The Coronavirus is having an impact on lawyers around the world. Right now, employers need advice on the best ways to react to employees who have contracted the virus, or those desperately trying to avoid it. From remote assignments to office closures, lawyers are needed to help companies navigate the uncharted waters of a modern pandemic.
Legal minds Paul Haskel and Jim Walker have kept a close eye on how litigation funding is impacting legal ethics. Like many lawyers and judges, they have grave concerns and feel that some tweaks in the Code of Ethics should be considered. But how to get everyone on the same page about what needs to change?
While not legally binding, the recent NYC Bar Association opinion on litigation funding is a powerful statement on the ethics of funding and what regulations are needed. In response to this, a 25-person working group on litigation funding was assembled.
As litigation funding increases in popularity, funders find that they can take their pick of lawyers and cases to back. While on the other hand, securing the funding needed to successfully litigate a case can be a challenge. Aside from the usual considerations—potential recovery amount and time, overall merits of the case, etc.—funders look closely at the lawyer(s) involved.
A UK case involving the post office, buggy accounting software, and widespread accusations of theft was big news across the pond. After numerous sub-postmasters were accused of theft, many endured firing, public shaming, loss of property, and even jail time. The real culprit was bad accounting software made by a company called Horizon. Now, the plaintiffs are alleging that the bulk of their payout will go to the firm that financed the legal case—and not to the people who were actually hurt.
International Women’s Day has come and gone. But the issues women face in the workplace—and in law firms in particular—are still present. With that in mind, Buford Capital has set aside a roughly $50 million funding pool to help balance the gender gap in litigation funding.
In 2018, the NYC Bar surprised a lot of folks by issuing a formal opinion declaring litigation funding in conflict with the Bar’s rules on fee-sharing with non-lawyers, as outlined in Rule 5.4 of the professional conduct code. The reaction within the funding community was swift, however no formal response has been delivered… until now.
No one will ever accuse Aussie law firm Maurice Blackburn of not being proactive. The class action king (Maurice has filed the most in Australia) is pursuing a class action claim against banking giant NAB, and plans to use a contingency-fee model. There’s just one wrinkle here: contingency-fee arrangements aren’t legal in Australia. The state of Victoria is mulling legislation that would legalize such arrangements, but hasn’t passed the final bill yet.
“Lawyer-Directed” litigation finance, whereby a funder forms a partnership with contingency counsel, provides an opportunity to work around some of the issues that exist in client-directed funding – most notably issues that arise when creditors or lienholders are awaiting recoupment from the client, pending successful litigation. Many funders are averse to partnering with a client that is encumbered by senior lienholders, hence many such claims go unfunded, despite the merits of the underlying case. Lawyer-directed funding provides an attractive solution.
New Zealand has been far slower to adopt litigation funding than neighboring Australia, where the practice originated. However, the funding market is surging in kiwi-land, thanks in part to local funder LPF Group, which has bankrolled some sizable claims.
Last week, Utah became the latest state to introduce a litigation funding bill, as state senator James A. Dunnigan filed House Bill 312, which would force litigation funders to register with the Department of Commerce, and also aims to regulate how they operate. Many lawmakers are blaming litigation funding for the rising cost of insurance, which is an argument that is being made by Big Insurance and the Chamber of Commerce against the industry.
Deputy Associate Attorney General Stephen Cox of the Justice Department gave a speech on Monday to False Claims Act (FCA) attorneys, and Cox expressed concern that DOJ doesn’t know the extent to which FCA attorneys are using litigation funding. Cox mentioned that Justice is considering mandating disclosure of litigation funding agreements for FCA whistleblowers.
Consumer Legal Funding has been a hot-button issue in Missouri for some time. There has been some concern from industry participants that Missouri may go the way of West Virginia and effectively ban the industry, but it is doubtful the legislature will take up the issue of capping rates on funding transactions in the next legislative session.
In List Interactive, Ltd. v. Knights of Columbus, Judge R. Brooke Jackson denied a motion to restrict public access to litigation funding agreements, finding that the content of the agreements are in the public interest. Judge Jackson confirmed that dollar amounts and specific terms may constitute trade secrets, but ruled that restricting access to the entire agreement is ‘grossly overbroad.’
According to the Amendments to the Code of Civil Procedure, 1908, (Order XXV Rule 3), litigation funding in India is permissible, in that non-lawyers are not restricted from accepting remuneration upon a completed claim. With recent litigation funding partnerships in the engineering and construction sectors, it seems litigation funding in India is poised for growth.
Among the chief concerns over the rise of litigation funding are the potential growth of frivolous lawsuits, and funder control over case decisions. While those worries haven’t exactly panned out as many industry skeptics had imagined, they remain nagging concerns as the funding industry continues to expand with new entrants and capital sources. One unifying solution to both of these ethical problems is to mandate that lawyers who partner with litigation funders operate on success-based fee arrangements.
Jonathan Mitchell of Mitchell Law PLLC has filed 21 class actions against public sector unions over the past two years. According to a recent court filing in which Mitchell disclosed the source of his funding, Chicago-based Juris Capital has been financing his class action claims.
With over 600 class actions filed in Australia since the regime was first allowed 27 years ago, litigation funders are finding the class action sector to be a wellspring of potential investment. Yet the rise and subsequent fall of common fund orders underscores the backlash that is growing against the sector.
In a bid to reduce the number of class actions in Australia, the Aussie Supreme Court has struck down common fund orders, which allow courts to order that all members of a class pay a portion of their settlement or payout to the litigation funder, regardless of whether they signed an agreement with that funder. The ruling changes the game for class action funding in Australia.
Arowana, the New Zealand company that established Intueri Education Group in 2010, took it public in 2014, then liquidated it in 2017, is facing a potential class action lawsuit by Adina Thorn Lawyers and funded by LPF Group. However Arowana has clearly stated that the company is confident any class action against it stands no chance of success.
Litigation funders have long been vying to get a piece of Obamacare insurance claims, which allege the federal government failed to make good on a host of payments to health insurers. Now that the Supreme Court has decided to hear several of those claims, funders have begun reaching out to insurers with more attractive terms and pricing.
Litigation funder LPF Group is funding a shareholder class action against the now-defunct insurance company CBL Corp., as well as its former directors. LPF has complained to ASIC, an Australian regulator, about rival funder IMF Bentham’s proposed action, which may end up targeting only CBL and not the former directors.
Burford Capital’s Equity Project turned one year old last month. The initiative – launched by senior managing director Aviva Will – is aimed at incentivizing female lawyers to take greater risks. The mechanism for accomplishing this is a $50MM fund that can only be used for claims where a female attorney is first-chair, plaintiffs’ lead counsel or on a plaintiffs’ steering committee, or if the claimant is represented by a female-owned law firm.
National Australia Bank (NAB) is facing a myriad of regulatory actions and lawsuits which is leaving company executives in a lurch. After voluntarily self-reporting potential compliance issues to regulators, the bank announced to shareholders in its annual report that it is facing mounting legal and financial pressure in the wake of revelations from the Hayne Royal Commission.
