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Key Takeaways from LFJ’s Digital Event: Legal Tech and LitFin

December 7, 2023

Key Takeaways from LFJ’s Digital Event: Legal Tech and LitFin

On December 6th, 2023, Litigation Finance Journal produced its final event of the year: Legal Tech and LitFin: How Will Tech Impact Litigation Finance Globally? Tets Ishikawa moderated an insightful and pertinent discussion on the use of legal tech in the litigation finance industry. Panelists included Nick Rowles-Davies (NRD), Founder of Lexolent, Isabel Yang (IY), Founder of Arbilex, and Joshua Masia (JM), Co-Founder and CEO of Dealbridge.ai. Below are some key takeaways from the event (answers have been truncated for the purpose of this article): Legal tech is quite a broad term.  What does the legal tech landscape mean to you, and how does it fit into your business? IY: We’re in a very exciting time in legal tech. Where I sit, I primarily deal with the underlying technology being artificial intelligence (AI). The primary advances in advanced AI have primarily occurred out of language being the source data. A lot of these text-based AI advancements all hold great significance for the practice of law. At Arbilex, we are taking advantage of large language modeling (LLM) to reduce the cost of data acquisition. When we take court briefings and unstructured data and try to turn that into structured data, the cost of that process has dramatically decreased, because of Chat GPT and the latest LLMs. On the flipside, because AI has become so advanced, a lot of off-the-shelf solutions have tended towards a black box solution. So the model’s output has become a more challenging task. At Arbilex, we have always focused on building the most stable AI—so we focus on how we can explain a particular prediction to our clients. We are increasingly investing a lot of our time and human capital into building that bridge between AI and that use case. How relevant has legal tech been, and will it be, in the growth of the litigation finance sector?  JM: When we look at scaling operational processes, a lot of times we have to put our traditional computer science hat on and ask, ‘how have we historically solved these problems and what has changed in the past several years to evolve this landscape?’ A lot of the emphasis with technology has been about normalizing and standardizing how we look at these data sets. There’s a big issue when you look at this approach and what existing platforms have been doing—this is a very human business. Because of that, there’s a lot of ad hoc requests that get mixed in. So what gen-AI is doing, we’re getting to a point where you don’t have to over-structure your sales or diligence process. Maybe the first few dozen questions you’re asking of a given data set are the same, but eventually we want to be able to ask questions that are specific to this deal. So being able to call audibles and ad-hoc analysis of data sets was really hard to do before the addition of generative AI. NRD: Legal tech is becoming increasingly relevant, but the real effect and usefulness has grown over time. It makes repetitive tasks easier, and provides insights that are not always readily apparent. But in terms of the specific use of AI to triage outcoming matters, we identify matters in different areas—is this something we simply aren’t going to assess, will it be sent back for further information, does it fit the bucket of something we would fund per our original mandate, or does it go on the platform for the purpose of others to look at and invest in that particular matter. AI is having an increasing impact and is being used with more regularity by litigation funders who are funding they can increase efficiency and get to a ‘yes’ much more quickly. A lot of lawyers would say, this is fascinating, but ultimately this is a human industry. Every circumstance will be different, because they will come down to the behaviors of human beings in that time. Is there a way that AI can capture behavioral dynamics? IY: In general, we need to have realistic expectations of AI. That comes from, what humans are uniquely good at are not necessarily the things that AI is good at. AI is really good at pattern-spotting. Meaning, if I train the model to look for recurring features of particular cases—say, specific judges in specific jurisdictions, when coming up against a specific type of argument or case—then AI in general has a very good ability to assign the weighting to a particular attribute in a way that humans instinctively can come to the same place, you can’t really quantify the impact or magnitude of a specific attribute. The other thing that we need to be realistic about, is that cases are decided not just on pattern, but on case-specific fact attributes (credibility of a witness, availability of key evidence). If you train AI to look for things that are so specific to one case, you end up overfitting the model, meaning your AI is so good at looking for one specific variable, that it loses it general predictive power over a large pool of cases. What I would caution attorneys, is use AI to get a second opinion on things you believe are a pattern. In arbitration, attorneys might use AI on tribunal matters—tribunal composition. AI models are way better at honing in on patterns—but things like ‘do we want to produce this witness vs. another witness,’ that is not something we should expect AI to predict. For the full panel discussion, please click here.

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Indemnity Costs Order Turns Prince Harry Claimants’ ATE Shortfall Into a Live Liability

The seven celebrity claimants in the failed privacy action against the Daily Mail have been ordered to pay costs on the indemnity basis and to make a payment on account of £9.54m by 28 August, crystallising a gap between their after-the-event insurance cover and the publisher's claimed costs.

As reported by the Law Society Gazette, Mr Justice Nicklin found that the case went "well outside the norm" and that its "conduct was unreasonable to a high degree." The judge described the action as "litigation conceived and pleaded on an unjustifiably wide canvas," which was "speculative at origin and depended substantially on inference," with serious allegations maintained over a prolonged period on an inadequate evidential foundation.

The claims of unlawful information-gathering, brought by claimants including the Duke of Sussex, Baroness Lawrence and Sir Elton John, were dismissed last month following an 11-week trial. Associated Newspapers had exceeded its approved budget by more than £18.6m, with total costs amounting to what claimant lawyers called an "eye-watering" £34,481,622.54. The claimants hold legal expenses insurance covering £16.2m.

Nicklin J declined to impose a cap on recoverable costs, though he described the publisher's costs as "striking." The payment on account was set at £9,544,355, close to the £9,950,624.37 sought by Associated, which represented 65% of incurred pre-budgeted costs and 90% of budgeted costs.

The order converts a previously theoretical insurance shortfall into an immediate obligation, and stands as a reminder of how far ATE limits can fall short of defendants' actual costs in heavily contested, long-running litigation.

Commercial

Rugby Head Injury Claimants Appoint Independent Counsel Over Funder and Law Firm Group Ties

Hundreds of struck-out rugby head injury claims have been granted relief from sanctions in principle after the players switched solicitors, in a ruling that also records the appointment of independent counsel to advise the claimants on their position relative to their new law firm and their litigation funder, which sit in the same corporate group.

As reported by Legal Futures, Senior Master Cook allowed the claims to proceed despite non-compliance with unless orders on disclosure of medical records, taking "comfort" from the change of solicitor. The litigation involves around 1,000 claimants across rugby union and rugby league who allege serious head injuries from collision forces in matchplay and training, and that the governing bodies did not do enough to protect them. Between the two groups, 530 claimants stood struck out.

The players moved from Rylands Garth, described by the judge as "a relatively new firm with one qualified solicitor," to class action specialists KP Law, with Leigh Day assisting. Master Cook said that had the original solicitor continued to conduct the litigation, "I could not have had any confidence that future court orders would be complied with timeously or at all."

A witness statement from former Wales international Alix Popham, on behalf of the union players committee, said the players have appointed James Oldnall, managing partner of Milberg London, as independent counsel to advise them on their position "vis-à-vis KP Law and [litigation funder] Asertis (as Asertis and KP are part of the same corporate group)."

Relief will be subject to conditions to be decided at a further hearing, with minimum terms including payment of the defendants' costs of securing compliance and production of the missing documents.

Commercial

Calunius Chairman Warns CAT’s Approach to Funder Returns Risks Driving Capital Away

Leslie Perrin, chairman of Calunius Capital, has argued that the Competition Appeal Tribunal's developing approach to litigation funding agreements poses a more immediate threat to the UK's opt-out collective actions regime than either the unimplemented Civil Justice Council recommendations or the still-awaited PACCAR reversal.

As reported by City AM, Perrin welcomed the government's recent light-touch proposals on the opt-out regime, which followed a Department for Business consultation and cover faster distributions in successful class actions, better management of legal costs and procedural reforms. But he wrote that funders still await implementation of key CJC recommendations on returns made a year ago, as well as the legislation promised to reverse the 2023 Supreme Court judgment in PACCAR.

His central concern is retrospective reassessment. Perrin wrote that the Tribunal "appears increasingly willing to revisit funding arrangements and priority agreements when determining distributions, effectively reassessing returns after a case has concluded," and that the concept of success being applied "remains uncertain and may depend on factors that were impossible to predict when funding was first committed."

Perrin framed the consequence in market terms: "Capital is mobile. Investors will only deploy funds into litigation if the potential return reflects the risks undertaken." He argued that no investment market can function if agreements are liable to be substantially redrawn after the event, and that if returns can be recalculated years later, funding becomes more expensive and some claims may never be brought at all.

Ten years after the first UK opt-out collective action was filed at the CAT, Perrin said scrutiny of funder returns is appropriate but must involve a level playing field, describing the issue as a test of whether Britain remains committed to a predictable and investment-friendly legal framework.