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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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Latam Advisors Director says Argentina’s President Should Negotiate a Deal for $16B YPF Judgement

By Harry Moran |

One of last year’s biggest stories of the legal funding world was the $16 billion judgement in the Argentina YPF case, standing out as a significant win for litigation funder Burford Capital. However, the pressing question since this judgement has been how Argentina’s government would deal with this mammoth sum, especially since Burford Capital has continued to demonstrate its commitment to judgement enforcement and foreign asset recovery.

An article in the Buenos Aires Times, which analyses the current state of Argentinian President Javier Milei’s government, offers a small but interesting insight into the direction that Argentina’s leader could choose to take in regards to the $16 billion judgement in the YPF case. The article highlights recent comments from Sebastián Maril, director of Latam Advisors, who suggested that the Argentine government could attempt to negotiate a deal to end the dispute with Burford Capital over the $16 billion sum, with payments made over time in return for a lower total amount paid.

Maril argues that “Argentina should start viewing international legal proceedings as assets and not liabilities”, and that the government should seek to build relationships with these companies so that “beneficiaries of foreign judgments should understand that, by helping the Republic they’ll be helping themselves.” Maril places the YPF judgement in the context of a wider pattern of Argentina already having to pay out ‘US$16.35 billion in closed and settled legal judgements since 2000’, with an additional $10.245 billion in open judgements beyond the YPF settlement.

SdK Offers Litigation Finance to Enforce Claims for Additional Payment for Former Shareholders of STADA Arzneimittel AG

By Harry Moran |

Former shareholders of STADA Arzneimittel AG who tendered their Stada shares as part of the takeover offer by Nidda Healthcare Holding AG in August or September 2017 are entitled to an additional payment of €8.15 per share. This was decided by the Federal Court of Justice in May 2023. Since Nidda Healthcare Holding AG refuses to make a voluntary additional payment to all former STADA shareholders, SdK Schutzgemeinschaft der Kapitalanleger e.V. is offering litigation financing for a legal claim without any cost risk to the affected former STADA shareholders.

On July 19, 2017, Nidda Healthcare Holding AG, a joint venture of the international financial investors Bain Capital and Cinven Partners, submitted a voluntary public takeover offer to the shareholders of STADA Arzneimittel AG to acquire their shares at a price of € 66.25 per share. Within the acceptance period (until the end of August 16, 2017), the bidder’s offer was accepted by 63.76 % of STADA shareholders and within a further acceptance period (until September 1, 2017) by a further 0.11 % of STADA shareholders. The bidder thus achieved a tender volume, including shares held by STADA, of approx. 63.87 % of STADA’s share capital and voting rights. 

On August 30, 2017, a shareholder holding 8,265,142 shares (13.26 % of the shares and voting rights) agreed to a domination and profit and loss transfer agreement between Nidda Healthcare and STADA if the amount of the compensation under the domination and profit and loss transfer agreement is at least EUR 74.40 per STADA share. Several former shareholders of STADA, who had accepted the lower takeover offer, filed a lawsuit against the bidder demanding the difference between the offer price and the compensation under the domination and profit and loss transfer agreement of EUR 74.40. 

In two identical judgments dated 23 May 2023 (case no. II ZR 219/21 and II ZR 220/21), the German Federal Court of Justice (BGH) ruled in favor of two plaintiffs pursuant to sections 31 (5) and (6) WpÜG, referring to the principles of the so-called Celesio case law. In principle, all former shareholders of Stada AG who had initially exchanged their regular shares for the securities tendered for sale with ISIN DE000A2GS5A4 or for securities subsequently tendered for sale with ISIN DE000A2GS5B2 and had subsequently tendered these in the takeover offer are entitled for the payment of the difference. 

Following a request of the Federal Financial Supervisory Authority („BaFin“), the Bidder published a corresponding notice in the Federal Gazette, but pointed out that, in its view, any payment claims by former shareholders could be based on the defense of the statute of limitations. In the opinion of the Bidder, the statute of limitations generally began at the latest at the end of 2017. However, this is incorrect. The claims of the former shareholders of STADA are not yet time-barred: This is because after the courts of the 1st and 2nd instance had still rejected the claim for subsequent payment, only the BGH confirmed this claim for additional payment. The claim for additional payment is therefore not yet time-barred.

The SdK is offering affected former STADA shareholders legal cost financing to enforce their claims for additional payment. The claims can thus be enforced without any cost risk. The SdK, as the financier of the legal costs, assumes all costs of the legal proceedings in return for a profit participation of 30% of the proceeds in the event of success. For more information please contact us at info@sdk.org.The SdK will be happy to answer any questions from its affected members by e-mail at info@sdk.org or by telephone on +49 89 / 2020846-0.

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Apple Asks Delaware Court to Force Omni Bridgeway to Answer Subpoena

By Harry Moran |

The fight over disclosure and transparency around third-party funding of patent infringement litigation continues to generate high-profile cases, as one of the world’s largest technology corporations is asking a court to force a litigation funder to respond to its subpoena.

Reporting by Bloomberg Law provides an overview of a recent filing from Apple Inc., which sees the technology giant file a motion to compel compliance with a subpoena for Omni Bridgeway. Apple is asking the US District Court for the District of Delaware to force the litigation funder to answer a December 2023 subpoena, seeking information about Omni Bridgeway’s involvement in a California patent infringement suit. The original patent lawsuit was brought by MPH Technologies Oy in 2018, claiming that Apple had infringed on its patents with Apple’s iMessage and FaceTime products.

The filing of the motion to compel compliance has come after Apple says that several discussions have taken place between lawyers for the company and Omni Bridgeway, but none of these conversations have resulted in the litigation funder being willing to disclose the requested information. In a declaration in support of the motion, Hannah Cannom, an attorney at Walker Stevens Cannom who represents Apple in the patent infringement case, confirmed that the funder “has not produced any responsive documents to the Amended Subpoena nor offered any witness for a deposition.”

A letter from Omni Bridgeway, that was included as an exhibit for another declaration by one of Apple’s lawyers, shows that the funder objected to the subpoena and asserted 20 separate objections to the request. In the summary of its objections, Omni Bridgeway’s counsel stated that “the subpoena does not coherently state what information it seeks; why the information sought by the subpoena is discoverable in the underlying litigation; and why information requested by the subpoena cannot be obtained directly from a party to the underlying action.”

Neither representatives from Apple nor Omni did not respond to Bloomberg Law’s requests for comment.