring carriage to the Arsalani Action. The court previously approved the Galactic Funding Agreement in a decision released on September 21, 2020. "We are prepared to go the distance with TWA Law as they prosecute the Arsalani Action to completion" said Fred Schulman, Chairman and CEO of Galactic Litigation Partners LLC. Members of the proposed class action are encouraged to consult the case specific website regarding progress of the litigation: www.flightps752.ca
Commercial

‘Chilling’ Precedent Overturned in Augusta Ventures Claim

Alleged underpayment was at the crux of a recently-overturned precedent ruling in Federal Court. UK-based legal funder Augusta Ventures had been ordered to pay more than $3 million in costs before it could proceed with a class action for underpayment at the Mount Arthur coal mine. Financial Review explains that the precedent might have impacted six or more class actions relating to the conduct of industrialists. If upheld, it could have been detrimental to much litigation based around the Fair Work Act. Chief Justice James Allsop determined that the claims in question were merely speculative. The ruling detailed that requiring funders to pay security upfront was contrary to the best interest of workers and to the public good. This clashed with an earlier decision by Justice Michael Lee, who held that securing costs was a necessary step. These rulings are of obvious interest to litigation funders as they impact how class actions can move forward under the terms of the Fair Work Act. Ultimately, a precedent that funders and claimants are not engaged in a ‘joint venture’ was set.
Commercial

The Effective Use of Monetization

Pending legal claims and potential awards are considered uncertain. They lack liquidity and a surety of success, but they’re also vital corporate assets. With the effective use of monetization capital, these assets can be used to access quick cash. Burford Capital explains that monetization is a growing type of legal finance that allows businesses to liquidate pending judgments, arbitration claims, and pending litigation. The process is simple—a legal financier offers a lump sum of non-recourse capital to cover expenses until the matter is resolved. The benefits of monetization are threefold:
  • Brings an immediate influx of cash when it’s needed most.
  • Allows companies to access capital when it’s needed rather than waiting for cases to be resolved.
  • Mitigating the company’s exposure to risk.
In-house lawyers also find benefits in the monetization of claims. The practice is seen as an innovative and creative solution to financial stress. Better still, monetization allows companies to pursue serious claims without worrying about how the expense will impact the bottom line. This makes pursuing litigation profitable even before a resolution can be reached.
Commercial

Manolete Case Numbers Rise, Fueling Profits

UK Funder Manolete is showing a 49% profit increase in the six months ending September 30th of this year.  Shares magazine details that in the first half of this financial year, 52 cases were completed. This represents nearly three times the number of cases from last year. After-tax profits for Manolete were GBP5.2 million in the first half of this financial year. Profits from completed cases topped GBP4.2 million, an increase of 45%. As of Tuesday morning, Manolete share price was 305p
Commercial

Maximizing Litigation Funding Opportunities in Africa

Around the world, litigation funding is growing at a fast pace. The economic impacts of the pandemic are one of several contributing factors that also include recent legislation that’s increasingly inviting to the practice. Africa is the newest bastion of growth for the industry. As companies face pressure to conserve funds, legal departments scramble for new ways to manage budgets effectively. Lexology details that there are a few main points worth looking at when considering the relevance of litigation funding to Africa. Most notable is the lack of regulation in much of the continent. Third-party funding is welcome nearly everywhere, and legislation impacting the practice is minimal. African communities have been adversely impacted by COVID, pretty much across the board. The businesses that serve these communities recognize their obligation to keep doors open—and reducing costs through the use of litigation funding is a solid way to accomplish that. Also, litigation costs in much of Africa were already on the rise before the pandemic began. Litigation funding allows litigants to avoid contingency plans and find the best counsel available. As a business tool, litigation funding is in high demand. This is an area in which the expertise of funders comes into play, as funding entities utilize legal advisers, analytics, and career-long expertise to advise businesses on how and when to pursue litigation. Funders are more than sources of quick cash. They can serve as advisors who can recommend business solutions that make the most out of third-party legal funding. Africa is joining the ranks of Australia, Europe, the United States, and Singapore as desirable places for investments in litigation funding. The perception of their courts has risen in recent years next to an excellent record for enforcement. There’s every reason to believe this trend will continue.
Commercial

Sizable Damage Awards Have Investors Looking at Patents

Several large awards for damages levied against tech giants like Apple and Cisco are turning industry heads. Centripetal Networks was awarded nearly $2 billion by a Virginia district court, representing just one of several awards of over $100 million for patent infringement. An article in Bloomberg Law explains that investors, including litigation funders, are looking at these sizable awards as an impetus to invest in patents. Some have suggested that big tech companies have become complacent and overconfident in the likelihood of beating a patent-related action. This attitude can limit the ability of parties to meet at the negotiating table—necessitating a long and costly trial. Investing in patents, not unlike litigation funding itself, is recession-proof to a large degree, as it’s not correlated with the rest of the market. A 2019 survey of lit fin companies, in-house counsel, and law firms suggests tremendous interest in acquiring patents. Jack Lu is a chief economist at an intellectual property consultancy. He explains that willful patent infringement can realistically lead to triple damages. Lu sees the large verdicts as a message to patent owners, letting them know that the courts are serious about protecting their rights. That’s good news for tech companies, and for patent owners. The large awards coming down involve high-end tech, or in some cases, pharmaceutical patents. One reason the damages are so sizable is that they factor in the expected sales volume. In the history of the US, only nine cases have ever ended with a verdict of $1 billion or more. They’ve all happened since 2007, which would seem to indicate the intrinsic value of technology in society. Joshua Harris, VP at Burford Capital, expects that the kind of verdicts they’ve been seeing will continue to attract investors. Even if, Harris says, verdicts are lowered on appeal—an award in the multi-millions is still attractive to investors.
Commercial

Experience is the Path to Trust in Litigation Finance

Despite the widespread acceptance of third-party litigation funding, some remain skeptical. Accusations of promoting frivolous legal actions and unfair recoupments are common. Bloomberg Law details that while most of the legal world understands the value of Litigation Finance in increasing access to justice, not everyone is convinced. A new survey shows that opinions on the efficacy and trustworthiness of the practice are directly impacted by one’s own experience. In short—those who have used litigation funding were more likely to say that it’s helpful, while those who haven’t were more prone to view it with suspicion.
Announcements Commercial

Litigation funder Validity Finance adds former Kirkland Ellis lawyer in Houston; former federal judge joins firm’s investment committee

Leading litigation funder Validity Finance has expanded its Texas bench with the addition of former Kirkland & Ellis Houston trial partner Sarah Williams. She joins as portfolio counsel in Houston, where she’ll advise on potential investments with particular focus on Texas and the Southwest. At Kirkland, Ms. Williams handled a wide span of litigation matters, including high-profile energy and bankruptcy cases, as well as disputes involving contract, fraud, professional liability, and employment claims. Along with her trial experience, she brings strong analytic skills for helping Validity assess funding opportunities with law firms and businesses across Texas and the region. The Texas legal market is the nation’s third largest and boasts one of the most active state court systems, and the fourth most active federal system. The latest annual report by the Texas Judiciary reported that the number of civil lawsuits filed in state district courts grew by 11% between 2018-19, and nearly 30% over a five-year period. As the state’s docket has grown, so has the backlog, creating more financial pressure on claimants trying to advance their cases. “We’ve seen a pronounced uptick this year in demand for funding support – including among companies and law firms constrained by Covid. Nationally, demand has grown around 50%,” said Validity’s Houston office head Laina Hammond. “In our two-and-a-half-year presence here, we’ve met with virtually all of the top trial practices in the state, including boutiques. This is a market that grasps the value proposition in partnering with strong funding providers to grow and sustain litigation pipelines.” Regarding Ms. Williams, Ms. Hammond added, “We had no doubt that Sarah was a strong fit with our team here. She brings outstanding trial experience and excellent relationships across the region, and her ability to size up the merits and worthiness of a case will make her invaluable for building our Texas portfolio. We are thrilled to have her with us and look forward to helping clients find innovative financing solutions to meet the unprecedented legal challenges they face.” Ms. Williams was partner at Kirkland from 2018-20, having previously been a litigation associate. She was formerly an associate at the Houston firm Diamond McCarthy as well as at Weil Gotshal. She served as judicial clerk for the Honorable Marcia Crone in the Eastern District of Texas from 2010-12. Before becoming a lawyer, Ms. Williams was an award-winning journalist, writing for various publications including The Houston Chronicle and Examiner Newspaper Group. “I am excited to join the Validity team and to help expand the company's portfolio in Texas and beyond,” Ms. Williams said. “As a trial lawyer, I'm keenly aware of the important role litigation finance can play in ensuring worthy cases reach the courtroom and look forward to partnering with our clients to develop innovative solutions to their funding needs.” Retired Magistrate Judge Henry Jones Joins Investment Committee Validity also announced a new member to its investment committee, former U.S. Magistrate Judge Henry Jones. He joins former federal Judge John Gleeson, retired Kirkland & Ellis partner Jim Schink, and Towerbrook General Counsel Glenn Miller on Validity’s investment committee. Judge Jones most recently served as a mediator, arbitrator and Special Master for The McCammon Group after retiring from more than 30 years as Magistrate Judge of the U.S. District Court of the Eastern District of Arkansas. A graduate of Yale University and the University of Michigan Law School, he enjoyed a broad civil litigation practice as a partner at Walker Hollingsworth & Jones in Little Rock, Ark., prior to his judicial career. Validity CEO Ralph Sutton stated, “Judge Jones and I have known each other for over 30 years. We both clerked for the Honorable G Thomas Eisele about 20 years apart. Judge Jones’ reputation for incisive, crisp and thoughtful decisions from the bench was always matched by his impartiality and respect for the dignity of every litigant who appeared before him. We know he will contribute meaningfully to the quality of our IC’s investment decisions.” About Validity: Validity is a commercial litigation finance company that provides non-recourse investments for a wide variety of commercial disputes. Validity’s mission is to make a meaningful difference in our clients’ experience of the legal system. We focus on fairness, innovation, and clarity. For more, visit www.validity-finance.com.
Commercial

Key Points on Building Contingency Practices

A recent legal finance report suggests that nearly ¾ of lawyers anticipate that their firms will look into building contingency practices in the coming years, and that almost 90% say their firms will begin to increase options for alternative fee arrangements. How should contingency practices be implemented? Burford Capital’s recent conversation with Aviva Will and Peter Zeughauser outlined factors to consider when building a risk-based practice. Knowing the trends exacerbating the need for alternative fee arrangements is a vital first step. These include competition from firms both established and new, and the fact that client expectations are higher than they’ve ever been. The leverage model is on its way out, and the legal services market has become unbalanced and polarized as top talent is poached by larger firms. Legal finance will no doubt play a role in the formation of a contingency practice. Risk-sharing and gaining more control over budget and cash flow is a major benefit of third-party funding. Litigation funding experts will also be helpful when vetting new cases and assessing risk, in addition to helping to educate stakeholders on the many benefits of litigation funding. Interestingly, some firms are offering risk-based terms on one aspect of a case, rather than the case as a whole. This is an innovative way to reduce risk while still maintaining a viable client relationship. An open dialogue with clients is essential to assess their need for alternatives to traditional fee structures. Working with partners to focus on pricing is also important. This includes the formation of a pricing department, which may including hiring for that purpose. Forming a pricing department may also necessitate an investment in educating lawyers and staffers. Incentivizing creative pricing models is another solid way to encourage innovation.
Commercial

Are Whistleblower Cases Appropriate for Litigation Funding?

A recent Medicare False Claims Act suit involving an outside funding agreement has caught the attention of the legal community. Specifically, the case calls into question the FCA’s current public disclosure provisions, and the authority of the government to dismiss FCA actions. An article in Bloomberg Law reveals that debate about third-party litigation funding is still rampant in the legal and financial worlds. This is especially true in cases involving the False Claims Act, where plaintiffs/relators pursue very large claims while acting on behalf of the federal government. One case in particular, Ruckh v Salus Rehabilitation LLC, is one of the first cases to address this controversial practice. In the decision, a qui tam action against nursing homes led to an award of nearly $350 million. In the appeal, the defendants appealed the verdict, asserting that the relator’s litigation funding contract negated the relator’s standing to pursue the claim. In the agreement, the relator offered a 4% payout of the potential recovery in exchange for funding upfront. The ruling suggested that the size of the funder’s cut impacted the standing of the relator. More importantly, though, it recognized that there was no conflict of interest because the funders had no control over the litigation or case outcome.   The receipt of public information is unclear in FCA cases involving funders—since funders will want detailed information about the case while vetting it. This would essentially make non-public information public, contrary to the standard that a relator must possess non-public facts. Also, third-party funding partially reassigns rights to the funders—which is not permitted by the dictates of the FCA.