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Key Takeaways from LFJs Q4 2020 Commercial Litigation Funding Roundup

Litigation Finance News

On Thursday December 17th, Litigation Finance Journal hosted a special 1-hour panel discussion on the major events impacting the commercial litigation funding industry. Panelists included Omni Bridgeway CEO Andrew Saker (AS), Therium Co-Founder and CIO Neil Purslow (NP), and LCM CEO Patrick Moloney (PM). The panel was moderated by Ed Truant (ET), founder of Slingshot Capital. Below are some highlights from the discussion.

ET: Why did each of you decide to pursue a global growth strategy as opposed to solely focusing on domestic markets?

PM: We looked at things from a very practical perspective at LCM, we looked at where the most economic activity was happening. Where there’s more economic activity there’s more disputes. Therefore, we looked around the globe toward the larger economies than where we started back here in Australia. We were cautious and disciplined about moving into new jurisdictions. So very much driven economically and by opportunity.

NP: When we started Therium about 12 years ago, we recognized the potential then that the industry would become a global industry. And from an early stage, we were seeing funding opportunities coming from other jurisdictions as well as the UK. Our global footprint reflects a view of the market that there are benefits to being bigger in funding. From a case point of view, it’s better to have more depth of financial resources. From an investor point of view, greater diversification is better. From an underwriting point of view, being able to draw on expertise across jurisdictions and to have the benefits of a global perspective is also helpful. 

ET: What were some of the business challenges you faced when you entered new markets?

AS: Most of our expansion was done through organic growth. It was where we perceived first-mover advantage. That required us to address a number of key risks, market awareness of the industry was perhaps first and foremost. There were some jurisdictionally specific issues in Canada where we needed to seek some insurance regulatory approvals. But otherwise, it was all about establishing boots on the ground, finding the right people which is more than half the problem. And ensuring that you’ve got access to the local contacts and networks that you need for establishing a successful business.

ET: Other than lack of sleep, what are some of the other negative aspects of going global?

AS: Lack of sleep is perhaps the biggest issue, but the benefits far outweigh any of the costs. Having such a global team, a global approach, different cultures that are being fully integrated, compensate for any of those downsides. But it’s an interesting dynamic market that’s continuing to grow.

PM: I think that’s right. I think…there’s a necessity to become global. In the respect of at least publicly listed and traded.

NP: The thing that’s interesting is, relatively speaking, how easy it is to operate across jurisdictions in this industry, and I think it’s because–to a very large extent–the skillset that you need is so transferrable. So it’s actually been very positive.

ET: What’s the implication given COVID? Are you thinking differently about your organizations going forward in terms of travel and face-to-face meetings and that type of thing?

AS: I think it’s an evolving thought process. Initially, at the front end of this crisis, we all saw the benefits of staying at home and working remotely and using technology to compensate. There was a great deal of enthusiasm and everyone bought in. As this has dragged on, there’s been different views about the merits of that and the efficacy of it all. To some extent, it does vary depending on your location. We’ve been very fortunate here in Australia to have a slightly different experience from our colleagues in Europe and the US. 

ET: The next major topic I want to tackle was this concept of corporate social responsibility and litigation finance in environmental social governance, or ESG. CSR is becoming a pretty powerful trend in global investing, so I wanted to explore the implications for the litigation finance asset class.

What are you hearing from your shareholder base about CSR and ESG in terms of their importance, and what pressures are those shareholders putting on public companies these days?

PM: From LCM’s perspective, I suppose we have had two experiences. One, the public markets through the securities exchange here in Australia, and then more recently the London stock exchange, are probably two quite different experiences. So I think investors out of the UK and Europe have been far more focused and have an expectation far more than I recollect that we’ve had here in Australia, and that’s not to say that these issues are not present in Australia. It’s probably more of a timing thing, but we’re very conscious of it. What we need to wrestle with is, as a relatively small listed entity, is what capacity we have to wade into this. So we’re very conscious of it and we do have principles associated with that.

AS: Definitely, it’s an increasingly important area of relevance to all our shareholders. What we have found as we’ve shifted from the ASX300 to ASX200 is that there are more ESG-specific type funds that are interested in a stock that’s compliant with ESG obligations, and as a consequence of that, we initiated our own process to have a formal ESG policy. It’s a work in progress and something that we’re developing with internal stakeholders and well as external stakeholders. It’s a value that resonates throughout the whole company.

NP: ESG and CSR considerations are becoming increasingly important for privately funded investors as well. And we get quite a lot of questions from them about how we’re thinking about this. On the CSR side, the way we’re approaching it—we tend to think of litigation finance as ultimately about investing to facilitate access to justice. And for the most part, obviously, we’re doing that as an investment in the expectation of a return. But there is a wider need in society for access to justice and legal advice where those situations can’t be funded on a commercial basis. And we have felt that it’s important as an investor in the legal world that we play our part in that area too. It’s for that reason that we set up Therium Access 18 months ago.

ET: Let’s move on to the third topic, industry growth, and implications for innovation. At a macro level, the industry arguably is growing in three main ways: growth in the number of jurisdictions allowing litigation finance, increasing penetration within existing markets, and then growth through product innovation. So let’s take a closer look at product innovation as a growth factor. Perhaps each of you can comment on what your business has done to innovate in the litigation finance market within the last 2-3 years.  

PM: At LCM, we’ve tried to look at business development in a very different way to how the industry might have looked at this previously, so we look at the available market in two ways. One is those who use litigation finance for necessity, and those through choice, so I think the larger part of the market which remains sort of un-penetrated and unaddressed by our industry globally is providing it to large sophisticated well-capitalized corporates. And I think that’s a very interesting part of the market for us, I think it’s an interesting part of the market for the industry as a whole. I think that’s where a lot of our focus has been in the last 2-3 years.

ET: Neil, how about you in terms of innovation at Therium?

NP: Certainly we’ve seen a lot of innovation in the development of product. Or perhaps to put in another way, in deployment techniques. Our core business is built around an ability to assess and to price litigation risk. But the way in which that investment has been delivered and the way it’s been structured has become a lot more varied in recent years.

We put a great deal of resources into developing those techniques, whether it’s portfolio funding of different types, corporate portfolios, law firm funding, or claim monetization. These aren’t new areas, we’ve been at this for a long time. But certainly, our level of sophistication in how we do them has increased dramatically in the last few years. I think also in terms of sophistication, we’re working with an AI firm called Solomonic, to bring a more data-driven approach to our investment process as well. I think that’s another theme.

The last point on this: I think the market is in an interesting point now where funders are starting to drive certain parts of the litigation landscape. So instead of being passive recipients of cases from law firms, funders are now playing an important role in shaping litigation trends and what case types do and don’t develop. 

AS: From a non-product perspective, I think the evolution of the fund management model is growing, it’s something that has had roots in the last five years, but is now being more warmly embraced by the litigation funders as well as PE investors. 

Looking forward, as Neil mentioned, a more active role for litigation funders in the investments is something that I think will grow. We are looking to try to shift our focus from being an agent to being a principal and actually owning claims, judgments, and awards. There are various other strategies we’re looking at, including downside risk management, cracking the holy grail we all talk about of defense-side funding. And then potentially even moving into law firm ownership, to take advantage of this shift that seems to be evolving around the world.

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Community Spotlight: Scott Davis, Partner, Klarquist

By John Freund |

Scott focuses on intellectual property litigation, representing clients in courts throughout the U.S. He has had great success both obtaining relief for intellectual property owners and defending suits in a wide range of technical fields in cases involving patent, trade secret, unfair competition, employment agreement, copyright, DMCA, trademark, trade dress, product configuration, and false advertising claims.

Scott has litigated cases involving chemical, mechanical, medical device, internet, software, encryption, computer, clean energy, automotive, apparel, food, agricultural, and pharmaceutical technologies. Representing some of the largest companies in the world as well as smaller businesses and start-ups, he has succeeded for clients such as Adobe, British Airways, Columbia River Knife & Tool, Capsugel, Costco, Danner, DexCom, Intuit, Microsoft, Nightforce, Phibro Animal Health Corporation, SAP, SunModo, and Yelp.

Describing his past success and approach with the Klarquist litigation team, IAM Patent 1000 recently lauded Scott’s ability to assess the best strategies and his talent for understanding and simplifying complex technology, and noted that Scott will “always put your objectives first and act like a part of your team.”

Company Name and Description: Klarquist is a full-service intellectual property (IP) law firm with services including IP counseling, patents, trademarks, copyrights, litigation, and post-grant USPTO proceedings. Because we focus our practice exclusively on intellectual property, our prosecution professionals leverage a thorough understanding of our clients’ cutting-edge technology to an extent not seen in general practice firms. Our technical expertise covers biotechnology, physics and optics, chemistry, electrical and mechanical engineering, software and computer science, plants, and semiconductors.

Klarquist is one of the oldest and largest intellectual property law firms in the Pacific Northwest. For more than 80 years, the firm has provided intellectual property legal services to innovators of all stripes and sizes. The firm has over 60 attorneys and patent agents, more than 90% of whom hold technical degrees and many with doctorates in their respective fields. Klarquist professionals are adept at handling all phases of intellectual property matters, from procurement to transfer to litigation of disputes and post-grant review proceedings. Our roster of clients includes some of the most innovative companies and institutions in the world, from Amazon and Microsoft to the U.S. Government, which chooses Klarquist to procure its patents more than any other firm in the nation. As a full-service intellectual property boutique, Klarquist is uniquely equipped to handle any matter, for any innovator, in virtually every area of modern technology.

Website: www.klarquist.com

Year Founded: 1941

Headquarters: Portland, Oregon

Areas of Interest: Dispute resolution, litigation, and patent post grant proceedings.

Member Quote: "Litigation funding provides a key to unlock access to civil justice."

$170 Million Settlement Approved in Allianz Class Action

By Harry Moran |

A complex Australian class action that emerged through the consolidation of two separate group proceedings has reached a successful conclusion, with the court approving a large settlement and thereby marking a significant win for the litigation funder who backed the case. 

A post on LinkedIn from Balance Legal Capital highlighted the approval of the settlement in the Allianz class action, with the Supreme Court of Victoria approving the A$170 million sum to bring the group proceedings to a close. The class action, which Balance Legal Capital funded, was brought on behalf of over 200,000 Australian customers who purchased a vehicle and were then sold Allianz or Allianz Life “add-on” insurance products by the dealership, alleging that the insurers engaged in misleading or deceptive conduct.

Johnson Winter Slattery (JWS) and Maurice Blackburn Lawyers jointly represented the plaintiffs in the class action. In 2021, the Court had ordered the consolidation of this group proceeding with a similar class action against Allianz, resulting in two representative plaintiffs: Ms Tracy-Ann Fuller and Mr Wilkinson.

The judgment approving the proposed settlement was made today, with the court approving a $30,000 payment to the two plaintiffs. The court also maintained the Group Costs Order (GCO) of 25% of the settlement, with a $42.5 million payment set to be divided between JWS and Maurice Blackburn, with a further sum of up to $4.72 million allocated to Maurice Blackburn for the administering of the settlement distribution scheme. 

On the costs incurred by the law firms, Justice Matthews wrote that they were, “satisfied that the costs are reasonable and proportionate to the issues in dispute and the overall amount in dispute.” The judge went on to highlight that the class action “was a very large and complex proceeding and it is unsurprising that the costs are substantial.”

The full judgment and settlement approval orders can be read here. More information about the case can be found on the Allianz Class Action website.

Judge Halves Funder’s Legal Costs in Mastercard Case

By Harry Moran |

The dispute between Walter Merricks and Innsworth Capital in the Mastercard claim has been one of the most visible examples of a rift between a class representative and litigation funder. 

An article in The Law Society Gazette provides an update on the ongoing fallout from the settlement in the Mastercard litigation, as the acting president of the Competition Appeal Tribunal (CAT) has described the funder’s legal costs of over £52,000 as “wholly disproportionate and unreasonable”. These comments came in a ruling on costs that Mr Justice Roth had ordered the class representative to pay, relating to the funder’s legal costs for responding to Mr Merricks’ application for a court order (‘Documents Application) that would have prevented the funder from using confidential documents in its intervention.

In his assessment of Innsworth’s submissions on costs, the judge accepted that the funder’s need to oppose the Documents Application was “critical to its ability to participate effectively in opposing the CSAO Application” and went on to say that he had “no criticism of the time spent by the solicitors.” However, Justice Roth did highlight the decision to instruct “both leading and junior counsel to advise on the response” and the fact that in this matter, “Akin Gump is charging at well over double, and in the case of the Grade B solicitor almost three times, the London 1 Guideline Rates.”

The ruling goes on to note that whilst Innsworth “may choose to agree with its solicitors to pay a much higher rate of fees”, it does not automatically follow “that costs incurred at those rates are recoverable from the other side”. Determining the final costs, Justice Roth settled on a reduction of the solicitors’ fees down from £26,355.50 to £12,000, and similarly reduced the counsel fees to £10,000, which he still described as “generous”. As a result, the final sum for Innsworth’s costs was set at £22,000.

The full ruling from Mr Justice Roth can be read here.