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Commercial Special Features

Key Takeaways from IMN’s 5th Annual Financing, Structuring and Investing in Litigation Finance

On Wednesday, June 7th, IMN hosted its 5th annual Financing, Structuring and Investing in Litigation Finance conference. LFJ attended the event and covered various panel discussions on topics ranging from key trends and developments, ESG initiatives and insurance products. Below are some key takeaways from the event.

The first panel of the day focused on broader trends and developments impacting the Litigation Finance industry. The panel consisted of Douglas Gruener, Partner at Levenfeld Pearlstein, Reid Zeising, CEO and Founder of Gain (formerly Cherokee Funding & Gain Servicing), William Weisman, Director of Commercial Litigation at Parabellum Capital, Charles Schmerler, Senior Managing Director and Head of Litigation Finance at Pretium Partners, and David Gallagher, Co-Head of Litigation Investing at the D.E. Shaw Group. The panel was moderated by Andrew Langhoff, Founder and Principal of Red Bridges Advisors.

One of the most interesting back-and-forths came on the issue of secondaries, as Doug Gruener noted that ‘There were a large number of investments made five to seven years ago, so the opportunity is ripe both on the demand side and supply side.” Andrew Langhoff, the moderator, responded that there are major hurdles involved in facilitating a secondaries market, such as questions around pricing, execution and management of the claims, to which other panelists agreed. However, Charles Schmerler pointed out that this industry is like any other capital markets industry, and to the extend that a secondaries market can provide liquidity and be a useful resource, he would be surprised if five years from now we’re not all reminiscing about how we once questioned the efficacy of a secondaries market in Litigation Finance.

Perhaps the most timely panel of the day was on insurance, and its impact on the Litigation Finance market. The panel consisted of Brandon Deme, Co-Founder and Director at Factor Risk Management, Sarah Lieber, Managing Director and Co-Head of the Litigation Finance Group at Stifel, Megan Easley, Vice President of Contingent Risk Solutions at CAC Specialty, and Jason Bertoldi, Head of Contingent Risk Solutions at Willis Tower Watson. The panel was moderated by Stephen Davidson, Managing Director and Head of Litigation and Contingent Risk at Aon.

Brandon Deme pointed to the rapid growth of the industry: “The insurance market is expanding. We’ve got insurers that can go up to $25MM in one single investment. When you put that together with the six to seven insurers who are active in the space, you can insure over $100MM. And that wasn’t possible just a few years ago.”

One interesting point of discussion was on how to engender more cooperation between insurers and litigation funders, given that the two parties are at odds on issues relating to disclosure and regulatory requirements. Jason Bertoldi of Willis Tower Watson noted that almost every carrier who offers this product will have some sort of interaction with funders, either directly or indirectly. And while there is opposition to litigation funding from insurers around frivolous litigation and ethical concerns, there are similarly concerns amongst insurers around adverse selection and information asymmetry. So the insurance industry has to get more comfortable with litigation finance, and vice versa.

The panel on ESG consisted of Viren Mascarenhas, Partner at Milbank, Nikos Asimakopoulos, Director of Disputes at Alaco, and Rebecca Berrebi, Founder and CEO of Avenue 33, LLC. The panel was moderated by Collin Cox, Partner at Gibson Dunn.

This discussion touched on the opportunities afforded to funders by ESG efforts, as well as the challenges this emerging sector presents, such as diligence problems and confusion around how multinational ESG initiatives might impact state and local laws. Examples were provided around whistleblower claims, international arbitration efforts, supply chain issues in foreign jurisdictions.

Other panels included discussions on the economics of the Litigation Finance market, strategies for mass torts investments, regulatory issues, and a small group meeting on women in Litigation Finance. Overall, IMN’s 5th annual Litigation Finance event highlights the growth and maturation of a nascent industry, and the range of interested parties in attendance (from funders to law firms to insurance providers to asset allocators) underscores the sector’s long-term sustainability.

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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.”