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Should Judgement Enforcement Move In-House?

According to a recent Burford Capital survey, more than half of in-house lawyers say their company has awards and judgements that have remained uncollected—often to the tune of $20 million or more. That’s a staggering number of successful cases that go unfulfilled, from a collectability standpoint.

The role of a judgment enforcement team is to advise clients and funders on the feasibility of collecting an award or judgement, and overcome a variety of obstacles that stymie or prevent a successful recovery. Asset tracing, collection of evidence (digital and documents), and intelligence gathering all fall under the purview of enforcement. Lawyers and researchers leading the team seek out actionable leads on debtors, then employ a strategy (or series of strategies) for collection, often across multiple jurisdictions.

Earlier this month, Litigation Finance powerhouse Omni Bridgeway announced the launch of a US Judgement Enforcement arm. Omni already had the largest global judgement enforcement team with 50+ dedicated professionals, as well as a strong track record of success in global enforcement since 1986, spanning over 100 jurisdictions. The 2019 merger with IMF Bentham, which had maintained a US-presence under the banner of Bentham IMF, solidified Omni’s foothold in the US market. And this recent announcement further cemented the funder as an attractive option for litigation funding and enforcement in the United States.

Burford Capital, another leader in third-party litigation funding, has maintained its own in-house judgement enforcement team since 2015. The recent high-profile Akhmedova divorce case generated a slew of headlines for Burford’s enforcement team, which combed jurisdictions as wide-ranging as London, Turkey and Dubai, in an effort to seize assets including the Luna: a superyacht valued at over $200 million (along with its Eurocopter and torpedo speedboat).

From a litigation funder’s perspective, collectability is integral to the decision of whether to fund a claim. After all, there’s no ROI in simply winning a case.  Funders must therefore consider the collectability risk in every case they finance. Given this, we at Litigation Finance Journal wondered if Burford’s success and Omni Bridgeway’s recent expansion of its Judgement Enforcement division might foretell an industry trend. Will other funders start moving enforcement teams in-house? What exactly are the advantages of doing so, as opposed to working with third party enforcement firms?

We did some investigating of our own to find out the answers.

May the Enforcement Be with You

Enforcement is a complex, laborious process, and comes on the heels of what is often a long, drawn-out legal proceeding. This enables defendants to deploy tactics simply meant to wear a plaintiff out. Many plaintiffs are keen to focus on growing their business, as opposed to the particular minutiae of asset tracing. Thus, debtors will go to great lengths to hide assets—sometimes legally, sometimes not so much—in the hopes a creditor isn’t up for arduous task of tracing those assets.

The goal of judgement enforcement is to combine data-driven analysis with human experience and intelligence, to discover actionable insights with which to locate assets and ensure funds reach the deserving parties. This is often achieved by putting pressure on defendants, essentially by making it so cumbersome to continue to hide assets (also an expensive, complex process), that they simply opt to pay the judgment or award. Essentially, the job of an enforcement team is to make a defendant feel the way defendants often try to make plaintiffs feel—weary-eyed, and ready to throw in the towel.

“Judgement enforcement can be an uphill battle,” explains one Omni Bridgeway rep. “Although we prefer to solve matters quickly, we are in it for the long run.”

Since every case is bespoke, there is no playbook for how enforcement plays out. Typically, however, enforcement involves several key strategies:

  • Researching the historical behavior of the defendant (What types of claims did the defendant have previously? Did those claims go paid or unpaid? How did the defendant respond to prior enforcement actions, if any?).
  • Identifying a subset of jurisdictions where the defendant’s assets are located, and where enforcement measures can be used to collect those assets.
  • Structuring a multi-district, often cross-border enforcement and collection strategy.
  • Highlighting additional pressure points, outside of litigation, that can be leveraged to impel a defendant to make good on their debts.

Of course, with the proliferation of new technologies such as crypto and other blockchain-based innovations, the game is getting trickier, as more opaque avenues for shielding assets arise. Thus, the ability for an enforcement team to be nimble, flexible and adaptive is paramount. Much like a chess player anticipating her counter-party’s next move, a solid enforcement team must have both a plan of action in place, and an eagerness to break from that plan should the process lead in an unforeseen direction. Omni Bridgeway, for example, has assembled a robust team that can comfortably navigate a multitude of scenarios, comprising lawyers from diverse legal backgrounds, and researchers from a multitude of disciplines, including banking, science and economics.

Bringing it In-House

Third-party funders outsource an array of legal and financial services, including research, cultivating and preparing experts, Legal Tech development, and more. For some, especially smaller funders, it makes sense to outsource judgement enforcement as well. But for larger, more established funders and their clients —an in-house judgement enforcement arm offers numerous benefits:

  • A judgement enforcement team can be as valuable at the beginning of a case as it can after the case’s conclusion. Input from enforcement professionals can help determine the defendant’s ability to pay, which can then be used as a factor in whether or not to fund a specific case. If the case gets funded, this same information can be used when estimating a budget with a clear eye of what steps need to be taken to enforce a judgement.
  • An in-house enforcement team acts as a conversation partner for claimants and attorneys. Such teams are intimately familiar with the people and processes of the funders, case types, and workplace culture. This helps establish an internal knowledge base that can provide a seamless transition from one facet of the case to the next.
  • Multidisciplinary collaboration. In-house teams have the benefit of being able to rely not just on in-house legal resources from many jurisdictions, but also a research team with additional abilities and language skills, whose members can advise continuously on assets and asset movements, and enable the enforcement team to act quickly on opportunities if and when an asset is identified.
  • Litigation funding is an increasingly competitive business. When funders compete for clients, having a judgement enforcement division helps establish a funder’s commitment not just to the case, but to the final collection. Having an in-house enforcement team shows clients that the funder is able and willing to do the hard work necessary to trace assets and collect those unpaid judgments or awards.

One of the more overlooked benefits of an in-house enforcement team is its expansion of access to justice. While the enforcement team’s assessment of a defendant’s collectability risk can be used to eschew cases classified as high risk, it can also be leveraged in the opposite direction—to help funders finance cases that might otherwise appear too risky. In-house teams are intimately familiar with their organization’s risk appetite, and therefore can make recommendations to the investment committee based on the particulars of that specific appetite. The end result being that funders with in-house teams can finance cases that would otherwise go un-funded due to a high collectability risk. Omni Bridgeway has confirmed that it does have a specific appetite for enforcement or collectability risk. Having an in-house team with a deep understanding of that risk appetite benefits prospective clients, as the in-house relationship can help get their cases funded.

Omni shared this summation of the benefits of having an in-house enforcement team: “Omni is a formidable ally to everyone involved, sharing in both the recovery and risk, and only getting paid its fee if real recoveries are made. That alignment of interests with clients means that once we step in, clients know we believe in their case and will only advise a strategy that directly increases the chances of recovery. For us, [enforcement] is our core expertise.”

Looking Ahead 

Two of the largest litigation funders have successfully created and maintained in-house judgement enforcement teams. While it’s hard to know what the future holds for this rapidly-evolving sector, it is possible this will set off a trend among large and medium-sized third-party funders, as competition for clients is fierce, and funders must do all they can to stay apace. This, in turn, is likely to aid not just the enforcement of awards—but case selection and how funds are deployed.

As a rep from Omni points out, “The judgment enforcement capabilities do not just benefit clients with an existing judgment or award, they help us fund new ‘merits’ cases that might otherwise be considered too risky (because of a perceived collection risk), with the client knowing that the case is in safe hands from start to finish, should active enforcement be required.”

We’re not in the business of prognosticating, so we won’t predict what the future holds. We will, however, point out that methodologies adopted by one funder can often become industry trends (portfolio funding, secondaries investment, and the push towards defense-side funding are all examples). It’s been demonstrated that in-house judgement enforcement leads to increased client satisfaction, and—as third-party legal funding has always centered on—increased access to justice. After all, a favorable judgement has very little value if it remains uncollected. As such, a proliferation of in-house enforcement teams (should that indeed come to pass) will be a boon to clients, lawyers, and the funders who utilize them.

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Who Could Regulate the Litigation Funding Industry after the CJC Review?

By Harry Moran |

As funders and law firms await the outcome of the Civil Justice Council’s (CJC) review of litigation funding later this summer, industry experts are opining not only on the potential direction any future regulation could take, but what body would be in charge of this new oversight function.

In an insights post from Shepherd and Wedderburn, Ben Pilbrow looks ahead to the CJC review of litigation funding and poses the question that if some form of regulation is inevitable, who will act as the regulator for these new rules? Drawing upon two previous reports that reviewed the funding of litigation, Pilbrow points out that historically there have been two main bodies identified as the likely venues for regulation of third-party funding: the courts or the Financial Conduct Authority (FCA).

Analysing the comparative pros and cons of these institutions as prospective regulators, Pilbrow highlights that each one has two core contrasting qualities. The courts have the requisite expertise and connection to litigation funding yet lacks ‘material inquisitive powers’. On the other hand, the FCA does not have the aforementioned ‘inherent connection to the disputes ecosystem’, but benefits from being an established regulator ‘with considerable enforcement powers’.

Exploring options outside of these two more obvious candidates, Pilbrow suggests that utilising one of the existing legal regulators may be viable due to the fact they are all ‘largely staffed by lawyers but have regulatory powers.’ However, Pilbrow notes that these legal regulators may have common flaw that would stop them taking on this new role. That flaw being the comparatively small size of these organisations, with the Solicitors Regulation Authority (SRA) still only boasting 750 employees despite being the largest of these legal regulators.

Concluding his analysis, Pilbrow suggests unless the government opts for an expanded system of self-regulation under an industry body such as the Association of Litigation Funders, the most likely outcome is for the FCA’s remit to be expanded to include the regulation of litigation funding.

The full article from Ben Pilbrow can be read on Shepherd and Wedderbun’s website.

Omni Bridgeway Announces Final Payment for Acquisition of its Europe Business

By Harry Moran |

In an announcement posted on the ASX, Omni Bridgeway announced that it had completed the final payment for the acquisition of the Omni Bridgeway Europe (OBE) business that took place in 2019. The litigation funder confirmed that 5,213,450 fully paid ordinary shares had been ‘issued in satisfaction of the fifth and final tranche of variable deferred consideration’ to complete the acquisition.

Highlighting the progress of the business over the past six years, Omni Bridgeway said that the European business ‘has been successfully integrated into the global operations of the group, creating the most diversified legal asset management platform globally, covering all relevant civil and common law jurisdictions and all relevant areas of law.’ 

The announcement also revealed that OBE has ‘achieved the defined five-year KPIs in full’, whilst the management team ‘has been fully retained.’

Burford Capital CEO Says Litigation Finance Market is ‘Booming’

By Harry Moran |

With the global economy and financial markets in a current state of uncertainty, the stability of litigation funding as an uncorrelated asset class for investors is attracting wider attention than ever.

In an interview with Bloomberg TV, Christopher Bogart, CEO of Burford Capital discussed the current state of the litigation finance market, explained why third-party funding is attractive to clients and investors alike, and addressed the common critiques that are levelled at the industry.

On the enduring appeal of litigation funding to corporate clients, Bogart said that for many CEOs and CFOs the truth is that their companies are “spending too much money today on legal fees”. He went on to say that money spent by companies on legal fees is “not doing anything that advances their core undertaking”, and as a result, “the ability to offload that to somebody like us [Burford] is very valuable.”

When asked about why the litigation finance market is thriving during the global economic uncertainty, Bogart highlighted that all of Burford’s “cash flows come entirely out of the outcome of litigation results and those are independent of what’s happening in the market, independent of what’s happening in the broader economy.” In terms of the future of litigation funding and the potential for the market to continue to grow, Bogart pointed out that between legal fees and litigation judgments there is a “multi-trillion dollar a year global market” and that whilst the industry is already “booming”,  there is still “a lot of room to run here” for litigation funders.

In response to a question on the criticisms of litigation funding and the suggestion that funders may look to prolong the duration of cases, Bogart pointed out that Burford is just like any other investment firm that is “looking for high quality assets that are going to produce a reasonable return in a short period of time.” Bogart emphatically rejected what he described as “false concerns” by opponents of third-party funding, and stated plainly: “we’re absolutely not in the business of being interested in prolonging duration or in bringing forward things that are not ultimately going to yield a good result for our shareholders”.

The full interview can be found on Burford Capital’s website.