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Burford German Funding Sued Over Hausfeld Ownership Stake

By Harry Moran |

The ownership or funding of law firms by litigation funders continues to be a hot topic in the world of legal funding, with models such as alternative business structures (ABS) gaining momentum in places like Arizona. However, a complaint filed by a client in Delaware reveals a falling out due to the reverse funding model, where a law firm maintained an ownership stake in the funder.

Reporting by Bloomberg Law covers a new lawsuit brought against Burford German Funding (BGF), an affiliate of Burford Capital, by a client who claims that the funder failed to disclose the fact that BGF was partly owned by the same law firm it nominated to lead the client’s antitrust cases. Financialright Claims GMBH (FRC) alleges that when it negotiated the funding agreement with BGF for its antitrust litigation against the trucks cartel, it had no knowledge “that Hausfeld  was  also  a  part  owner  of  BGF  through  an  entity  called German Litigation Solutions LLC (“GLS”) or that one of the lead German partners at Hausfeld responsible for the firm’s representation of FRC had a personal stake.”

The complaint, filed by FRC in the Delaware Superior Court, explains that as Hausfeld is part-owner of BGF, and the funding agreement “provides for a share of FRC’s recoveries in the Trucks Litigations to flow to FRC’s lawyers”, this constitutes a contingency fee arrangement which are illegal under German law.  FRC had filed a lawsuit against Hausfeld in a German court and then applied for discovery from BGF, Burford and GLS in the Delaware District Court, which was followed by an assertion by these parties that the application for discovery “is subject to mandatory arbitration” under the terms of the funding agreement.

FRC argues that “as  a  direct  result  of  BGF’s  fraud  on  FRC,  FRC  did  agree  to  the Arbitration Agreement that—according to BGF—subsumes disputes between FRC and GLS.” However, FRC claims that it “would  never  have  agreed  to  an  arbitration  clause  requiring  it  to arbitrate claims against Hausfeld”, were it not for the concealment of Hausfeld’s ownership stake in BGF. FRC is therefore asking the Superior Court to declare that “BGF fraudulently induced  FRC  into  agreeing  to  the  Arbitration  Agreement”, and that the agreement should be declared both invalid and unenforceable.

Lisa Sharrow, spokesperson at Hausfeld LLP, provided the following statement:  “The US-based Hausfeld LLP and the UK-based Hausfeld & Co LLP hold indirect economic minority interests in Burford German Funding. These are separate legal entities from Hausfeld Rechtsanwälte LLP that do not practice law in Germany. Burford German Funding was of course developed and set up in a way that was fully compliant with all relevant regulations.”

David Helfenbein, spokesperson at Burford, also provided a response to Bloomberg via email: “There is a dispute in Germany between a client Burford has funded and its lawyers. Burford is not a party to that dispute and its outcome has no impact on us. This Delaware proceeding is a third-party discovery request to Burford for material for the German litigation, which Burford believes should be adjudicated in arbitration and not in the Delaware courts.”

The full complaint filed by FRC can be read here.

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Harry Moran

Harry Moran

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Case Developments Commercial

Claim Issued in Multi-Billion Pound UK Class Action Against Microsoft

By Harry Moran |

Alexander Wolfson, a highly experienced barrister of more than 25 years standing, has issued an opt-out class action claim against software giant Microsoft. He is issuing the claim on behalf of all UK-domiciled natural and legal persons (including public bodies) that purchased licences for certain specified Microsoft software products (including Microsoft Office and Windows). 

The claims allege that the software giant abused its market dominance and engaged in conduct that restricted competition to its new licences from pre-owned licences for Microsoft products. That conduct affected and inflated the prices of both new licences and pre-owned licences. 

The claim is one of the most significant class action cases currently underway in the UK, with a potential value reaching into the billions. 

Wolfson has retained the services of the Head of Competition at Stewarts, Kate Pollock, alongside partners Stuart Carson and Marc Jones (and others), and is instructing Counsel teams at both Monckton and Matrix Chambers, together with a team of experts to provide testimony on the economics of the case. The claim is funded by Harbour. 

Alex Wolfson, Proposed Class Representative, said: “Microsoft’s actions have had a significant and far-reaching impact on UK consumers, businesses and public bodies. This claim seeks to hold Microsoft to account and to secure compensation for the many affected members of the class. With billions of pounds potentially at stake, this case is about ensuring fairness in the digital marketplace and ensuring even the largest tech companies play by the rules.”

Kate Pollock, Head of Competition Litigation at Stewarts, said: “Microsoft’s conduct has had a profound and costly impact on millions of individuals and private and public sector organisations that rely on its software for daily business operations. We believe that Microsoft abused its market dominance by imposing restrictive licensing practices that effectively shut down competition and inflated prices. We’re proud to be supporting Alexander Wolfson in bringing this claim. With our specialist experience in complex competition litigation, we are well placed to help secure justice for the millions affected. This case has the potential to restore greater fairness and accountability to the UK’s increasingly digital economy.” 

Ellora MacPherson, Managing Director and Chief Investment Officer at Harbour, which is funding the case, said: “We are delighted to be able to support Alex Wolfson, Kate Pollock and the rest of the Stewarts team by funding this important case which will give access to justice to tens of thousands of individuals and public and private organisations in the UK. This action is likely to be one of the largest the UK has seen and is an example of how big corporate entities can be held to account.” 

For more information about the case, visit MicrosoftClaim.com

Case Developments Commercial

Federal Judge Threatens Sanctions for Attorney Who Shared Netflix’s Source Code with Litigation Funder

By Harry Moran |

A patent infringement case being brought against one of the world’s largest streaming companies would on its face be considered a significant matter. However, this case may have added implications for the world of litigation funding, as a judge has indicated that sanctions may be imposed on an attorney who shared sensitive information with the case’s funder.  

Reporting by Bloomberg Law offers new insights into an ongoing patent lawsuit being brought against Netflix, as a federal judge looks set to impose sanctions on the plaintiff’s attorney for sharing the streaming service’s source code and company financial information with a litigation funder. The development came during a hearing in the US District Court for the Northern District of California, following Netflix’s complaint that attorney Bill Ramey shared information disclosure during discovery with AiPi LLC.

AiPi is the party that has funded the patent infringement case brought by Lauri Valjakka, a Finnish inventor who sued Netflix in 2022. AiPI Solutions’ website lists ‘IP Litigation Finance’ as one of the core services it offers to clients, which include corporate patent holders, law firms seeking alternative financing arrangements, and investors looking to invest in lawsuits.

Netflix’s complaint stems from allegations that Ramey shared information that was designated “attorneys eyes only” with AiPi, and that this information had been shared before Netflix had been informed of the funder’s involvement in the lawsuit. Sarah Piepmeier, an attorney at Perkins Coie representing Netflix, argued that having access to this sensitive company data “could influence their decisions to underwrite new cases or that could inspire them to bring new cases.”

Whilst Ramey tried to argue that the case’s protective order allowed for information to be shared with affiliates, and that the four lawyers at AiPi he had shared the information with fell under this designation, Judge Jon S. Tigar strongly disagreed with Ramey’s suggestion that this “is a situation of no harm”. Judge Tigar not only suggested that substantial “attorneys’ fees as a sanction are going to be appropriate”, he also said he was considering ordering Ramey to hand over any communications with the four individuals at AiPi. Furthermore, the judge indicated that he would be considering referring Ramey to a disciplinary body such as the California State Bar.

Case Developments Commercial

Emmerson Submits Request for Arbitration in Dispute with Morocco

By Harry Moran |

As LFJ reported in March, an investor-state dispute over the Khemisset Potash Project in Morocco had continued to progress as the mining company bringing the claim began to draw down the first tranche of its litigation funding.

An announcement released by Emmerson Plc revealed that the company has now officially submitted its Request for Arbitration (RFA) to the International Centre for Settlement of Investment Disputes (ICSID). Emmerson’s claim for compensation against the Government of the Kingdom of Morroco centre on the government’s alleged breaches of a bilateral investment treaty between the United Kingdom and Morrocco.

As previously covered by LFJ’s reporting, Emmerson’s claim is being supported by an unnamed litigation funder who are providing up to $11.2 million under a capital provision agreement. In this latest announcement, Emmerson once again emphasised that the funding agreement will cover all of the legal costs for the arbitration, as well as covering ‘a significant portion of G&A costs’. 

Following the submission of the RFA, Emmerson said that it is working with its legal team at Boies Schiller Flexner on the formation of the arbitration tribunal and preparing its formal Memorial submission. The company explained that the next phase of the arbitration process is expected to take around two years, which will include the constitution of the tribunal, the filing of written submissions and the evidentiary hearing.

Graham Clarke, Managing Director of Emmerson PLC offered the following comment on the submission: "The completion and lodgement of the RFA with ICSID is a significant step and marks the formal commencement of the litigation process. The Company is working closely with our lawyers at BSF and as a group we remain confident in the merits of this case. We look forward to providing further updates in due course".