What happens when a liquidator lacks the resources to pursue a debt? Often times, the debtor walks away from their responsibilities. That may be changing under Singapore’s new Insolvency Restructuring and Dissolution Act (IRDA)—which took effect just two weeks ago. The Act is part of a larger overhaul of Singapore’s insolvency legislation. Business Insider details that one key facet of the new law allows liquidators to utilize third-party funding to hold directors of firms to account. This change is expected to allow judicial managers to be appointed even after a business has collapsed.   The changes in the IRDA have been in the works for seven years—long before the COVID pandemic impacted businesses around the world. But the legislation takes on new significance, now that corporate insolvency and personal bankruptcy have skyrocketed. In the second quarter of this year alone, Singapore’s economy shrank over 13%. Meanwhile, applications for compulsory liquidation went up a shocking 70%. Governmental relief measures combined with encouraging non-legal mechanisms to settle conflict have led to an easing of new bankruptcies and insolvencies. The Act offers protection and increased options for debtors in temporary crisis—but also provides safeguards against abuse from opportunistic use of the Act’s provisions. It is believed that the IRDA is the final part of a planned revamping of insolvency laws designed to carve out a place for Singapore in the field of cross-border restructuring of debt. Insolvency laws must be fair to debtors and creditors in order to be effective. The ideal framework for insolvency should leave both parties feeling as though justice has been served. Allowance for third-party funding is a key element of the IRDA, but it is one tool in a larger toolbox. It’s expected that the non-recourse nature of the funds, along with the transparency the system provides, will help bolster Singapore’s status within the global marketplace.

For Liverpool-based Anexo Group, 2020 got off to a slow start. From Jan-June of this year, the legal services provider showed sales of GBP 36.625 million, down from 36.717 million this time last year. Share dividends are .5p a share, down from 1p per share last year. Still, the group is poised for a big finish to 2020. The Business Desk reports that Anexo Group has taken steps to expand the business while bringing in extra funds. In May, a share placing brought in GBP 7.5 Million. This was used to bring in new staff, and amp up the company's marketing presence. Meanwhile, their legal team, Bond Turner, is pursuing a class action regarding emissions against Volkswagen. A further GBP 2.1 million was raised from a litigation funder. This influx allowed the firm to seek out and sign on class action members in the case against Volkswagen. Litigation funding allows Bond Turner to devote resources to the case—which has the potential for significant returns—without impeding the firm’s overall budget. Like most businesses, Anexo Group has had to get creative in how they balance budgets, meet expenses, and adapt to the needs brought about by the COVID pandemic. Because litigation funding was available to them, they were able to continue pursuing meritorious cases, acquire new clients, and transition staff to remote work whenever possible. While COVID has brought about a reduction in receipts and increased costs—the firm expects more and larger settlements and collections in the second half of the year. Executive chairman Alan Sellers anticipates great things ahead, saying that Anexo has already hit its target of generating a profit this quarter. The firm has increased its overall number of cases, while maximizing the value of their existing backlog of cases. Sellers went on to assure shareholders that they are looking ahead with confidence.

Martin Tripp, formerly with Tesla, is embroiled in a case with his former employer. The case, which began in 2018, accuses Tripp of stealing and disseminating multiple gigabytes of confidential trade secrets. In turn, Tripp denies all wrongdoing and describes himself as a whistleblower exposing evidence of vital safety concerns and company fraud. He is countersuing Tesla for defamation. Teslatati reports that recently, Tripp fired his legal team and intends to represent himself for the rest of the case. This announcement came on the heels of the revelation that Tripp’s litigation funder, The Funicular Fund LP (doing business as Cable Car Capital LLC) was short-selling Tesla stock. When news broke, Tripp took to Twitter to explain himself. His Tweets assert that he believed the funding for his case to be from a legitimate litigation funder. He also stated that it was his legal team who advised him not to divulge information about the funding. Recent documents published in Google Drive and released by Tripp detail that Cable Car Capital invested $150,000, and that a further $125,000 was requested. In response to the confidential information drop, Tesla filed an emergency motion to force Tripp stop publishing, and to stop “harassing” counsel for Tesla. This is in reference to his publishing an email from Jeanine Zalduendo, counsel for Tesla.

Fintech credit professional Rob Cottingham has been appointed to Chief Credit Officer at ME Group, a Cheadle-based firm. Cottingham takes on this new role that will report to executive chairman Bruce Walker—who is also new to the business. These appointments herald a new phase in a long-term growth strategy for the company, as it moves toward becoming a leader in consumer litigation funding. Business Desk details that Cottingham is expected to evaluate credit risk. His role will be crucial as he heads up the credit committee that determines how litigation funding is allocated to cases and firms. Rob Cooper, ME Group chief executive, states that Cottingham’s CV is impressive, and that his experience is expected to add considerable clout to the senior team. Cooper went on to explain that ME Group found itself in competition with other firms to hire Cottingham. Existing tech at ME Group is integrated with that of claimant law firms. They also boast in-house claim expertise. Together, this provides excellent oversight and an ability to effectively manage credit risk throughout the litigation process. Prior to his new appointment, Cottingham was with Specialist Lending, assessing credit and risk for a financial technology startup. Funded by private equity, SL provided consumer litigation funding to law firms. He has also worked for Elavon Merchant Services, Provident Financial Group, and Ferratum Group—all in risk-management. His new appointment at ME Group takes effect in September.

Startups are often strapped for cash and rushing to meet deadlines, so what happens when your startup suddenly has to fund an unexpected legal battle? That’s what happened when video startups Eko and Quibi found themselves in a legal skirmish. Both companies are relatively new, and each has a huge corporate entity at its back (Disney/eBay and Walmart, respectively). Bloomberg Law reports that the companies are in dispute over ‘turnstile’ technology, after Eko pitched it to Jeffrey Katzenberg. Both parties have filed suit to keep the other from using the tech in question. Eko is funding their suit by selling equity in the company to hedge fund and litigation funder Elliott Management. This idea, selling capital to finance litigation, was unheard of 10 years ago. Now, it’s becoming commonplace—largely because businesses are finally able to defend and protect their rights while pursuing business goals. Litigation Finance is beneficial to startups, offering three distinct advantages. First, the use of funding keeps new businesses from giving up equity to fund their suit. A valid claim is already an asset that can be used to secure funding. Next, the non-recourse nature of litigation funding means a company only owes a funder if the case is successful and an award is received. This kind of de-risking can be vital to companies in their early stages. Finally, funders can choose to provide working capital to companies that have a meritorious claim. That money can be used to help the plaintiff’s business run smoothly, even though litigation is pending. Ultimately it’s Litigation Finance that helps a new company like Eko pursue a case against a giant like Quibi. Regardless of who wins, we can be confident in knowing that justice will be meted out appropriately, because both sides were given a fighting chance—thanks to Litigation Finance.

Susanna Taylor is a Senior Investment Manager with LCM, and has been a commercial litigator for over 20 years. She answered a few questions from Tom Balmer, Director of Business Development at TLS. JD Supra details the finer points of their discussion, beginning with a general comment on how her firm, Litigation Capital Management, has done so well. Taylor credits her company’s successful growth to three specific things:

• Formulating an assertive strategy for short and long-term growth.
• A welcoming and professional corporate culture where people feel valued.
• Compiling a staff of experts at the top of their game.

Taylor states that it’s vital to develop a strategy that fits your personality and strengths, and then utilize that to get the results you want. Also, taking time to build and grow a network from existing contacts is essential. Networks aren’t just made of potential clients. They can encompass anyone who might call on you for your expertise, and anyone you might call on as well. When asked for advice for young, green lawyers, Taylors’s response was simple. Follow your interests and find yourself a mentor. Then do all you can to surround yourself with those succeeding in your desired area. Listen more than you talk, and learn all you can while you can. Taylor’s own experience included work in the Crown Solicitor’s Office, which is where she developed an interest in litigation. From there, she worked at Hammonds in London and then onto Norton Rose Fulbright, where she focused on commercial claims and class action. In 2014, she took her advanced skillset to LCM, and has been successful there ever since.

The concept of Litigation Finance is a simple one. A plaintiff with a valid claim can seek third-party financing to take that claim to court. If the claim is successful, the funder gets an agreed-upon percentage of the award, or a multiple of the investment, or some combination thereof. If the claim isn’t successful, the funder walks away with nothing. That simple model has grown by leaps and bounds in recent years, and is now even more powerful given the pandemic and subsequent lockdown. Above the Law explains that Litigation Finance is growing in many directions. These days, firms and businesses turn to litigation funding to manage risk, adjust balance sheets, or free up capital for other uses. Three areas, in particular, are growing rapidly. Corporate entities are typically able to fund their own litigation. But they’re taking advantage of the opportunities that litigation funding can offer. Even strong lawsuits are unpredictable, and company shareholders might not be in favor of pursuing litigation. Funding is accounted for differently on balance sheets than, say, a traditional loan. So some large businesses use litigation funding as a way to improve valuation. Portfolio funding refers to a circumstance when a third-party funder arranges to bankroll a portfolio of cases, rather than provide funds for a single claim. Returns on this type of funding can be sporadic and unpredictable. But they can also be highly lucrative, over time. Portfolio funding is particularly valuable for firms that take on contingency cases—since it provides reliable cash flow. Claim selling is another way people use Litigation Finance to improve cashflow. A funder might agree to purchase the interest in a claim. This can be incredibly helpful for those who can’t wait years for the court process and collection to happen. As the practice of Litigation Finance grows and develops, we can expect legal professionals to find new ways to make use of it.

Did social media giants like Twitter, Google, and Facebook conspire to kill cryptocurrency in 2018? JPB Liberty, led by Andrew Hamilton, is filing a class action against social media. In a recent statement, Hamilton claimed the assertions would be “pretty easy” to prove. CoinTelegraph explains that Hamilton is accusing several prominent social media entities of behavior more fitting a cartel than a web platform. Allegations assert that there was a coordinated attack on competing cryptocurrencies. Facebook, for example, is alleged to have banned competitors from advertising on its site while developing its own Libra currency. Similarly, Twitter CEO Jack Dorsey banned ads for cryptocurrencies while taking his own payment processing app, Square, into the crypto realm. Together, a handful of social media giants allegedly managed to squash the ICO (initial coin offering) market. $600 million in claims have already been amassed, with Hamilton stating that claims could grow as high as $300 billion. This suggests that the case is ripe for third-party funding. The case is being brought to Australia, a country where Litigation Finance is booming. If non-recourse funding is provided for this class action, funders will receive 30% of any award, with the remaining 70% going to costs and claimants. Anyone wishing to sign on as a claimant has until August 21 to do so.

Non-recourse funding is the backbone of the Litigation Finance model. It’s what exempts the practice from usury laws and allows funders to charge higher interest rates than other lenders. An as-yet-unpublished article suggests that funders actually made higher profits from individual car accident claims than from mass tort cases. That is to say, cases where a small number of people are injured or killed made more money for funders than large cases with multiple impacted parties. Reuters points out that if funders aren’t really taking on high risk, what justifies the high-interest rates Moreover, post-settlement cases are increasingly taken on by funders, and carry little, if any, risk. An upcoming paper suggests capping post-settlement interest rates at 15%. Lynn Baker, a law professor at the University of Texas, Ronen Avraham of the University of Tel Aviv, and Anthony Sebok of Cardozo Law examined data from thousands of funded cases. Their conclusions were striking, and suggest a need for increased oversight of the industry. Most interesting were the advances made near the end of cases. Post-settlement advances accept almost no risk—which becomes evident when case vetting is examined. Funders vet cases carefully before extending any funds. Pre-settlement cases are evaluated on their merits and potential awards. But the veracity of the claim has almost no relevance to funders in post-settlement claims. This is presumably because the key issue for funders is the net recovery. Baker points out that in the data she reviewed, post-settlement cases were limped into an ‘other’ designation, ostensibly to de-emphasize how financially valuable they are to funders. Data suggests that as much as 68% of funder profits stem from post-settlement cases. This in turn suggests that post-settlement advances are a different sector than pre-settlement funding and should be regulated differently. Ultimately she maintains that if there’s no real risk, the ‘non-recourse’ designation should not apply.

Trucking-related lawsuits are on the rise, as are the potential awards. When a driver is negligent, the company pays the price. This has led to a comparable increase in insurance premiums and shipping costs, much of which is passed down to the consumer. What’s causing this? Some point the finger at Litigation Finance. Logistics Management details tips from the American Transportation Research Institute, which has some suggestions on how to mitigate litigation. Most of the suggestions are obvious—settlement is often better than a trial, make safety a paramount concern, avoid accidents. Trucking companies describe the current conditions as a free-for-all, where well-funded lawyers choose welcoming jurisdictions or use shady medical testimony to reap a big payout. In one recent case, a driver ignored a stop sign and caused two deaths. Is this simple driver error, or is the real culprit here a set of policies that leave drivers too exhausted to follow the rules of the road? In the last decade, the average dollar amount of awards was just over $3 million. Now they average around $7 million. The rate of increase in the awards outstrips inflation and is even more pronounced than the rise in healthcare costs. This has inspired some states to legislate ‘damage ceilings’ that limit total awards per incident. Is it fair to blame Litigation Finance for the current predicament of truckers? It’s true that third-party litigation funding has grown in popularity in recent years. It’s also true that ordinary citizens have better access to justice than ever before. It makes sense that trucking companies would long for the days when awards were small and most people couldn’t afford to take them to court. After all, the growth of an industry is a signal that their services are in demand.

Residents of Mountain View complex in Mt Wellington, Auckland, are fed up. After a 10-year battle to get the owners to fix rampant leaks, a class action suit is being brought against building consultant Maynard Marks. Stuff explains that the 99-unit apartment complex is currently the largest claimant of the country’s leaky home assistance. They’ve been provided with over $41 million to fix the damages. Various inspections showed leaky cladding and roofs, issues with passive fire systems, and even balconies. Still, Mountain View was certified as being in compliance with existing codes. One man, Paul Running, bought a flat in 2007, but couldn’t live there due to the need for extensive repairs. He intended to rent out the place after repairs were done, but the repair work has been consistently shoddy and expensive. Now that repairs are finished, the corporate body is in conflict with the new owners of the construction company—with residents divided over the case against Maynard Marks. Leading the class action is Adina Thorn, who asserts that owners had paid roughly twice the value of their homes because of the shoddy repairs and unrealistic estimates. Marks suggested that repairs were a more cost-effective option than tearing down and rebuilding—a move that caused an initial $8.3 million estimate to surpass $41 million. The government program offered assistance to the tune of roughly 25% of the total costs—leaving residents stuck with the remainder of the bill. Court House Capital is backing the class action. The Australian litigation funder has not released details, but it’s expected that the funds will be used for experts and legal costs. This is yet another instance of ordinary people caught up in a situation beyond their control. Without the backing of Litigation Finance, the alleged victims would have no recourse to pursue justice. 

There’s a lot you can learn about a Litigation Finance company by looking at at its investors. Insider investment is common in firms that are newer and smaller, while more established players boast large institutions as their major shareholders.   Yahoo Finance explains how this applies to a litigation funder like Burford Capital. Burford is a large funder with institutions as major backers—over 40% in fact. At the same time, the next smallest investor group is made up of ordinary citizens. This bodes well for Burford, since it implies that the company has earned the trust and respect of regular folks, while still being attractive to institutional investors. But what happens if there is a change in how more than one institution views the company? That could spell big trouble for share prices. Burford’s recent short-selling attack is evidence that opinion can alter abruptly.  Burford’s insider investment is significant at nearly 10%. It’s good to have affirmation that those who work for the company also believe in it. One might say that number should climb even higher in the future. Over 6% of Burford Capital is owned by hedge funds. Some say this is potentially problematic. Hedge funds are sometimes known to put pressure on management to make changes, specifically to increase shareholder value. Should this conflict with what’s best for Burford’s clients, trust from the general public might erode—impacting a much larger portion of investors. Meanwhile, just over 5% of Burford shares are owned by private companies. In theory, the same issues could develop. While it doesn't comprise the entire picture, looking at investors can tell you a lot about a company.

Innovation and adaptability are key factors in every business trying to stay afloat during the current pandemic. Many law firm were quick to send workers home while finding remote working solutions to stave off loss of business. But as soon as some issues were managed, others cropped up. For example, the need for cybersecurity was heightened almost immediately. Financial Times explains that savvy lawyers backed away from putting out proverbial fires and started seeking opportunities to reach out to their customers. They began by identifying issues and using creative problem-solving. Solutions included expanding the use of digital signatures for those who couldn’t go out to banks or meetings, and amping up anti-fraud protections to make distance working safer. Legal teams aren’t just innovating, they’re creating as well. WeChat has allowed the development of apps that facilitate digital transactions in bulk, and even allow for price haggling. Westpac, an Australian bank, developed a digital boot camp and training program to better help lawyers analyze and draw conclusions from data. The new reliance on technology and digital problem solving puts the traditional firm model on notice. With rare exceptions, partners with decades of legal experience will not be up-to-date on modern digital solutions. In fact, they may find themselves relying on younger, greener lawyers to help them navigate this new remote working landscape. How will that impact the way firms operate going forward? It’s easy to see COVID as a temporary disruption, even as the months pass us by. But the likelihood is that the changes being implemented now are likely to last. Staffers may continue to want to split time between home and office, while clients may prefer fewer in-person meetings. As security and safety improve, there’s more reason to rely on tech solutions for business concerns. It’s just a matter of finding a balance.

This week, the ABA’s House of Delegates approved new best practices guidelines for litigation funders. The ABA’s inclusion of third-party funding in their guidelines is a necessary step, given the increasing popularity of the practice. Some say, however, that these new guidelines are not an accurate reflection of how Litigation Finance works.   Burford Capital details proposed revisions to the policy, which they claim will add clarity and context. Still, it’s important to keep in mind that ABA guidelines are merely that - a set of guidelines. They aren’t meant to be the basis for disciplining firms or individual attorneys. According to Burford, context should be added. It should be noted that third-party funding is widely accepted and endorsed by legal communities all over the world. Next, commercial litigation and consumer litigation should be addressed separately. It’s not logical to apply the same guidelines to two such different practices. The same applies to lawyer-directed funding versus that directed by the client. The ABA guidelines do begin by pointing out that these are separate practices with their own issues, yet they don’t seem to recognize common exceptions to this—such as what occurs when an entire portfolio of cases is funded. There’s also a suggestion that paragraphs should be devoted to the NYCBA Committee on Professional Ethics. This is a non-binding opinion from 2018, which was released without an opportunity for public comment. It has widely criticized by legal professionals, and is best left out of new guidelines. Finally, Burford suggests removing or editing any recommendations that do not practically serve clients or attorneys. In particular, amending the idea that funders having oversight of litigation is tantamount to undue influence.

Over the last 10 years, provisional measures such as security for costs have been requested in progressively higher numbers. In fact, of all the provisional measures asked for, roughly 20% have included security for costs. These requests are rarely granted, however. As it stands, most courts feel that requests for security for costs can only be granted under unusual and specific circumstances.  Burford Capital explains that courts have determined that simply receiving third-party funding does not demonstrate a need for security for costs. That may be even more true now that it’s established that Litigation Finance isn’t just for those in financial peril. Funding is now commonplace, even among well-capitalized firms, since it provides financial flexibility and enables investments in growth. A case from 2019 sheds light on this, as a tribunal rejected a request by the Republic of Panama to secure costs in a funded claim. In their rejection, the tribunal questioned whether or not Panama even had the right to make such an ask. A survey conducted by the ICSID addressed compliance with cost awards, and found that most awards in favor of states were indeed paid. Of those that weren’t, the state tended not to enforce payment orders. The evidence suggests that security for costs requires that the filing party show need, timeliness, and unusual circumstances. In reality, though, many cases funded by third parties automatically request security for costs. Those applications are typically rejected. According to Burford’s 2019 Legal Finance Report, 67% of in-house counsel agree that litigation funding is a good way to reduce the impact of litigation costs. 72% see value in the practice of litigation funding overall. Where once third-party funding was a market of financial instability, it is now indicative of strategic planning and savvy money management.

Intellectual property can become a valuable asset, especially during an economic downturn. That may be why new patent lawsuits have increased over 15% in recent months. Trade secret litigation is likely to follow—which may be encouraged by the overwhelming availability of third-party litigation funding. Therium details that the five most prominent patent litigation plaintiffs in 2020 are non-practicing. Many take this to mean that these companies are using their patent portfolios to finance their claims. When budgets are tight, patent and other types of IP litigation may be pursued, and meritorious claims that might otherwise be discarded can in fact see the light of day.  Experts suggest that several specific factors are driving the increase in trade secret actions. The Defend Trade Secrets Act, signed by President Obama in 2016, makes trade secret law more favorable to plaintiffs. The definition of ‘trade secrets’ has become broader in recent years, and some sizable awards have been issued as a result. Companies are also avoiding the patent process in favor of listing innovations as trade secrets instead. The shift to work-from-home and widespread employee furloughs may cause an increase in trade secret cases—simply because they make trade secret violations more likely. People who are out of work and desperate may be more likely to use an employer’s trade secrets for their own gain. Remote working can also lead to unsecure video chats, while important documents being left unsecured in communal work or living spaces, and a lack of proper encryption, can all lead to a loss of IP. Security overall is down during COVID, as the emphasis is placed on the safety of workers and slowing/negating virus transmission. Anyone pursuing a case involving trade secrets should move quickly. Urgency is of the essence, especially since the loss of IP can be lead to swift and crippling impacts. Trade secret litigation can lead to monetary damages or injunctive relief, either of which would be welcome during these uncertain times.

Sean Callagy's law firm, Callagy Law, has been involved in several contentious lawsuits in recent months, in part due to defaulting on loans from Legal Capital Group. The LCG agreement was made with George Prussin, an old friend of Callagy. Their friendship fell apart after several professional differences that became litigious. Legal Newsline reports that Callagy borrowed nearly $600,000 to pursue routine medical malpractice claims, and other cases. One case in particular descended into legal chaos when Callagy sued his co-counsel. Another case involved international litigation for the proceeds of the lawsuit in a 2006 plane crash that killed more than a hundred people. That case was the stuff of tabloid news—also involving a Mexican firm owned by a non-lawyer, legal legend Benton Musselwhite, and the IRS. Callagy now claims he owes $18MM to LCG, with an effective interest rate of 90% per year. LCG has taken legal action against Callagy.  While regulations regarding litigation funding can vary from state-to-state, on the federal level, funding is treated differently than loans. The main difference is that funding is non-recourse, and therefore only repaid when the case yields a payout.

UK Litigation Finance firm Woodsford is funding a class action against BT, AMP, and Commonwealth Bank. If successful, the case could bring the funder as much as 25% of any potential reward. Craig Allsopp, class action leader at Shine, who has taken on the case, has said that funders generally receive between 20-30% of awards from successful cases. The News Daily explains that the class action suit against Commonwealth Bank, BT, and AMP alleges that the banks improperly signed members up for a superannuation fund at a higher rate than is appropriate. A claim has already been lodged against AMP, with BT and Commonwealth Bank claims to follow. Allsopp stated that Shine law firm is confident that the evidence shows overcharges of more than $500MM. Essentially, the banks are accused of vertical integration—which includes the practice of selling in-house products at artificially inflated prices. Allsopp calls this practice both “illegal” and “unfair” to clients. The difference in policy costs varied, but BT and CBA are accused of charging 10-30% more for comparable services. AMP was even more aggressive, charging between 30-50% more. The claimants assert that this isn’t representative of an error or two—but that the evidence is indicative of systemic misconduct by the banks. While signups to the claim are still ongoing, Shine law firm suggests a possible membership class of half a million people. Shine is expected to contact bank members past and present to inform them of the claim.

This past Thursday, July 30th, Litigation Finance Journal held a special digital conference covering the key issues facing the commercial funding industry. Moderator Ed Truant (ET) of Slingshot Capital helmed a roundtable discussion which included panelists William Farrell (WF), co-founder of Longford Capital, Robert Hanna (RH), co-founder of Augusta Ventures, and Molly Pease (MP), Managing Director of Curiam Capital. Mick Smith, co-founder of Calunius Capital, whose new venture Almatura is now being launched, was slated to join, but unfortunately a power outage at his home left him unable to attend the virtual event. Below are highlights from the event which covered a range of topics currently facing the sector: ET: Does the level of activity, at least in the US Federal Court System, surprise the panelists? Would you have expected to see the same number of cases? WF: This data that you’re describing is not surprising at all. We’re in a tremendous time of economic uncertainty and volatility following the COVID-19 pandemic. And that environment is expected to create controversies and stimulate litigation. At Longford Capital, we have also seen the results of that with an increase in interest among law firms and among corporate litigants for litigation financing in some of the same areas your data suggests have seen an uptick in litigation—namely corporate litigation, corporate contract disputes, and insurance, namely insurance recovery for business interruption or property damage. RH: I think there was an increase in the number of inquiries we were seeing anyway. Slowly, lawyers are generally accepting litigation funding more than they have in the past. As a result of our friends at Burford, they’ve always been a very high-profile poster child for the industry which has made the corporate world, certainly in the UK, aware of litigation funding. Come the virus, all of a sudden, we decided that we thought maybe the cases were going to take longer to reach a resolution. So we, like a lot of other funders did, added six months to the life cycle of the case when valuing our portfolio. Interestingly, I was speaking to a high court judge the other day and she was saying we’ve seen more resolutions year-to-date than we saw in the high court the whole year 2019. Thanks to the virus, you’re getting resolutions in many cases quicker than you might otherwise have seen. There is definitely a positive influence on litigation. There is going to be more and more litigation, more insolvency that will create opportunity. Immediately what we’re seeing is a search for liquidity. MP: I definitely agree with what Bill and Robert have said. I think looking at the Lex Machina numbers, I think it’s probably even an underestimate. I’m sure there are plenty of cases that were filed that may have been initiated for COVID-related reasons but the complaint itself might not actually mention COVID. I think with any downturn people tend to be more litigious and may take on suits that they may not otherwise have decided were worth it in an environment where things were moving up and looking positive. We’ve definitely seen a lot of activity at Curiam, and I think there are people who are considering filing litigation if they can get the right financing in place and have the economics make sense, who may not have considered it. It’s just something that seems more worthwhile to them in the context of the economy right now. ET: To what extent do you think Litigation Finance will get involved on the insurance litigation side? Is that deemed a good case type to pursue? Is there some concern about going up against well-capitalized insurance companies, or is litigation finance particularly well-suited to those pieces of litigation? RH: I think we’re a little bit different in the UK. The FCA (financial conduct authority) has actually taken some test cases in this space. Everyone is waiting, rather nervously on the insurance side of things, to see the result of those. Certainly from our point of view, we haven’t taken on business interruption cases just yet. We’ll see what the result of the FCA cases, then there will be plenty of time to react accordingly. ET: Is that the Hiscocks case everyone is looking at? The class action? RH: That’s the one everyone is talking about, absolutely. So it’ll be interesting to see what happens there. WF: There have been thousands of insurance claims filed and lawsuits are following once the insurance companies have been denying claims. And I think that number of insurance recovery lawsuits will increase into the hundreds of thousands in the United States. Many companies are looking at their business interruption provisions of their insurance policies and their property damage provisions and asking lawyers to apply the circumstances to their particular policies. Some that we’ve seen are asserting claims based directly on the COVID-19 pandemic. What we find is a lot of policies have exclusions or disclaimers against coverage for pandemics or other types of health issues. So as a result, I see other claims being filed that are basing the damage on something else—either properly damage, or interestingly, government authority intervention. It’s going to be difficult for the insurance industry to deal with this massive influx of claims. And I’m sitting back evaluating policies on a case by case basis. Our conclusion is that many cases do not rise to the level of confidence that we need to pursue a case. I’m also interested to see if the US Government will in some way intervene—as a stimulus or some sort of economic package to help the insurance industry. You asked if these would these insurance recovery cases be interesting to funders because the defendants—these big insurance companies are very well funded. In our experience at Longford Capital, the defendants in the cases in which we’re involved are typically well-funded. And we like that attribute because it eliminates other concerns like credit worthiness or collectability risk. So that’s not a detriment to our involvement. It’s a positive when the corporate defendant or other type of defendant is able to hire the very best lawyers and come to reasonable commercially-minded outcomes. And then if they’re unsuccessful in their defense, that they’ll be able to pay a judgement. ET: We’re at a point in time over the next coming months we’re probably going to see a significant increase in insolvencies unfortunately. Do you view this as attractive part of the marketplace and is it something where your firm is focused? WF: We at Longford Capital have identified the bankruptcy arena as a very fertile ground for us to be able to help law firms and companies that are in distress of one sort or another. The example that I see every week is a company that moves into bankruptcy has shuttered its doors perhaps and is suffering tremendously on top line revenue and perhaps its greatest remaining asset is a meritorious legal claim. And when companies are in a distressed situation it has seemed to be that they end up being the victims of fraud and breach of contract even more often than usual. So I suspect that our industry will be able to assist in those situations. RH: When we started Augusta, we were convinced that we were going to see an awful lot of insolvency claims coming to us. I think the problem is that what you’ve got in the UK, is you’ve got a very closed group of IP agents who are very familiar with valuing risk. Hence, as a funder, if you’re shown a claim by an IP agent, then you’ve got to be very careful and understand why they’re showing this to you and not funding it themselves. We were surprised at how unsuccessful we were at getting access to good insolvency cases, and so we’ve funded a number but not the number we thought we were going to do. ET: Survey results that were published by Above the Law, taking a look at Litigation Finance Perspectives in the legal community. There we saw some very positive trends that came out of the survey as it compares to 2019. The survey response references 70% usage versus 41% last year, with probably a disproportionate amount of that usage coming from smaller sole practitioners and smaller law firms. I’m curious as to the panel’s perspective on how the survey results impact how you originate and create relationships within the legal community? RH: Surprisingly, we still get the vast majority of our cases from lawyers and law firms that we’ve built relationships with. I’d say it’s 70-75% we get from lawyers. We are seeing more and more claimants aware of litigation funding. Some of them do come to us direct. But typically they will go to their trusted lawyer and say ‘I want to know about Litigation Finance, tell me what it’s all about, tell me what you think I should do.’ The lawyers and funders have always had a sort of love-hate relationship. They’ve always been very wary of funders. They always think that we’re going to interfere with the relationship between them and their client. But now they’re being forced to really work with us funders because their clients are asking them to do that. I think that’s the big trend. MP: For the most part we still get the majority of our opportunities, or at least the good opportunities, from law firms. So I agree on that. I think that there has been a trend for quite a few years now for in-house counsel and clients being under pressure to control the costs of outside law firms. And I think that being concerned about how the billable hour is going up and budgets are increasing significantly and GCs are being asked to do more with less and have to work with their law firms to try to come up with alternative fee arrangements or some way to keep the costs of outside counsel under control. That push supports interest and a move toward litigation funding. I think for a while now clients have been saying to firms, ‘what can we do to try to keep this under control, to make sure that the budget doesn’t exceed what we’re expecting.’ ET: Do you think the industry has a bit of a PR problem? And the US still remains one of the few countries that does not have an industry trade association at least on the commercial side, they do on the consumer side. What are your thoughts about trade association in the context of the US?   WF: I like the idea of an industry trade association. I particularly like the idea of a multinational trade association so that we can continue to share ideas and best practices across jurisdictions. I like speaking to Robert, for example, to learn from his experiences in the UK. I think we would benefit as an industry from that. When I was in private practice we spent significant time representing trade associations and see great benefit to those. I suspect that in short order that we as an industry will take steps to put that in place. ET: I heard Burford make some comments about a global trade organization coming in, so we’re just waiting on that official announcement. Robert, from your perspective, you have an industry association in the UK, and I believe you’re active in it. How has that been working out? And do you suffer any of the same PR issues in the UK as compared to the US? RH: I think ALF has a very good role in the industry. It’s there to self-regulate the industry. It’s done that well, I believe. What it isn’t, necessarily, is a mouth piece. It’s not a PR machine. So I totally agree with Bill. I think there is room for an international trade association to get both sides of the story out there. I think there is a need for a more vocal PR mouthpiece for the industry. Litigation funding is not rocket science, but it is there to level playing fields if necessary. Sure it’s there for large corporates to take liabilities off balance sheets and use other people’s cash. But it’s a very transparent process and a very valuable one. At the lower end of the scale it provides access to justice which is really important. And that message should get through.

COVID continues to impact the business world in ways few were ready for. The already evident spike in insolvency and bankruptcy litigation is expected to grow in the coming months and beyond. Burford Capital spoke with industry experts to get their thoughts on these developments. They include Margot MacInnis of Grant Thornton, Jason Yardly of Jenner & Block, Derek Lai of Deloitte China, and Thomas Janover of Kramer Levin. When asked what types of cases would be most prevalent in the near future, Lai predicted that fraud cases may increase. He suggested that when businesses are scrambling to make up for losses, fraud may follow. Margot MacInnis brings up insurance claims, which are already contentious, as insurers look for ways to hold back payouts related to COVID closures. Jason Yardley explained that the issues that caused the 2008 financial crisis were never fully resolved. This means that insolvency cases, including disputes over the value of assets, will be huge. Thomas Janover echoed that sentiment, saying that he expects more litigation involving breach of contract suits and endless valuation testimony. When asked how to best address the needs of clients in financial distress, MacInnis states that insolvency lawyers must have detailed discussions with clients about their options. Only through informed decision making can businesses make good choices on how to proceed during a pandemic. Lai suggests reaching out to clients to develop relationships and assuage their fears while streamlining risk management. Being able to help clients in crisis with swift, decisive action can make all the difference.  As with most things, the keys to financial survival in the time of COVID include strong communication, solid information, and flexibility.