More than ¾ of firm lawyers surveyed expressed concern about 4th quarter collections. More than half of firms have also stated a willingness to provide discounts in order to receive payments faster or to gain new clients. Meanwhile, realization rates are falling.
Treasurer Josh Frydenberg is known for his zeal in regulating the litigation funding industry in Australia. He was instrumental in instituting new restrictions and mandates for those who engage in the practice, and for funders themselves—including a requirement that funders register as Managed Investment Schemes while holding AFSL’s.
Complaining that she has only received $7 million and an ill-kept helicopter, divorcee Tatiana Akhmedova was due to face her son Temur in court in an effort to gain the rest of her $600 million divorce settlement. This time, the asset in question is a $40 million London apartment.
Shareholders of Vocation Limited, a now-defunct training company, have settled a class action for a reported $50 million. Vocation had been listed on the ASX as of November 2013, and enjoyed a reputation as Australia’s premier provider of education and vocational training services. Slater and Gordon facilitated the settlement, funded by Omni Bridgeway.
Mining company Rio Tinto finds itself under threat of legal action from a US hedge fund. Pentwater Capital Management is threatening an oppression order to gain an extension of debt in order to expand the Oyu Tolgoi mine project into the Gobi desert. The expansion is controversial, in that it requires the destruction of a sacred Aboriginal site.
When looking for help via legal finance, it makes sense to want the best deal possible. With that in mind, portfolio funding might be worth a look. Single-case funding represents the highest risk for funders—because the non-recourse nature of litigation funding means there’s no remuneration for funders unless the case is successful.
Litigation Capital Management, a prominent face in litigation funding, makes a profit on nearly 90% of the cases in which it invests. This gives the funder an IRR of 78%. LCM largely operates in the UK and Australia, funding cases in exchange for a share of awards. Over the last decade, LCM boasts an ROIC of 134%.
The phrase “new normal” can be unsettling, especially when it foretells an unwelcome change. Will rampant class actions lead to a glut of insolvency cases levied by shareholders? Some are predicting that as many as 50 new claims each year could be the new normal.
Security for costs is frequently asked for in international arbitration cases, but almost never granted. In fact, the common thinking is that security for costs should only be granted in certain rare and specific instances. Notably, one of the main things spurring requests for security for costs is litigation funding. Many defendants are more likely to ask for this when plaintiffs utilize third-party-funding.
Economic uncertainty is plaguing industries around the globe. Between the COVID pandemic, bizarre political circumstances, and ongoing international market turbulence—unpredictability is everywhere. Investors are seeking new investment types that are uncorrelated with the rest of the marketplace. For some, third-party legal funding meets all the requirements.
In its most recent general meeting, Bronwyn Brown’s chairman’s address laid out the most noteworthy actions and accomplishments of the year. The talk was attended by non-executive directors, the company secretary, several auditors, and of course, the Executive Chair.
A record-setting divorce settlement is still in contention as Google is ordered to turn over the emails of a private citizen. Temur Akhmedov, son of a late oligarch Farkhad Akhmedov, has been fighting the release of funds from his step-mother’s divorce settlement of about $600 million. Her case is being funded by Burford Capital.
Geraldine Clark, former president of the Law Society in Ireland, has a lot to say about navigating the professional ethics of litigation funding. Referring to the resurgence and growth of the practice as “the wild west,” Clark focuses on the obligations of those attorneys who would encourage or facilitate utilizing the practice.
The recent Bluberi decision regarding litigation funding arrangements is still making news. The decision, which approved the use of litigation finance in a Canadian insolvency case, was appealed after a reversal by the Quebec Court of Appeal. In May of this year, the reversal was rescinded and the lower court ruling was upheld.
Yieldstreet is touted as a Financial Tech company that leverages the power of the internet to make a unique contribution to investment. Its focus on alternative investments includes placements in Litigation Finance, marine vessel acquisition, deconstruction, and real estate, among others. The overall impression is that Yieldstreet can provide excellent returns with alternative investments, though their fees are higher than one might expect.
Ross Henderson, formerly at Goldman Sachs, has been accused of handing over confidential financial documents to Tatiana Akhmedova, the former wife of a Russian oligarch, and her litigation funders: Burford Capital. He is now facing a criminal investigation led by the Swiss police.
Conflicts of interest are a concern if law firms find themselves entwined with litigation funders, according to one former president of the Irish Law Society. The potential exists for lawyers to feel torn between third-party funders and the clients they are sworn to serve. This is especially true in the UK, where funders and lawyers become “close.”
What’s the key to success in a field beset by risk? According to Omni Bridgeway General Counsel Chris Young, it’s patience. He explains that litigation is highly speculative, and each case requires multiple layers of investigation and research. Omni Bridgeway is a firm that invests rather than lends funds to litigants—because they only see a payout when the funded case is successful.
As the coming tide of COVID-related class action suits looms, many countries are adapting and growing the legal processes by which these cases are governed. The US and Canada have seen filings for class actions skyrocket, with Australia, Germany, the UK and China all expected to follow suit. And where there are class actions, there are litigation funders.
Who do Canadians think is tops in their respective legal fields? The 2020 Canadian Readers’ Choice Awards answer that very question. The list of suppliers, vendors, and legal-adjacent businesses was voted on by nearly two-thousand readers who revealed their favorites in 38 separate categories.
Two former directors of a now-dissolved company lost an attempt at the dismissal of their case. The directors had sought for the cases against them to dismissed, on the grounds that a litigation funder should not benefit financially from the claim.
Opt-in or opt-out, that’s the issue at the center of an appeal in the case of Southern Response v. Ross. In New Zealand, where the case was heard, opt-in class actions are the norm. The case, supported by third-party legal funding, began with an allegation that Southern Response did not provide complete and accurate information about repairing earthquake damage to homes.
Trends in the legal or business world often begin as adaptations to some outside event or circumstance. The early stages of COVID brought about a trend of firms moving away from billable hours and toward contingency fees. Another growing trend is the use of Litigation Finance to manage balance sheets and continue to pursue viable litigation without tying up liquid assets. When law firms opt to ignore trends, they can miss out on advantageous developments.
It cannot be denied that insurance for directors and officers is skyrocketing, whether it’s for private or public companies or even non-profits. The market is expected to remain hardened, as pressure to raise rates grows exponentially. COVID and its impact are only adding to the problem. What can be done?
The Court of Appeals recently upheld last year’s Supreme Court ruling regarding a litigation funding agreement in a case against the Gladstone Ports Corporation. That case is being funded by Litigation Capital Management. The SCQ ruling rebuffed allegations that litigation funding agreements may be unenforceable due to champerty restrictions, or because such agreements are contrary to existing public policy. Yesterday’s appeals court ruling ensures that the judge’s order stands.
Even as the industry grows and adapts to changing times, some folks still question the staying power of Litigation Finance. It’s here to stay. Third-party legal finance is well-funded, having raised over a billion dollars in 2020. This may be because of its attractiveness to savvy investors seeking opportunities that are not correlated with the market at large.
Litigation Finance has exploded since the pandemic spurred massive shutdowns and kickstarted a flurry of litigation. The practice of third parties funding meritorious legal action in exchange for a share of the award is expected to become better understood and more utilized in 2021.
Investor interest is high and funders are raising massive capital even amid the global COVID crisis. That’s a great sign for an industry that barely existed 15 years ago. The pandemic has brought with it massive shutdowns, layoffs, court delays, and lockdowns all over the world. Yet, litigation funding continues to prove its worth.
