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High-Volume Claims Funding: Strategies for Efficiency and Risk Management

By Louisa Klouda |

The following is a contributed piece by Louisa Klouda, CEO at Fenchurch Legal.

Litigation funding is a well-established concept that provides essential financial support for legal claims. While financing for high-value lawsuits is commonplace, small-ticket funding, especially at high volumes, remains a niche area.

This article explores the challenges and opportunities of funding high volumes of small-ticket claims. It outlines the strategies employed by some small-ticket litigation funders to efficiently manage these claims while ensuring investor confidence.

The Challenge of High-Volume Claims

While a single small claim might seem manageable, the sheer volume of “no win, no fee” cases can overwhelm a law firm’s financial and operational resources. Each claim demands substantial time and effort for investigation, evidence gathering, and legal representation.

Without additional funding, managing multiple cases simultaneously becomes a significant financial burden. This can limit a firm’s ability to take on new clients or dedicate sufficient resources to each claim.

Litigation funding bridges this gap by providing the resources law firms need to handle a high volume of claims effectively. Securing funding to cover the costs of these claims allows law firms to build strong processes and procedures, ultimately benefiting from economies of scale.

Strategies for Success

Firms specialising in high-volume claim funding can achieve success through a combination of technology, experienced teams, and robust processes.

  • Technology: State-of-the-art software isn’t just an advantage – it’s an imperative. It can streamline every aspect of the operations, automating repetitive tasks and facilitating efficient case vetting through rigorous risk management, ensuring efficient and reliable funding solutions.
  • Experienced Team: A knowledgeable team plays a crucial role in assessing claims, managing risk, and ensuring compliance with regulations. A team must go beyond just general experience – they should possess deep market knowledge and a nuanced understanding of the specific claim types.
  • Robust Processes: Clearly defined processes for loan approval, monitoring, and repayments are essential for maintaining transparency and accountability.

The Importance of Software

Limitations of manual processes can hinder efficiency. Software solutions can streamline the loan process, enhance risk management, and provide robust audit trails. This software should:

  • Facilitate Efficient Case Vetting: Streamline the process of assessing claims for eligibility.
  • Enhance Risk Management: Built-in safety measures can prevent errors like double-funding and identify potential risks.
  • Ensure Transparency and Accountability: Robust audit trails provide a clear picture of the funding process.

Funders like Fenchurch Legal have gone further. Recognising the limitations of off-the-shelf loan management software, they have built their own bespoke software, which serves as the backbone of their operations and enables them to manage a high volume of claims efficiently. It eliminates manual errors and incorporates built-in safety measures, such as preventing double-funded cases and cross-referencing duplicate data across the platform. This seamless approach is essential for managing drawdowns and repayments and ensuring the integrity of their funding processes.

A Streamlined Funding Process

An efficient funding process benefits both law firms and funders.  Here’s a simplified example of how it might work:

  1. Clear Eligibility Criteria: Law firms understand the types of cases that qualify for funding based on pre-agreed criteria (i.e., success rate thresholds).
  2. Batch Uploads: Law firms can easily request funding by uploading batches of cases to a secure online platform.
  3. Auditing and Approval: A sample of cases is audited to ensure they meet agreed upon terms. If approved, funding is released in a single lump sum.
  4. Monitoring and Repayment: Software facilitates seamless monitoring of the loans and the repayment status, ensuring efficient management of repayment schedules.

Managing Risk in High-Volume Funding

Risk management is vital in high-volume funding. Here are some strategies that can be employed to mitigate risk effectively:

  • Diversification: Spreading funding across different law firms and case types is a crucial strategy for mitigating risk in high-volume claim funding. It minimises overexposure and creates a well-balanced portfolio.
  • After the Event (ATE) Insurance: Provides an extra layer of protection for investments in high-volume claim funding. It specifically covers the legal costs if a funded claim is unsuccessful.
  • Rigorous Due Diligence: Thorough assessment of cases and the law firm’s capacity to handle them ensures informed decision-making.
  • Continuous Monitoring: Proactive risk identification and mitigation safeguard investments. This includes requesting regular updates and performance data from law firms.

Conclusion

By leveraging technology, team expertise, and robust processes, funders can efficiently manage high-volume small claims, presenting a compelling investment opportunity. This approach can minimise risk and ensure transparency throughout the funding process.

Fenchurch Legal specialises in this niche area, efficiently managing and supporting a high volume of small-ticket consumer claims with an average loan value of £3,000 each. They handle diverse areas such as housing disrepair and personal contract payment claims. Their proven track record of funding over 12,000 cases is driven by their bespoke software, knowledgeable team, and robust processes.

About the author

Louisa Klouda

Louisa Klouda

Commercial

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Case Developments Commercial

CAT Finds in Favour of Professor Andreas Stephan in Amazon Claims

By Harry Moran |

Whilst last week saw a flurry of activity in the Competition Appeal Tribunal (CAT) as trials began in multiple collective proceedings, this week has seen the Tribunal hand down a ruling in a carriage dispute between two claims both targeting Amazon for allegations of anticompetitive behaviour.

A press release from Geradin Partners highlights the judgment from the CAT in a carriage dispute, which saw the Tribunal find in favour of Professor Andreas Stephan in collective proceedings being brought against Amazon. The carriage dispute related to the parallel claims brought by Professor Stephan and by the British Independent Retailers Association (BIRA), over allegations that Amazon engaged in anticompetitive practices that harmed third-party sellers on the online marketplace. Professor Stephan’s proceedings had instructed Geradin Partners and secured litigation funding from Innsworth, whilst BIRA had instructed Willkie Farr & Gallagher and agreed to funding from Litigation Capital Management (LCM).

In its ruling, the CAT found that whilst BIRA had an advantage in its suitability to act as the class representative, “this was clearly outweighed by the factors which favour Prof Stephan”, which it identified as “the scope of the claims and the expert methodology.” Although the CAT highlighted that the breadth of Professor Stephan’s claims “would no doubt enlarge the scope of a trial and therefore make it more complicated”, the ruling cited case law in emphasising that his claims “more consistent with the goals of access to justice by capturing more viable claims”.

The published judgment also shed light on the details of the funding arrangements in the claims. Professor Stephan’s litigation funding agreement (LFA) with Innsworth committed a maximum of £32.9 million to cover costs and expenses, with an additional commitment “to pay adverse costs of £5 million until the grant or refusal of a CPO and of £20 million thereafter.” As to the returns outlined in the funding agreement, Professor Stephan’s LFA with Innsworth “provides for a total multiple rising from 4 up to 10 (if the recovery is after the commencement of the substantive trial).” The CAT noted that the returns from Professor Stephan’s LFA were higher than for the funder in the BIRA claim, in the conclusion of its examination the Tribunal noted that “the funding arrangements of the two applications are a neutral factor in choosing between them.”

The CAT’s full judgment in the carriage dispute can be read here.

Additional analysis of the CAT’s ruling and its implications for future carriage disputes for funded proceedings can be found in a LinkedIn post from Matthew Lo, director at Exton Advisors.

Commercial People Moves

Ayse Yazir Appointed Managing Director at Bench Walk Advisors

By Harry Moran |

Ayse Yazir has started a new position as Managing Director at Bench Walk Advisors. This latest promotion comes in the seventh year of Yazir’s tenure at the market-leading litigation funder, having joined the firm in 2018 as a Vice President and most recently having served as Global Head of Origination.

In a post on LinkedIn, Yazir reveals that her work at Bench Walk Advisors incorporates a wide range of matters across the litigation funding industry including international and commercial arbitration, insolvency, class actions and global litigation matters as well as law firm and corporate portfolio arrangements and defense funding.

Yazir also expressed her delight at starting the new role and thanked her fellow Bench Walk Advisors’ managing directors Stuart Grant and Adrian Chopin for the opportunity.

Case Developments Commercial

Judge Preska Orders Argentina to Comply with Burford Discovery Request

By Harry Moran |

As we enter yet another year in the story of the $16.1 billion award in the case funded by Burford Capital against the YPF oil and gas company, a US judge has ordered the Argentine government to provide additional information about the country’s financial assets to the funder as part of its efforts to collect on the award.

An article in the Buenos Aires Herald provides an update on the ongoing fight to recover the $16.1 billion award in the YPF lawsuit, as a New York judge ordered Argentina to comply with a discovery request for information around the Argentine Central Bank’s gold reserves. The order handed down by Judge Loretta Preska followed the request made by Burford Capital in October of last year, with the litigation funder citing media reports that Argentina’s Central Bank had moved a portion of its gold reserves overseas.

Lawyers for Argentina’s government had submitted a letter last week arguing against the discovery request on the grounds that the Argentine Republic and Central Bank are legally separate entities, and that any such gold reserves have “special protection from execution under [United States’ Foreign Sovereign Immunities Act] and UK law.” Responding to these arguments in her order, Judge Preska stated plainly that “regardless of whether the gold reserves are held by [the Central Bank], the Republic shall produce its own documents concerning the reserves.”

Judge Preska also ordered the Argentine government to provide additional information concerning its SWIFT data on its overseas accounts and for documents from another lawsuit brought against the Republic, saying that all this information could “lead to other executable assets.”