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Triple-I: Plaintiffs Should Disclose Third-Party Funding Arrangements

By John Freund |

Ohio’s defendants should know whether a third-party litigation funding firm is financing a lawsuit against them, the Insurance Information Institute’s (Triple-I) chief insurance officer, Dale Porfilio said, in testimony today before the state Senate’s Judiciary Committee.

Third-party litigation funders (TPLF) provide billions of dollars each year to U.S. plaintiffs and their legal counsel, yet only a handful of U.S. states, such as Indiana and Montana, have required plaintiffs to disclose in court whether a TPLF is financially supporting a civil lawsuit.

“Without any direct ties to litigated cases and minimal transparency, institutional investors and even sovereign nations are contributing significant amounts of capital toward litigation suits for the sole intent of making a profit,” Porfilio stated. “Without transparency, we are not able to provide deep data-driven insights about TPLF’s impacts on consumers and the insurance industry. Therefore, Triple-I supports mandatory disclosure of TPLF so we can study the impacts on consumers and carriers alike.”

A Swiss Re Institute report published in 2021 estimated more than half of the $17 billion in TPLF monies deployed globally in 2020 were in the U.S. Moreover, while TPLF investments offered internal rates of return exceeding 25 percent, commercial liability plaintiffs who used TPLF firms to finance their litigation saw the settlement proceeds allocated to them decrease by 12 percent, this same Swiss Re Institute report estimated.

“The insurance industry retains claim adjusters, litigation managers, and defense attorneys to help settle claims. The portion allocated to defense costs are defined as ’Defense and Cost Containment Expenses’ (DCC). These expense dollars across all P&C (property and casualty) products increased 30 percent from 2016 to 2022, while increasing 60 percent for general liability (GL) products across these same years. GL products are where more of the complex and high-limit litigation occurs for large corporations. Because TPLF is not disclosed in Ohio as well as most other states, Triple-I cannot today quantify how much TPLF is contributing to the increase in DCC and the industry’s financial results,” Porfilio testified.

Triple-I has been educating and informing consumers about its growing concern with third-party litigation funding under the broader umbrella of what the organization refers to as “legal system abuse.” Triple-I defines legal system abuse as policyholder or plaintiff attorney practices which increase costs and time to settle insurance claims. While litigation is considered a policyholder’s last resort, Porfilio continued, legal system abuse exploits litigation when a disputed claim could have been resolved without judicial intervention. Legal system abuse contributes to higher costs for insurance operations and policyholder pricing, Triple-I’s chief insurance officer concluded.

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John Freund

John Freund

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Announcements Commercial People Moves

ALFA Welcomes Mackay Chapman as Newest Associate Member

By Harry Moran |

In a post on LinkedIn, The Association of Litigation Funders of Australia (ALFA) announced that it is welcoming Mackay Chapman as its newest Associate Member. Mackay Chapman becomes the 12th Associate Member of ALFA, following the inclusion of Litica in April of this year.

Mackay Chapman is a boutique legal and advisory firm, specialising in high-stakes regulatory, financial services and insolvency disputes. The Melbourne-based law firm was founded in 2016 by Dan Maclay and Michael Chapman, who bring 25 years of experience in complex disputes to the business.More information about Mackay Chapman can be found on its website.

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Announcements Commercial Fundraising

CASL Targets Australian Investors in Launch of New $150M Litigation Fund

By Harry Moran |

Leading Australian litigation funder CASL today launched a $150 million fund giving local investors the opportunity to participate in funding of selected new class actions including product liability and other mass consumer claims, commercial litigation and insolvency claims. 

CASL Fund 2 is expected to appeal to Australian sophisticated investors seeking exposure to a truly alternative asset class with attractive risk-adjusted returns and a capital-protected option. The fund is well suited to high-net worth individuals, family offices and foundations seeking to diversify into uncorrelated ESG assets. 

Co-founded in 2020 by two of Australia’s most experienced litigation funders, John Walker and Stuart Price, CASL has quickly established a reputation as an astute backer of legal claims in the competitive Australian market. The two completed actions filed with the backing of CASL’s inaugural $156 million fund since 2022 have returned 165% to investors; another 11 actions are in progress. 

Considered a pioneer of litigation funding in Australia, CASL Executive Chair John Walker co-founded IMF Bentham, now Omni Bridgeway, in 1998 while CASL CEO Mr Price was CEO of Litigation Lending Services for six years prior to co-founding CASL. 

Mr Price said litigation funding had an important role to play in levelling the legal playing field for victims of corporate or government misconduct, and investors were important partners in this process. 

“In global terms Australia is a receptive jurisdiction for the filing of group claims and funded actions but there is increasingly a premium on funders with proven expertise in sourcing and qualifying claims, and managing them to a successful resolution,” Mr Price said. 

“CASL brings that – our team has a proven record for deploying funds efficiently in support of worthy claims and generating strong financial outcomes for both claimants and investors. 

“We see a healthy pipeline of potential new actions in Australia with good prospects and considerable upside for investors willing to fund them. This fund will be a rare opportunity for investors to participate in a purely domestic litigation funding play backed by an experienced local team with a proven record for generating returns for investors. Early indications are we have $30 million in investor pre-commitments so there is clearly an appetite for litigation funding as an alternative asset class.” 

The combined success rate of 183 funded claims involving Mr Walker or Mr Price since 1996 is 92%. These cases have delivered settlement proceeds of $2.6 billion with an average duration of two and half years. 

The launch of CASL Fund 2 comes amid a changing landscape for class actions in Australia, with consumer actions overtaking securities actions as the leading type of funded claim, reflecting the development of effective legislation to hold large corporates to account. 

An innovative feature of the CASL Fund 2 offer is the ability of investors to elect a capital-protected allocation option with a discounted target return.

Key features of the offer include:

 CASL Fund 2: Up to $150m, Class A and Class B Units
 Class AClass B
Capital protectionYesNo
Fund term5 years
(2 years investment, 3 years harvest)
Hurdle rate per annum10%12%
Performance fee (after hurdle, fees and costs)40%25%
Management fee (% of capital commitment) per annum2%2%

Funds raised will be deployed only into new actions, with all existing funded matters funded by CASL Fund 1. No distinction will be made between Class A and B funds for the purposes of funding actions. 

An estimated $200m to $300m is deployed by litigation funders supporting legal claims in Australia, excluding law firms’ funding of actions from their own balance sheets. The most active sources of funding for Australian actions are based offshore and include hedge funds and specialist asset managers, many domiciled in tax-friendly jurisdictions such as the Cayman Islands and Channels Islands, attracted to Australia’s relatively receptive environment for group claims. 

CASL’s Fund 2 will be an Australian-domiciled unit trust. Bell Potter is lead manager for the CASL Fund 2 capital raise. 

Mr Price said: “Agility and responsiveness are important in selecting claims and bringing litigation – being based locally, CASL has the advantage of being able to move and make decisions quickly when required.” 

To coincide with the fundraise CASL announced that Ian Stone, former Group Managing Director and CEO of RAA, would join the Board of CASL’s Trustee entity CASL Funder Pty Limited. Tania Sulan, former Managing Director and Chief Investment Officer - Australia for Omni Bridgeway will also join the CASL Investment Committee. Visit www.casl.com.au for more information about CASL Fund 2.

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Announcements Commercial Deals

Almaden Announces Litigation Financing of up to $9.5 million

By Harry Moran |

Almaden Minerals Ltd. (“Almaden” or “the Company”; TSX: AMM; OTCQB: AAUAF) is pleased to announce that further to its press release of June 17, 2024, it has confirmed non-recourse litigation funding in the amount of up to US$9.5 million to pursue its international arbitration proceedings against the United Mexican States (“Mexico”) under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”). The Company has also agreed with Almadex Minerals Ltd. (“Almadex”) to an extension to the maturity of its gold loan, and a litigation management agreement to help streamline corporate management of the arbitration process.

  • Non-recourse funding secured to pursue international arbitration proceedings against Mexico;
  • Globally leading counterparty validates quality of legal claims;
  • Gold loan maturity pushed out from March 31, 2026 to March 31, 2030;
  • Litigation Management Agreement streamlines corporate management of the arbitration proceedings to save money and time.

Litigation Financing

The Company has signed a litigation funding agreement (“LFA”) with a leading legal finance provider. The facility is available for immediate draw down for Almaden to pursue damages against Mexico under the CPTPP resulting from Mexico’s actions which blocked the development of the Ixtaca project and ultimately retroactively terminated the Company’s mineral concessions, causing the loss of the Company’s investments in Mexico.

The LFA provides funding which is expected to cover all legal, tribunal and external expert costs of the legal claims, as well as some corporate operating expenses as may be required. The funding is repayable in the event that a damages award is recovered from Mexico, with such repayment being a contingent entitlement to those damages.

The financing follows extensive due diligence by the finance provider. The financing size as well as the quality of the provider is testament to the strength of the Company’s legal claims against Mexico.

Gold Loan Amendment

The Company is also pleased to report that it has agreed with Almadex to extend the maturity of the gold loan (see press release of May 14, 2019) from March 31, 2026 to the earlier of March 31, 2030 or the receipt by Almaden or its subsidiary of any amount relating to its legal claims against Mexico.

In return for this amendment, in addition to its obligation to repay the gold loan, the Company has agreed to pay Almadex 2.0% of the gross amount of any damages award that Almaden may receive as a result of the legal claims, such repayment to be subordinate to amounts due under the LFA, and any additional legal and management fees.

Litigation Management Agreement

Finally, the Company has agreed with Almadex and its Mexican subsidiary to streamline the management of the arbitration proceedings by entering into a Litigation Management Agreement (“LMA”). Under the LMA, Almaden will bear the up-front costs of the arbitration and provide overall direction to the arbitration process for itself and its subsidiaries, as well as Almadex and its subsidiaries, with certain limitations. Almadex will remain a party to the arbitration and continue in its cooperation and support of the process. As noted above, Almaden has already secured litigation funding in the amount anticipated to be needed to fully prosecute the arbitration proceedings.

Should the arbitration proceedings result in an award of damages, the pro rata portion of those damages, if any, which may be attributable to Almadex from the 2.0% NSR royalty it held on the Ixtaca project will be determined. Almadex’s award will consist of this pro rata portion, less its pro rata share of the costs of pursuing the legal claims, including the financing costs (the “Almadex Award”). Almadex will compensate Almaden in the amount of 10% of the Almadex Award in exchange for managing the claim proceedings.

Safe Harbor Statement

Certain of the statements and information in this news release constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian provincial securities laws. All statements, other than statements of historical fact, are forward-looking statements or information. Forward-looking statements or information in this news release relate to, among other things, the total potential cost of the legal claims and the sufficiency of the money available under the LFA to cover these costs, the ability of the LMA to streamline corporate management of the legal claims, and the result and damages arising from the Company’s request for arbitration.

These forward-looking statements and information reflect the Company’s current views with respect to future events and are necessarily based upon a number of assumptions that, while considered reasonable by the Company, are inherently subject to significant legal, regulatory, business, operational and economic uncertainties and contingencies, and such uncertainty generally increases with longer-term forecasts and outlook. These assumptions include: stability and predictability in Mexico’s response to the arbitration process under the CPTPP; stability and predictability in the application of the CPTPP and arbitral decisions thereon; the ability to continue to finance the arbitration process, and continued respect for the rule of law in Mexico. The foregoing list of assumptions is not exhaustive.

The Company cautions the reader that forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements or information contained in this news release. Such risks and other factors include, among others, risks related to: the application of the CPTPP and arbitral decisions thereon; continued respect for the rule of law in Mexico; political risk in Mexico; crime and violence in Mexico; corruption in Mexico; uncertainty as to the outcome of arbitration; as well as those factors discussed the section entitled "Risk Factors" in Almaden's Annual Information Form and Almaden's latest Form 20-F on file with the United States Securities and Exchange Commission in Washington, D.C. Although the Company has attempted to identify important factors that could affect the Company and may cause actual actions, events or results to differ materially from those described in forward-looking statements or information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that our forward-looking statements or information will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements or information. Except as required by law, the Company does not assume any obligation to release publicly any revisions to on forward-looking statements or information contained in this news release to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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