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Commercial

The Evolution and Expansion of Litigation Finance

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.
Announcements Consumer

Tribeca Capital Group, LLC, Converts COVID-19 Wrongful Termination Claims into Cash with Lawsuit Fundings

NEW YORK, Aug. 12, 2020 /PRNewswire/ -- Tribeca Capital Group, LLC, a pioneer in pre-settlement litigation funding, announces that it is now advancing funds to claimants who have lost their livelihoods through wrongful termination, the employer's mishandling of wage and benefit claims, and other employment issues arising from the pandemic crisis. "It wasn't long after the coronavirus reached our shores that we started hearing about mass layoffs and furloughs. Unemployment levels suddenly jumped to double digits, and over the course of weeks, Americans had filed more than 6 million unemployment claims. With so many losing their jobs, it was inevitable that we would discover some layoffs and furloughs were being conducted unlawfully," said Tribeca's founder, Rory Donadio. Some companies affected by so-called shelter-in-place or lockdown orders laid off substantial numbers in their workforces without observing mandatory federal and state reduction in force rules. Other companies have fired employees for wanting to wear personal protective equipment or for calling out unsafe working conditions. Some have fired workers or denied them federally mandated sick leave for exhibiting symptoms of COVID-19 or for caring for a family member stricken with the virus. Still others have refused to pay back wages or compensate laid off employees for unused benefits. "We've seen employers commit egregious acts like reducing an employee's wages by the amount of their stimulus checks or by denying them the severance guaranteed by their employment contracts," says Donadio. "There's no doubt that this pandemic is unprecedented and has stretched employers to the breaking point. Employers have a responsibility to their workforce, which a majority of employers take seriously even under the direst of circumstances. Unfortunately, not all employers share respect for federal and state laws and employment contracts that are designed to protect employees." Wronged former employees are hit by a double whammy. Not only have they been personally wronged, they have lost their sources of income. Donadio explains, "The ex-employee files a lawsuit seeking compensation for the wrongs they endured and replacement wages to help them survive and provide for their families. In the meantime, they turn to litigation funding companies like Tribeca to fill in the gaps. Based on a thorough evaluation of the claim, Tribeca can often provide the plaintiff a one-time advance to get them over a hump or an ongoing payment to supplement unemployment benefits." If you or a family member suffered a wrongful termination or reduction in wages, Tribeca may be able to help. Hundreds of plaintiffs have turned to Tribeca to convert their court cases into cash when they needed it most. If you need help funding your case, contact Rory Donadio, Tribeca Capital Group, LLC, at 866-388-2288 or visit our website for more information: tribecalawsuitloans.com
Announcements Consumer

Legal-Bay Announces Update to California Wildfires Negligence Claims

SACRAMENTO, Calif., Aug. 13, 2020 /PRNewswire/ -- Legal Bay Lawsuit Funding reports that California utility company PG&E recently admitted negligence in the 2018 Camp Fire that killed 84 people and destroyed the entire town of Paradise. The fire devastated hundreds of lives and wreaked billions of dollars in property damage, and was the single most destructive wildfire in California's history. After two entire years of litigation, PG&E entered a guilty plea and will pay $13.5 billion to people who lost homes and businesses from wildfires started by its equipment. Additionally, Governor Newsom recently signed into law a $20 billion fund to assist in the displaced residents' recovery. Additional lawsuits are expected to be filed. As California enters their wildfire season once again, the Gold Fire in the rural northeastern part of the state has already burned through several hundred acres, and residents are currently being evacuated. Those who have been displaced can apply for aid through the Wildfire Assistance Program, a fund intended to help anyone who needs financial assistance with housing costs or daily living expenses while they rebuild their lives. If you or a loved one need an immediate cash advance, you can apply HERE or call: 877.571.0405 Chris Janish, CEO of Legal-Bay, commented on the recent wildfire lawsuits, "Victims of these disasters need to rebuild their homes and their lives now, but their cases are lagging in the court system. Legal-Bay is proud to offer pre-settlement funding to plaintiffs so they can survive until their wildfire lawsuit makes it to trial." If you have filed a wildfire lawsuit and need an immediate cash advance against your pending settlement, you can apply HERE or call: 877.571.0405 If you have not yet filed yet and need help finding a lawyer or law firm that specializes in wildfire lawsuits, Legal-Bay can offer referrals. Legal-Bay's programs are non-recourse lawsuit cash advances, also known as case funding, which means you only repay the lawsuit cash advance money if you win your case. None of the lawsuit money programs should be considered to be a lawsuit loan, lawsuit loans, settlement loans, settlement loan, pre-settlement loans, or a pre settlement loan.
Announcements Commercial

DLA PIPER AND LCM COLLABORATE WITH NEW THIRD-PARTY FUNDER FOR DLA PIPER CLIENTS

DLA Piper has entered into a non-exclusive arrangement with publicly listed disputes financier Litigation Capital Management (LCM), and a newly formed litigation funder, Aldersgate Funding Limited to offer clients of DLA Piper access to £150m for funding large-scale litigation and arbitration. This will be offered on a financial risk-free (non-recourse) basis with a streamlined approval process embedded within the offering. Intended to be available in all applicable international jurisdictions, Aldersgate Funding has been structured to provide DLA Piper clients "best-in-class" funding terms, fast decision-making and enhanced due diligence that will allow actions to be pursued without any financial downside to claimants. With access to funding secured from LCM and Aldersgate Funding, DLA Piper will be able to provide the firm's clients with non-recourse finance for 100% of the costs of bringing a claim and additionally the ability to ‘source in’ adverse cost cover and security for costs as necessary. LCM, which is listed on the London Stock Exchange’s AIM market, has a proven and successful track-record spanning more than two decades of providing bespoke financing solutions, including corporate portfolios, to clients in various industry sectors across Europe, the Middle East, Africa, and Asia-Pacific. This funding offering opens up the opportunity to DLA Piper clients to pursue claims that would have otherwise been untenable due to capital constraints. Aldersgate Funding will be led by former DLA Piper Corporate partner Jim Holding. Jean-Pierre Douglas Henry and Jamie Curle (DLA Piper Co-Heads of Global Litigation & Regulatory and UK Litigation & Arbitration respectively) have spearheaded the portfolio funding initiative which has ultimately led to the creation of Aldersgate Funding. They will continue to lead DLA Piper’s engagement in this area and for this offering in particular. Former Global Co-Chair of Litigation & Regulatory at DLA Piper, Stephen Sly, has retired from the Firm and will also serve as Chairman of the Investment Committee of Aldersgate Funding, bringing decades of disputes experience to the table. DLA Piper will be offering this funding service as part of its enhanced legal offering named Law&. Speaking on the collaboration, Simon Levine, Global Co-CEO, DLA Piper commented: "We are working at pace to develop a stream of bold and innovative products and services as part of our enhanced legal offering Law&, that will allow clients to seize opportunities. As part of this mission, our collaboration with Aldersgate Funding and LCM gives clients access to capital to fund claims with a speed, ease and at a quantum hitherto unheard of and represents a sea change in the traditional approach to litigation funding." Jim Holding, Managing Director of Aldersgate Funding added: "This offering provides the ability for DLA Piper clients to pursue recourse through litigation and arbitration on a risk-free basis, opening up opportunities that may have previously been unavailable to them. With the benefit of our valuable collaboration with LCM, Aldersgate Funding provides a streamlined and efficient service that provides corporates with efficient access to capital, providing increased financial freedom within their businesses, an ability that is especially relevant against the current backdrop of global economic uncertainty.” Nick Rowles-Davies, Executive Vice-Chairman, Litigation Capital Management, commented: “We are delighted to be working with DLA Piper and Aldersgate Funding on this facility which not only demonstrates that LCM collaborates with the most forward-thinking law firms globally, but also the maturing of the industry where clients now demand sophisticated disputes finance solutions that move beyond the traditional templated funding model,” Funding through Aldersgate Funding is only available to clients of DLA Piper and can only be accessed via the firm.
Commercial

Cryptocurrency Class Action Seeks Funding

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.
Consumer

Litigation Finance Data Suggests a Need for Post-Settlement Regulation

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.
Announcements Commercial

Legal Industry Rebounds in June

The UK's Legal industry generated revenues of £2.79bn in June 2020. Whilst 3.6% down on June last year, that month was the highest billing June on record. June 2020 was the third best June in history for the UK’s legal industry, according to Office of National Statistics data released on 12th August.

Month on month, June 2020 saw revenues grow 19.5% since May 2020, but as May is traditionally the weakest month of the year for the Legal profession, the year on year comparison is more telling.

Louis Young, MD at Augusta said: “June’s revenue data shows the green shoots of recovery are now here for the UK’s legal industry. Firms will welcome this news, having been hit hard by the pandemic. Many will however take time to recover, having geared up for a record year in 2020. Leaders continue to look for options to manage costs and enhance their balance sheets, whilst planning for an improvement in trading conditions in Q3”.

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About the ONS Data

  • ONS Monthly Business Survey data shows Legal Activities revenue as £2.79bn in June 2020 compared to £2.33bn in May 2020 and £2.89bn in June 2019.
  • The overall Services sector (including Legal) grew by 24.5% since May 2020.
Commercial

How a Rise in ‘Nuclear Verdicts’ Impacts an Industry

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.
Announcements Commercial

Pravati Capital Launches Fifth Specialized Litigation Finance Fund with $200 Million

PHOENIX, Aug. 11, 2020 /PRNewswire/ -- Pravati Capital, leading litigation finance pioneer and consulting firm, today announced the launch of its fifth specialized litigation finance investment fund with $200 million, following the success of its four previous funds launched since 2013. Pravati Investment Fund V (Fund V) will allow for the first time non-US and US-tax exempt international qualified investors the opportunity to invest in a specialized litigation finance alternative investment vehicle. Fund V, as its four predecessors, is structured using the proven methodology of stringent due diligence in selecting and structuring investments, while providing opportunities for law firms to restructure, regain financial footing and build their asset portfolios. The firm's focus remains to invest in non-correlated assets with limited risk independent of the economic cycles offered by the growing litigation finance sector. Pravati founder's 18 years of specialized experience in financial litigation has contributed to the launch of four successful funds, which together with the newly launched Fund V, will continue to provide breakthrough capital solutions that allow firms to restructure and emerge stronger in distressed markets throughout the United States. "We are pleased to offer Fund V as an alternative investment vehicle in the litigation finance sector. Given the current climate litigation financing has never been more critical. As a result, we have shifted the focus of this fund to meet those needs and the social impact we want to create. The present crisis has exacerbated the need for capital to continue operating or is the only solution to implement a restructuring process that allows smaller law firms to survive or explore the possibility to merge with others given the existent distressed environment," commented Alexander Chucri, Chief Executive Officer and Portfolio Manager of Pravati Capital. Mr. Chucri added, "The past few months have affected multiple sectors across the economy, and litigation finance has not been unscathed. Our mission remains as solid as ever, we believe we can have a positive impact by helping capitalize in need of resources firms, either to continue funding their operations or providing the necessary funding to implement changes that will allow them to persist in the current scenario or to restructure by merging with other firms and guarantee their relevance." Pravati Capital acts as the middle-market lender, merchant bank and advisor to mid-size law firms around the world and provides non-recourse, and recourse cash advances to law firms that are generally collateralized by underwriting a portfolio of cases. The company invests in a broad range of high probability, complex, plaintiff commercial disputes. Pravati Capital Fund V is expected to have short-term duration of 36-48 months. The fund aims to deploy funds in excess $200 million in the following 18 months. The fund's strategy will continue to build an international all-weather non-correlated alternative investment fund with a solid risk-reward profile that is not affected by economic cycle changes compared to traditional equities and fixed income funds. About Pravati Capital As a leader in the litigation financing field, Pravati Capital has changed how law firms envision their future. For more than a decade, we have been at the forefront of litigation financing solutions, creating innovative sources for bridge capital. It is our mission to provide innovative, efficient capital solutions for law firms, compassionate assistance to plaintiffs, and a secure alternative investment option for accredited investors. For more information, please visit our website at Pravati Capital or call 1.844.772.8284. You can also follow us on LinkedIn and Twitter.
Commercial

NZ Class Action Secures Funding in Mountain View Case

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. 
Commercial

Institutional Ownership at Burford Capital

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.
Commercial Covid-19

COVID Brings Tech-Savvy In-House Lawyers to the Forefront

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.
Commercial

Will the ABA’s Litigation Funding Guidelines Do More Harm Than Good?

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.
Commercial

Taking a Look at Security for Costs

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.
Commercial Covid-19

What’s Causing the Rise in Trade Secret Litigation?

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.
Consumer

How Did a $440K Law Firm Loan Balloon to $18MM?

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.
Announcements Commercial

District Court in Poznań Grants Third Injunction against Mariusz Świtalski to Secure Forteam Investments’ Claims

WARSAW, Poland, August 5, 2020 -- Forteam Investments Ltd., an investment company controlled by U.S. private equity firm Delta Capital Partners Management LLC (“Delta”), which is seeking over PLN 300 million from Mariusz Świtalski and companies he controls, has secured a third court injunction.

The District Court in Poznań granted the injunction against Druga-Sowiniec Capital sp. z o.o. S.K.A., a company controlled by Mariusz Świtalski, and Krzysztof Belcarz.

The injunction secured by Forteam concerns a claim that seeks to declare as invalid agreements to sell stakes in Czerwona Torebka S.A. (24,758,600 and 9,707,588 shares, respectively), executed in March 2020 between Świtalski FIZ and the entities facing this injunction.

Under the injunction, Forteam has secured another Czerwona Torebka shares. In total, by force of the first (granted in February 2020) and third injunction, 48.44% of the Czerwona Torebka shares have been secured. Currently, 35.5% of the Czerwona Torebka's shares have been already seized by a bailiff, while the procedure is on-going for the remaining 12,94% of shares.

Christopher DeLise, CEO of Delta, said, “We will make full use of the latest injunction issued by the court that enables us to participate in the oversight of Czerwona Torebka. We have already begun such involvement by exercising our rights to safeguard the interests of the shareholders and to protect the company’s commercial interests and assets.This includes an extensive review of the price, trading volume, and history of Czerwona Torebka’s securities. We also intend to exercise our rights to meet with and hold fully accountable the Management Board and to obtain all essential information and detailed plans concerning the company’s future. We also intend to express our concerns regarding the way the company appears to be mismanaged for the benefit of certain parties rather than as required by law and consistent with the fiduciary duties of the Board”

The transactions between Świtalski FIZ, Druga-Sowiniec Capital and Krzysztof Belcarz took place in March 2020 after the District Court in Poznań’s February 21, 2020 decision that granted Forteam an injunction against Mariusz Świtalski and companies from Sowiniec Group under his controls (with the exception of Druga-Sowiniec).

As a result of that ruling, Mariusz Świtalski’s assets are frozen until the case is concluded. These share sale transactions illustrate Mariusz Świtalski’s attempts to sell and conceal his assets to make it more difficult for Forteam to satisfy its claims.

This newest injunction is yet another positive court ruling for Forteam, following the court’s June 25, 2020 dismissal of an appeal lodged by Mariusz Świtalski on February 21, 2020. Moreover, Mariusz Świtalski previously failed in his attempt to exclude all judges working at Poznań-based courts from all cases between him and Forteam.

At the end of April 2020, the court, in connection with potential detriment being suffered by Forteam as a creditor, decided to secure Forteam’s claims on parts of the assets of Mariusz Światalski’s children: Mikołaj, Marcin, Mateusz (President of the Management Board at Czerwona Torebka S.A.) and Natasza (Proxy at Czerwona Torebka S.A.). The court’s decision concerns investment certificates in fund Świtalski FIZ, which Mariusz Świtalski had transferred to his children.

All three injunctions were obtained in anticipation of a conclusion in a civil proceeding against Mariusz Świtalski that relates to his breach of a guarantee agreement executed with Forteam Investments in 2015.

Reminder: On May 8, 2015, Forteam purchased a 100% stake in Małpka S.A. from Czerwona Torebka. Małpka was the owner of the Małpka Express chain. In settling the transaction, Forteam sold its stake (16.18%) in Czerwona Torebka. Upon signing the sale agreement, the parties were aware of Małpka’s difficult situation. The agreement, itself, noted that the parties realize that further considerable financing would be needed for the company to reach the break-even point.

Because of this, Mariusz Świtalski and Sowiniec Group also executed a Guarantee Agreement with Forteam, which provided Forteam with a guaranteed return on the Małpka investment if the Małpka Express store chain was later sold to a third party. Mariusz Świtalski submitted a written declaration that his personal assets were sufficient to perform the Guarantee Agreement.

When Forteam attempted to sell Małpka Express in 2018, it was unable to obtain consideration at or above the minimum sale price, despite engaging a respected independent investment bank to run a robust sales process. Mariusz Świtalski has not exercised his preemptive rights and did not buy Małpka for the guaranteed amount.

Accordingly, Forteam notified Świtalski on December 28, 2018, of his obligations to remit the monies owed to Forteam pursuant to the Guarantee Agreement. Notwithstanding, Świtalski and the companies have failed to pay any amounts due and owed to Forteam, which, in turn, necessitated the filing of the injunction and civil lawsuits. As a result of Mariusz Świtalski’s actions, Forteam was forced to take additional steps to secure part of his children's property and other entities to which Świtalski transferred owned assets.

Krzysztof Belcarz has been affiliated with Mariusz Świtalski's various businesses for years. In the course of his career, he has served as Development Director at Świtalski FIZ, Management Board Representative for Commercial Affairs in Czerwona Torebka and Expansion Partner at Świtalski & Synowie S.A.

Announcements Consumer

KBRA Assigns Preliminary Rating to TVEST 2020A, LLC Note

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns a preliminary rating to one class of notes from TVEST 2020A, LLC, a $123 million securitization collateralized by litigation finance and medical receivables serviced by Experity Ventures LLC (“Experity”). The TVEST 2020A, LLC notes (“Notes”) represents Experity’s first ABS securitization collateralized by litigation finance and medical receivables. Experity, formed in April, 2019, is the parent company of the various receivable originators including Thrivest Legal Funding LLC (“Thrivest”), a direct to market pre-settlement legal funding company with a history of originations dating back to 2009 and ProMed Capital Venture LLC (“ProMed”), a recently acquired leading medical lien funding company that has been originating since 2017. Experity is also the parent of four other litigation finance receivable originators that were formed in connection with strategic financing and operational partnerships with third parties. The portfolio securing the transaction has an aggregate discounted receivable balance (“ADPB”), including assumed prefunding, of approximately $160 million as of the May 31, 2020 cutoff date. The ADPB is the aggregate discounted cash flows of the collections associated with the TVEST 2020A, LLC portfolio’s litigation funding receivables (“Litigation Receivables”) and medical receivables (“Medical Receivables” and, collectively, “Receivables”). The discount rate used to calculate the ADPB is a percentage equal to the sum of the assumed interest rate on the Notes, the servicing fee rate of 1.00%, and an additional 0.10%. As of the cutoff date, Medical Receivables comprise 83.20% of the portfolio by count and 67.44% by advance amount and have an average advance to expected settlement case value (“Expected Case Worth Ratio”) of 22.06%. Litigation Receivables comprise the remaining 16.80% of the portfolio by count and 32.56% by advance amount and have and Expected Case Worth Ratio of 8.77%. The Notes benefit from credit enhancement in the form of overcollateralization, a cash reserve account and a capitalized interest account. The transaction also features a $20 million prefunding account that may be used to purchase additional Receivables during the three months after closing, subject to certain eligibility criteria. Click here to view the report. To access ratings and relevant documents, click here Disclosures Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above. A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here. Information on the meaning of each rating category can be located here. Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com. About KBRA KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
Consumer Special Features

ABA Adopts Guidance in Third-Party Litigation Funding

This article was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). On August 3, 2020, The American Bar Association (ABA) House of Delegates, by a vote of 366-10, voted to adopt the resolution for “Best Practices for Third-Party Litigation Funding”. This established a slew of national guidelines that law firms, consumers and legal funding companies should follow. We applaud the ABA in setting these standards that ARC and its members already follow. Some of the items that they highlight are:
  • The arrangement should be spelled out in writing.
  • The writing should make clear the non-recourse nature of the investment the funder is making in the claim; how the funder will be compensated
  • Who is responsible for paying the funder, from what source (g., the recovery after trial or settlement) and when (e.g., time period after receipt of judgment or settlement funds)
  • The arrangement should be structured so that the client retains control of the litigation, and not the funder.
  • Lawyers should be cautious in making case-related reports or predictions.
  • Funding agreements should state the amount of funding to be provided, the amount or method of calculating the return to the third-party funder, and how and when the proceeds of the party’s recovery are to be distributed among Funding agreements should provide a fair, transparent, and independent dispute resolution process.
  • Funding agreements also should include a recommendation that a party obtain independent legal advice as to whether to enter into the proposed There should also be a confidentiality obligation for the funder that survives termination of the agreement
  • In client-funder financing, the third-party funder and the party should be the sole parties to the funding agreement, in order to avoid any potential attorney conflicts of interest, should the party and the funder disagree on a material issue during the course of the litigation. Many non-recourse finance agreements ask the attorney to promise the funder that the attorney will notify the funder when the case is resolved.
  • Limitations on a third-party funder’s involvement in, or direct or indirect control of, or input into (or receipt of notice of), either day-to-day or broader litigation management and on all key issues (such as strategy and settlement), should be addressed in the funding agreement.
  • Lawyers may want to obtain written acknowledgement that the funder will not seek to control the litigation or the expense.
These items are consistent with the statutes that ARC and its members support in legislation. ARC fully supports proper regulation of the Consumer Legal Funding Industry across the country. Eric Schuller President
Commercial

Class Action Accuses Banks of $500MM in Overcharges

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.
Announcements Commercial

Pravati Capital Completes Expansion to Key Markets and Adds Accomplished New Hires to its Distinguished Leadership Team

NEW YORK, July 29, 2020 — Pravati Capital, leading litigation finance pioneer and consulting firm, today announced four new members to its esteemed leadership team, each complementing the firm’s outstanding services and legal insight. Joining Pravati Capital, Bruce Cohen, Douglas Smith, Scott Potter and Shane Ham will bolster the company’s litigation practice with specialized experience to better serve clients. Pravati Capital announced four new members to its esteemed leadership team, each complementing the firm’s outstanding services and legal insight. Joining Pravati Capital, Bruce Cohen, Douglas Smith, Scott Potter and Shane Ham will bolster the company’s litigation practice with specialized experience to better serve clients. The accomplished new additions bring a wealth of knowledge in areas such as debtor-in-possession financing, complex litigation and commercial litigation, and will help steer and strengthen the firm’s plans for growth, while expanding its footprint to key markets including New York, Los Angeles and Dallas. As Pravati Capital continues to grow and scale, the strategy will remain on developing attractive alternative investment funds that offer solid returns at a low risk given that assets are not related to the economic cycle. The established focus combined with the specialized experience will allow the industry leader to explore new and existing opportunities within the dynamic and growing field. “We are thrilled to welcome these accomplished individuals and look forward to the value they will add to our insight and practice,” said Alex Chucri, CEO at Pravati Capital. “Our clients are our top priority and we are confident these additions will enhance our company as we continue to grow and offer exceptional service as we expand our practice of finance litigation.” New additions to Pravati Capital’s leadership includes: Pravati Capital welcomes Bruce Cohen as Director of Business Development in the Dallas office. Cohen’s 30 years of well-rounded background add extreme value to the firm and his past positions include Senior Legal Director at PepsiCo, Inc., where he was responsible for sales and antitrust matters in its Frito-Lay subsidiary and Associate General Counsel of Verizon Communications Inc. A former U.S. Army Field Artillery Officer, he is a Distinguished Graduate with Honors of the Virginia Military Institute and received his Juris Doctor summa cum laude from the University of Georgia School of Law. Cohen was a litigation partner at a prominent Atlanta law firm and has appeared in trials, regulatory proceedings and appeals in over three dozen states. He holds advanced degrees in history and law from Michigan State, the University of North Texas, and King’s College London. He previously served as a Special Assistant to the Attorney General of Texas, and as a judicial law clerk for a judge of the United States Court of Appeals for the Fifth Circuit. “I’ve really enjoyed the challenge of learning about litigation finance and explaining it to law firms and legal departments, many of whom really didn’t know it existed, let alone the ways it could help their practice and their teams,” said Cohen. “It’s still a nascent business in many respects, and I look forward to helping it grow.” Doug Smith serves as Senior Commercial Lending Advisor in the Scottsdale, AZ office. With a 30-year background managing corporate and commercial real estate lending, Smith focused primarily on structured finance transactions, Debtor-In-Possession bankruptcy restructuring, and distressed loan portfolios. Prior to the private sector, he worked for Congressman John Rhodes, Minority Leader of the U.S. House of Representatives during the Carter and Reagan administrations. Currently, he is a member of the Arizona board of directors for a commercial bank and President of the private non-profit Phoenician II Foundation. In the past, he has served as a member of the Board of Directors for the Maricopa County Industrial Development Authority, the Board of Directors for the Arizona Chamber of Commerce, the Maricopa County Community Development Advisory Committee and the Arizona Republican Party Finance Committee. “The economy is experiencing major dislocation and businesses will need debtor-in-possession and debt restructuring services for some time to come,” said Smith. “Pravati is uniquely positioned to provide these financial services in an efficient and creative manner to middle market enterprises.” Scott Potter joins as Director of Business Development in Pravati Capital’s home office in Scottsdale, AZ. Potter honed both his legal and client relations skills through a decade long commercial litigation career and an additional four years of in-house counsel experience. He was the corporate counsel and global client relations manager for an international manufacturing firm and the vice president of legal affairs for a national lien company. Scott is a graduate of both the Marriott School of Management and the J. Reuben Clark Law School at Brigham Young University. He has practiced at the administrative, trial and appellate levels in both real estate and commercial litigation and represented both billion-dollar corporations and impoverished individuals. Scott has served on the Arizona State Bar’s alternative Dispute Resolution committee and been named a Southwest Super Lawyer Rising Star. “My parents always said I could excel at anything that I wanted to do.  What I always wanted to do was help people to be happy,” said Potter. “Pravati gives me the chance to lift financial burdens from others as they seek greater peace in their lives.” Shane Ham joins as a Legal Investment Analyst in Pravati Capital’s home office in Scottsdale, Arizona. Formerly a litigation partner at Osborn Maledon, he focused on complex commercial and personal injury matters. His practice spanned a broad variety of topic areas, from constitutional law to medical marijuana compliance. Prior to attending law school, Shane spent nearly a decade in Washington, D.C. where he worked as a producer on a political talk show and a technology policy analyst for a prominent think tank. Shane received both his Bachelor of Arts degree in Political Science and Juris Doctorate (magna cum laude) from the University of Arizona, and he clerked for then-Vice Chief Justice Andrew D. Hurwitz at the Arizona Supreme Court. “As a litigator I saw too many cases that were strong on the merits but had to be abandoned because the plaintiff did not have the funds to fight for years against a deep-pocket defendant,” said Ham. “At Pravati I get to help level the playing field, and give people who have been wronged a chance to have their day in court.” “The new additions to our leadership team will continue to support our vision of transformation and innovation, which together with leading and breakthrough insight and practices within our industry, will allow us to continue serving our clients as we grow in the future,” added Pravati Capital’s CEO Chucri. About Pravati Capital As a leader in the litigation financing field, Pravati Capital has changed how companies and law firms envision their future. For more than a decade, we have been at the forefront of litigation financing solutions, creating innovative sources for bridge capital. It is our mission to provide innovative, efficient capital solutions for law firms, compassionate assistance to plaintiffs, and a secure alternative investment option for accredited investors.
Announcements Commercial

Helene Roins joins Litigation Capital Management (LCM) in Sydney

Litigation Capital Management Limited, a global provider of disputes funding, publicly listed on the London Stock Exchange’s AIM market, is pleased to announce the hire of Helene Roins as an Investment Manager based in Sydney. With extensive experience in insolvency and restructuring, commercial litigation, insurance disputes and class actions, Helene joins LCM after more than two years with a Sydney-based litigation funder where she was responsible for the assessment and management of a number of high-profile insolvency projects and class actions. Prior to her transition into litigation finance, Helene spent 15 years in private practice, most recently as a Senior Associate at TressCox Lawyers (now HWL Ebsworth Lawyers) where she acted for corporations, shareholders, directors and insolvency practitioners in a variety of litigation involving insolvency and restructuring, bankruptcies, insurance, intellectual property and other commercial disputes across State and Federal jurisdictions. Among Helene’s notable achievements, she has conducted various liquidator’s examinations in the Supreme and Federal Court under the Corporations Act, led a team of lawyers in defending an A$30 million claim under a D&O policy on behalf of an insurer and acted for a shareholder in Federal Court proceedings commenced against the company and its directors for the unlawful reduction in share capital, unlawful re-organisation of the company and breach of officer’s duties. Commenting on Helene’s hire, LCM’s Chief Executive Officer Patrick Moloney said: “We are very pleased to welcome Helene to the LCM team. Helene is a highly experienced practitioner with a specialisation in insolvency claims which is an area where we anticipate there will be significant growth for LCM in the next 12 to 18 months. Helene will be a great addition to our high-performing team of investment managers, and she joins at an exciting period of growth for LCM globally.” Helene Roins added: “I am delighted to be joining such a reputable organisation that has experienced strong growth over the past few years. LCM’s history and strong track record, particularly in insolvency and commercial litigation claims funding, is strongly aligned with my own experience in both private practice and more recently in the litigation finance industry.” Helene is a member of the Law Society of NSW, the Women’s Insolvency Network Australia, and Women in Insolvency and Restructuring Victoria. In April 2020, Investment Manager James Foster and Chief Financial Officer Mary Gangemi both joined LCM in London. Their hires followed the March closing of a new US$150m third-party fund backed by significant global blue-chip investors. The fund marked LCM’s return to managing third-party funds, following its building of a permanent source of balance sheet capital through the equity markets. About LCM Litigation Capital Management (LCM) is a leading international provider of litigation financing solutions. This includes single-cases and corporate and law firm portfolios across class actions, commercial claims, claims arising out of insolvency, including assignments, and international arbitration. LCM has an unparalleled track record, driven by effective project selection and robust risk management. Headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT.
Commercial

Key Takeaways from LFJ’s Quarterly Industry Roundup on Commercial Litigation Funding

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.
Commercial Covid-19

Burford Hosts Roundtable on Restructuring and Liquidity

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.
Commercial

Litigation Finance—High Risk, High Reward

After gaining considerable steam during the economic crisis of 2008, the Litigation Finance industry has only increased in popularity since. Predictions suggest that by 2027, the litigation funding sector will be worth more than double what it is now. The Edge Markets explains that lit fin is an attractive option for investors for a few key reasons. First, litigation funding doesn’t correlate with the rest of the market. Individual claims may vary in value—particularly when a defendant’s net worth drops drastically. Litigation funding also has a slower investment cycle, since cases can take years to resolve. At the same time, when funders become involved with cases after specific milestones are met, the time between investment and payout becomes much shorter. Jay Greenberg of LexShares details that unlike other alternative asset classes, Litigation Finance has a clear resolution and ending. Cases eventually reach a resolution that typically comes down to a clear win or loss. Litigation funding is generally considered a risky venture—especially if the funding is for a single case or class action. Investing in a litigation portfolio may mitigate this risk, but also limits potential rewards. Funders, by law and ethical standards, do not have a say in decision making in the cases they fund. That means a client may decide to accept a lowball settlement, leaving funders eligible to receive less than they put in. A trend toward funding for smaller and mid-size cases can also lead to less risk for investors. If this continues, investors may find opportunities to make less risky lit fin investments that still increase access to justice for those who need it most.
Litigation Finance News
Commercial

Litigation Finance Journal’s Quarterly Industry Roundup

It’s clear by now that 2020 has been a year like no other. Industry growth and the impact of COVID make this an ideal time to catch up on all of the relevant issues impacting the commercial Litigation Finance industry. With that in mind, LFJ is hosting a panel discussion that will cover a wide range of topics, including the Burford/Muddy Waters saga, the IMF/Omni merger, the rise in IP litigation, hedge fund interest in the funding sector, and much more.  The panel will be moderated by Slingshot Capital founder Ed Truant. Truant is an investor with a unique perspective on commercial litigation finance, backed up by years of experience in the field. The panel will feature a collection of industry experts:  Molly Pease is the managing director of Curiam Capital, and a former litigator whose expertise includes insurance, antitrust, and securities. She has also been an Executive Director and has worked as General Counsel—providing her a varied and nuanced perspective on a vast array of legal subjects. Mick Smith is the founder of Almatura, and co-founded Calunius Capital in 2006. He has studied Mathematics and Law at Cambridge, and is pursuing a Masters in Data Science. Robert Hannah, co-founder of Augusta Ventures, spent 20 years managing hedge funds before becoming acting Chief Investment Officer for Mako Investment Managers—an organization he co-founded. Hannah has an LLB and an MBA from Cranfield School of Management. He is currently the Managing Director of the London office. William Farrell Jr. is the managing director and co-founder of private investment company Longford Capital. His current duties include underwriting, sourcing, and monitoring investments. He has decades of litigation experience and as a government prosecutor. Farrell has also served as a partner in the commercial litigation departments of two different firms. The panel is audio-only and will be held Thursday, July 30th at 1 pm EST. It will feature a 45-minute panel discussion that will be followed by a question and answer period with attendees.  For more information and to purchase tickets, please visit this link.
Commercial

Closing the Gender Gap in Law

Burford Capital recently joined forces with InterLaw Diversity Forum for a study on ways to improve diversity in large firms. To that end, a panel of experts gathered to discuss the issue. Included were: Burford’s Elizabeth Fisher, Rothschild’s Sarah Blomfield, Patti Kachidza at M&G Prudential, and David Jackson from Barclays. Burford Capital reports that the major focal points should include corporate culture within firms, recognizing family responsibilities that impact women more than men, work-life balance, origination credits, implicit and unconscious biases, and factoring in why women are less likely to self-promote in the workplace. Because most large law firms are run by men, the tendency is to train, develop, and promote men to the partnership track. The intricacies of billing and compensation for lawyers means it’s more difficult to discern whether all staffers are being treated equitably. More transparency would lead to more fairness—if only because others would be watching. Gender biases can punish women with the same qualities that are praised in men. Ambitious women are called “pushy,” a woman expressing dissatisfaction may be called “overly emotional” or “moody.” Accepting this as a factor is one thing—finding strategies to combat it may be far more difficult and complicated. Origination credit is at once a solid marker for success at a firm, and also a foundation for a long-lasting equity gap in compensation. Surely those doing the actual work for a client are more deserving of compensation than those who aren’t. It was suggested by several experts that clients could have an impact on this, simply by asking the firm about origination credit. It’s disappointing to realize that 80% of those surveyed state that their firms have no official policies in place to improve diversity. Diversity isn’t just about numbers—it’s about having a team that can better represent clients both demographically, and in terms of bringing a varied skill set to the table.
Announcements Commercial

Litigation funder Validity Finance secures $100M in new capital, adds first time corp. counsel from Fried Frank

NEW YORK (July 28, 2020) – Looking to meet growing demand among businesses and law firms to finance commercial disputes, litigation funder Validity Finance has raised $100 million in additional capital. The firm also announced the arrival of experienced transactional attorney Jason Listhaus to fill the new role of in-house corporate counsel as its portfolio continues to grow. Validity’s additional capital comes from a mix of institutional and private investors, including the firm’s founding private equity sponsor TowerBrook Capital Partners.  Validity CEO Ralph Sutton commented: “We’ve seen a pronounced increase in demand this year fueled, in part, by the pandemic. Businesses and law firms are experiencing unprecedented cost constraints and welcome our backing to pursue or monetize claims. Our latest capital raise will help us continue to meet our clients’ needs for funding their most important litigation matters in the current challenging economic environment.” Since launch, Validity has committed more than $125 million in dozens of deals across a range of litigation and arbitration matters and jurisdictions. Mr. Sutton noted that large law firms have increasingly been drawn to third-party funding during the slowdown, as brand-name practices with large litigation platforms see the value in having individual clients receive funding and also of having the direct backing for a basket of cases while they stabilize finances and preserve cash. “Funding had already become mainstream in the last several years but the pandemic has hyper-charged the acceptance and use of contingent, non-recourse funding by major law firms and well-capitalized clients,” he said. Validity has funded a broad spectrum of litigations and arbitrations: including breach of contract, patent infringement, breach of fiduciary duty, theft of trade secrets, domestic and international arbitration, judgment/asset enforcements, insurance coverage cases and others. A growing allocation is going towards portfolios of cases handled by law firms. Validity also announced that experienced finance and transactional attorney Jason Listhaus has joined as its first corporate counsel. The New York-based Mr. Listhaus will help manage deal-side aspects of Validity’s investments, including helping structure and negotiate funding arrangements. He joins the firm’s bench of former trial lawyers who work on underwriting, risk and case review. His arrival helps the firm transition from using outside counsel to handle its expanding book of transactions. “Jason is a great addition as we grow our capital base and pace of investments, not only in the U.S. but internationally,” said Validity’s Chief Risk Officer Dave Kerstein, noting the firm recently launched an Israeli office in Tel Aviv. “As our first in-house corporate counsel, Jason will help streamline the investment process and also lower transaction costs. As a corporate lawyer with a background in Big Law, he has a strong grasp of deal advisory details and investment strategy.” Mr. Listhaus was previously a member of the Corporate department at Fried, Frank, Harris, Shriver & Jacobson, as well as an associate in the Financial Services group of Cadwalader, Wickersham & Taft. He earned his joint J.D./M.B.A degree from New York University in 2013. Mr. Listhaus earned his B.A. degree in Economics, magna cum laude and Phi Beta Kappa, from NYU in 2009. Validity Finance has been steadily expanding in 2020. In June, Validity opened its first international office in Israel, the company’s fourth, alongside its U.S. offices in New York, Chicago, and Houston. The Israel office is headed by international-disputes lawyer Eli Schulman in Tel Aviv. Earlier this year, in March, attorney Joshua Libling joined Validity as a portfolio counsel in New York. 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.
Announcements Commercial

Omni Bridgeway resolves to fund claims on behalf of Wirecard AG shareholders against Ernst & Young GmbH

LONDON, 28 July 2020: Omni Bridgeway Limited announces that it has resolved to fund proposed litigation to be brought by shareholders of Wirecard AG against its auditor, Ernst & Young GmbH. Such litigation will be brought in Germany by leading international law firm Quinn Emanuel Urquhart & Sullivan LLP. BACKGROUND German company Wirecard AG was compelled to initiate insolvency proceedings in Germany on 25 June 2020. The catalyst for this inevitability was that its auditor, Ernst & Young GmbH, informed Wirecard AG on 18 June 2020 that no sufficient audit evidence could be obtained in relation to cash balances in trust accounts that were to be consolidated in the consolidated financial statements in the amount of EUR 1.9bn. A matter of days afterwards, Wirecard AG was then forced to acknowledge that the EUR 1.9bn in cash included in those financial statements probably never existed in the first place. The consequence of the recent actions of Wirecard AG is that the share price of Wirecard AG has dropped by over 95%. In these circumstances, shareholders have rightly turned their attentions to the auditor who has been in post since 2008. All of the audits of Wirecard AG have been unqualified. This is despite the fact that, over the last years, Wirecard AG has been the subject of intense scrutiny by shareholders, short sellers, journalists and regulators. Wirecard AG has also been the subject of two key external reviews – one by Rajah & Tann, a respected Singapore law firm, and the other by KPMG. PROVIDING AN OPPORTUNITY FOR WIRECARD AG SHAREHOLDERS Jeremy Marshall, Senior Investment Manager of Omni Bridgeway, said “Shareholders have understandably relied increasingly heavily on the audited financials of Wirecard. The nature of the Wirecard insolvency is such that it was inevitable that serious claims would be levelled against the auditor, and it is only right that we provide shareholders with the opportunity for redress, particularly where their prospects of a modest recovery against Wirecard itself are so limited.” WHAT AFFECTED SHAREHOLDERS CAN DO Shareholders who purchased shares in Wirecard AG since 1 April 2012 are encouraged to contact:
ABOUT OMNI BRIDGEWAY
Omni Bridgeway is the global leader in dispute resolution finance, with expertise in civil and common law legal and recovery systems, and operations spanning Asia, Australia, Canada, Europe, the Middle East, the UK and the US. Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery. Since 1986, it has established a proud record of funding disputes and enforcement proceedings around the world. Omni Bridgeway is listed on the Australian Securities Exchange (ASX:OBL) and includes the leading dispute funders formerly known as IMF Bentham Limited, Bentham IMF and ROLAND ProzessFinanz. It also includes a joint venture with IFC (part of the World Bank Group). Visit omnibridgeway.com to learn more.
ABOUT QUINN EMANUEL URQUHART & SULLIVAN LLP
Quinn Emanuel is the largest law firm in the world dedicated solely to the resolution of business disputes. Quinn have 800+ attorneys working in 23 offices in ten countries around the world, including 4 offices in Germany. Quinn Emanuel sees litigation as an independent practice that calls for a high degree of specialization. As an integral part of the firm’s international network of offices, Quinn Emanuel’s German legal team is dedicated to providing the highest standards of service, professional excellence, industry knowledge and experience that firm clients expect. Quinn Emanuel has taken a leading role in some of the largest security cases that are currently pending before the German courts, including the representation of the largest group of investors (by damages) participating in model case proceedings against Volkswagen AG in the Higher District Court of Brunswick centering on the so-called “Dieselgate” scandal. Quinn also represented a group of Tier-1 bondholders in litigation against Hamburg Commercial Bank.
Announcements Commercial

Delta Capital Partners Management Welcomes a New Board of Advisors

CHICAGO, Illinois, July 27, 2020 -- Delta Capital Partners Management LLC, a global private equity firm specializing in litigation and legal finance, has announced its new Board of Advisors.

Delta has developed an outstanding Board of Advisors that consists of eight members who are experts in government relations and geopolitical affairs, public relations and marketing, investigations and intelligence gathering, and capital markets. The members include:

  • Ian Casewell – London Office Managing Partner of the Mintz Group, a top-tier business intelligence and investigation firm, and a former Europol intelligence analyst;
  • Nitin Chadda – Co-Founder and Managing Partner of WestExec Advisors, former Senior Advisor to the U.S. Secretary of Defense, and former Director at the White House National Security Council;
  • David Hellier – Partner and Chair of the Capital Markets Group at Bertram Capital, member of the Board of Directors of the Association for Corporate Growth, and former CEO of a highly technology company and one of the fastest growing Internet companies;
  • Brian Maddox – Senior Managing Director at FTI Strategic Communications with over 30 years of experience in public relations and marketing;
  • Bill Moran – Retired Four-Star Admiral who served as the Vice Chief of Operations and Chief of Personnel for the United States Navy;
  • Ileana Ros-Lehtinen – former Chairperson of the U.S. House Foreign Affairs Committee, and member of United States Congress for nearly 30 years;
  • Dennis Ross – former special assistant to the United States President and former Director at the White House National Security Counsel; and
  • Geoffrey Verhoff – Senior Advisor at Akin Gump, and former Vice Chairman of the Republican National Committee’s Finance Committee.

Christopher DeLise, Delta's Founder, CEO and CO-CIO, stated, “We are honored to have such accomplished and highly respected professionals on Delta’s Board of Advisors. Their backgrounds, innumerable achievements within their respective fields, and vast and deep experiences will help Delta execute various strategic objectives and further enhance and distinguish Delta’s strong position within the litigation finance industry. These eight outstanding individuals join Delta’s team as the firm continues its U.S. and global expansion to meet the evolving needs of end-users.” 

About Delta

Delta Capital Partners Management LLC is a US-based, global private equity firm specializing in litigation and legal finance, judgment and award enforcement, and asset recovery. Delta creates bespoke financing solutions for professional service firms, businesses, governments, financial institutions, investment firms, and individual claimants.