Class Actions Post Coronavirus—What Can We Expect?
The global financial crisis of 2008 brought with it a flood of class action litigation against big banks. A similar wave of litigation is expected in the post-COVID world. Indeed, it might be even more widespread. In recent years, the rules and procedures surrounding the formation of class action suits have become more sophisticated. Advances in the understanding and use of Litigation Finance make pursing class actions less complicated. City AM reports that class action suits are already popular in the US, and the UK is expected to follow suit as big banks are held accountable for malfeasance toward their customers. The thinking in legal circles is that increased litigation is a foregone conclusion post-Coronavirus. Christopher Bogart, CEO of Burford Capital, has stated that the reality of the Coronavirus is that it will bring about a huge number of legal disputes. Questions surrounding insurance coverage or contract specifics will be plentiful. Expansive access to litigation funding means many of these cases will go the distance in court. Businesses are already forming groups to take on insurers and others who have already refused to meet their contractual obligations during shutdowns and work stoppages. One such group, Hiscox Action Group, is pursuing claims against Hiscox insurance, with funding from Harbour Litigation Funding. The use of social media makes finding claimants for class action suits easier than ever. Combined with the wealth of funding provided by third-party funders, it’s easy to understand why class action suits will be a popular means of seeking recompense after the pandemic is behind us.
INVESTOR INSIGHTS
Frequency In terms of frequency of co-investment opportunities, almost 50% of respondents indicated they have from 1 to 5 opportunities in a given year, with just over 20% in the 6-10 range, and a few managers indicating they had 20 such opportunities in a given year. The number of opportunities directly correlated with the size of the funder and the size of the cases they typically finance. 
Co-Investor Characteristics Regarding the characteristics that are most important in a co-investment partner, speed to commitment and having a funded capital source ranked the highest, with responsiveness and understanding complex litigation also ranking highly. However, there was not a huge disparity in terms of the importance of the six criteria listed, suggesting that all criteria were factored into their decision-making process. Keep in mind that the compilation of rankings on the chart below is an average of the six criteria, so a high number on the chart should be viewed as being more important (even though that answer drew more 1's and 2's), whereas a low number on the chart should be viewed as less important. For example, 'Speed to Commitment' and 'Having a Funding Capital Source' both received the most 1's and 2's, but their average ranking is the highest and therefore most important. 'Flexible Capital' received the most 6's, but has the lowest average score, and is therefore the least important metric. 
When we dive further into the ‘speed to commitment’ characteristic, we find the vast majority of respondents expect a commitment within 3-4 weeks. It remains to be seen if expectations and reality are in alignment, a good question to include in the next survey. 
Expected Duration With respect to the underwritten expected duration, most fall within the 12-36 month range, which is consistent with duration expectations for the industry as a whole. However, 30% of respondents did indicate that duration was a function of the type of case being underwritten, with certain case types (patent, international arbitration, etc.) having longer durations and appeal cases having shorter durations. 
Co-Investment Structuring In terms of insight into how these co-investment transactions are typically structured, the responses varied. In the ‘other’ category, some respondents indicated they have used a variety of the choices offered, whereas one respondent stated that they received a specified interest in the profits produced by the investment. 
Current Co-Investors As it relates to where the current co-investment opportunities are being offered, the majority were offered to other funders, suggesting there is a fair amount of cooperation in the litigation finance marketplace. However, within the ‘other’ category, most respondents suggested it was a combination of all of the choices listed. 
This brings to a close the results of our first commercial litigation finance co-investment survey. 
Edward Truant is the founder of Slingshot Capital Inc. and an investor in the consumer and commercial litigation finance industry.
Edward Truant is the founder of 
