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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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Case Developments Commercial

Parabellum Capital Funding ‘Daniel’s Law’ Cases in New Jersey

By Harry Moran |

Whilst there is constant debate and discussion over the level of transparency and disclosure that should be required for the involvement of litigation funders in cases, the state of New Jersey is demonstrating how these rules work in practice after a plaintiff disclosed that it anticipated using litigation funds in an ongoing series of lawsuits.

Reporting by Reuters highlights a recent court filing in the United States District Court for the District of New Jersey, where the plaintiff, Atlas Data Privacy Corporation, informed the court that it would soon be using funding provided by Parabellum Capital. The litigation funding was secured by Atlas Data Privacy to support over 140 lawsuits that it has been assigned and brought against businesses who have allegedly breached New Jersey’s Daniel’s Law, which allows public officials to protect against the release of their personal information to the public.

In its filing to the court, Atlas Data Privacy said that as New Jersey’s rules on funding disclosure “requires that a statement be filed promptly following the use of third-party litigation funds”, and because the firm “anticipates utilizing such funds shortly”, it was filing the letter to comply with Local Civil Rule 7.1.1. The two-page letter does not provide many details of Atlas’ funding arrangement with Parabellum Capital but confirmed that it was “non-recourse financing provided to Atlas, collateralized by litigation proceeds”. Unsurprisingly, the letter also confirmed that “the funder’s approval is not necessary for any litigation or settlement decisions in these actions.” 

Reuters’ article also includes comments from spokespersons for both Atlas and Parabellum, with the funder’s spokesperson saying that it was acting as “a passive financial partner of Atlas, which is playing an important role in enforcing compliance with one of the most meaningful privacy laws on record.”Atlas’ letter of disclosure to the court can be read in full here.

Case Developments Commercial

GreenX Metals Awarded £252M in Compensation in Arbitration Claims Funded by LCM

By Harry Moran |

Disputes between companies involved in mining operations continue to represent valuable opportunities for litigation funders, with bilateral investment treaties offering avenues for these corporations to seek compensation from nation states.

An announcement from GreenX Metals Limited revealed that the company has reached a successful outcome in its arbitration claims against the Republic of Poland, and has been awarded two substantial sums of compensation by the tribunal. The claims were brought against Poland under the Australia-Poland Bilateral Investment Treaty (BIT) and the Energy Charter Treaty (ECT), with GreenX arguing that the Polish government had breached its obligations under the treaties in relation to the Jan Karski mining project. 

The tribunal awarded GreenX £252 million under the BIT and a further £183 million in compensation under the ECT. However, GreenX also revealed that the tribunal did not uphold the company’s claim in relation to the Dębieńsko project. The tribunal’s ruling on these claims are also final and binding, with no provision for an appeal procedure, in accordance with the United Nations Commission on International Trade Law Rules (UNCITRAL).

As part of the announcement, GreenX highlighted that the claims had been financially supported by Litigation Capital Management (LCM), referring to the company’s July 2020 announcement that it had secured an A$18 million funding facility to pursue the arbitration. GreenX noted that whilst the tribunal has ordered each party to cover their own legal costs, all of GreenX’s costs have already been covered by the funding from LCM.

Case Developments Commercial

Delaware Court Denies Target’s Discovery Request for Funding Documents in Copyright Infringement Case

By Harry Moran |

A recent court opinion in a copyright infringement cases has once again demonstrated that judges are hesitant to force plaintiffs and their funders to hand over information that is not relevant to the claim at hand, as the judge denied the defendant’s discovery request for documents sent by the plaintiff to its litigation funder.

In an article on E-Discovery LLC, Michael Berman analyses a ruling handed down by Judge Stephanos Bibas in the United States District Court for the District of Delaware, in the case of Design With Friends, Inc. v. Target Corporation. Design has brought a claim of copyright infringement and breach of contract, and received funding to pursue the case from Validity Finance. As part of its defense, Target had sought documents from the funder relating to its involvement in the case, but Judge Bibas ruled that Target’s request was both “too burdensome to disclose” and was seeking “information that is attorney work product”.

Target’s broad subpoena contained five requests for information including Validity’s valuations of the lawsuit, communications between the funder and plaintiff prior to the funding agreement being signed, and information about the relationship between the two parties.

With regards to the valuations, Judge Bibas wrote that “while those documents informed an investment decision, they did so by evaluating whether a lawsuit had merit and what damages it might recover,” which in the court’s opinion constitutes “legal analysis done for a legal purpose”. He went on to say that “if the work-product doctrine did not protect these records,” then the forced disclosure of these documents “would chill lawyers from discussing a pending case frankly.”

Regarding the requests for information about the relationship between Design and Validity, Judge Bibas was clear in his opinion that these requests were disproportionately burdensome. The opinion lays out clear the clear reasoning that “Target already knows that Validity is funding the suit and that it does not need to approve a settlement”, and with this information already available “Further minutiae about Validity are hardly relevant to whether Target infringed a copyright or breached a contract years before Validity entered the picture.”The full opinion from Judge Bibas can be read here.