All posts by litigationfinance

Litigation Funding in Arbitrations may be allowed in Hong Kong and Singapore

Hong Kong and Singapore are in the process of amending laws which will allow litigation funding. The proposed amendments will allow third-parties to fund arbitrations seated in these cities. Despite the fact that Singapore and Hong Kong are among the top locations for arbitration globally. Their current laws prohibit litigation financing.

Litigation Funding in Hong Kong

The Hong Kong Law Reform Commission first proposed an amendment to allow third-party funding in October 2015. Over a year later, a bill to that effect was published in the Government Gazette. The bill was formally introduced in Hong Kong’s Legislative Council in January 2017 at its “first reading.” The next step is the second reading, where a vote will take place. The date has not been announced yet. But the law is expected to take effect this year.

The bill amends the Arbitration Ordinance, the current law applicable to domestic and international arbitrations in Hong Kong. The amendment provides that the laws of maintenance, champerty, and barratry will not apply to third-party funding in arbitrations. The proposed law also provides for certain standards and requirements needed to provide or access funding in these cases.

Litigation Funding in Singapore

Singapore published its amendment in the Government Gazette in February 2017. Singapore Parliament approved the law, the Civil Law (Amendment) Act 2017, in January 2017. The law will abolish maintenance and champerty laws in Singapore and permit third-party funding in certain categories of dispute resolution proceedings. The new law takes effect on March 1, 2017.

Singapore’s amendment comes with associated regulations and rules of professional conduct. The regulations provide a list of criteria third-party funders must meet in order to provide financing. One such requirement is that the third-party must be in the “principal business” of litigation funding. The regulations also set out certain categories of cases where third-party funding will be allowed. As for professional conduct, one new rule requires attorneys to disclose any funding agreements to the relevant court or tribunal. The identity of the third-party funder must also be disclosed.

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Summarized and reviewed by Jim Smith.

Class Action Litigation Act Would Require Disclosure of Litigation Funding in Class Action Cases

The House Judiciary Committee recently approved the newly introduced Class Action Litigation Act of 2017. It is known that the Act was proposed by House member Bob Goodlatte (R-Va) in an attempt to provide greater protections to plaintiffs in class action cases, particularly with respect to abuses of the class action system by class counsel.

What does the Class Action Litigation Act require?

Notably, the Act would require class counsel to disclose any third-party litigation funding. The idea is that disclosure would reveal who is really driving the litigation. Though the Act has yet to be voted on by the House or the Senate but has received support from the Chamber of Commerce and other organizations.

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Reviewed by Marc Lesnick

IMF Bentham Launches $200 Million Funding Vehicle

IMF BenthamThe Australian litigation funding giant IMF Bentham launched a $200 million investment vehicle to finance United States cases and investments.  Thus Bentham invested $50 million and an unnamed hedge fund invested $150 million.

The IMF Bentham funding vehicle

The funding vehicle was raised by IMF Bentham on behalf of its U.S. subsidiary, Bentham IMF. This is IMF Bentham’s first investment vehicle. Bentham IMF’s CEO stated that the vehicle is indicative of investor confidence in litigation financing and Bentham’s position as a top company in the litigation financing industry.

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Reviewed by Meghan Hallinan.

University of Michigan to Invest in Litigation Funding

The University of Michigan is in talks to invest $5 million of its endowment in litigation funding.

The university plans to invest with Lake Whillans, a litigation funding company, with the goal of receiving a portion of proceeds from successful cases. According to Lake Whillan’s website, the company invests in meritorious commercial claims with realistic damages in excess of $20 million. The investment is part of the University of Michigan’s aim to diversify its portfolio by investing in areas where returns are independent of financial markets.

Last year, the university invested in real estate, credit, and energy funds. The university’s endowment was valued at $10.5 billion at the end of 2016.

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Summarized by Marc Lesnick


UK Litigation Funders Assets Rise 25 Percent Last Year

Recent research revealed the assets of the top 20 UK litigation funders rose 25 percent last year alone.

Their balance sheets totaled £723 last year, up from £575 in 2015. This also represents a 55 percent increase since 2011. The increase coincides with Burford Capital’s recent acquisition of Gerchen Keller Capital, which will total its combine assets at $1.2 billion.

The release of these numbers highlights just how fast the litigation funding industry is growing and becoming recognized as a lucrative investment opportunity.

View full post at SolicitorsJournal

Summarized by Matthew Dunes

Litigation Funding Company Hit With CFPB Complaint

The Consumer Financial Protection Bureau and the New York Attorney General filed a complaint against the litigation funding company RD Legal in the Southern District of New York this week.

At issue is RD’s practice of providing cash advances to people awaiting payments under statutory compensation funds and settlement funds. Cash advances are up-front payments which the consumer agrees to repay upon receipt of its settlement award. The CFPB claims in this case consumers were damaged by repaying amounts significantly larger than the advances they received.

The complaint alleges that RD markets the advance as an “assignment” which is really a loan that violates, among other laws, New York state usury laws and the Consumer Financial Protection Act. While there is still a question of the CFPB’s jurisdiction over RD’s cash advances, this case is significant. It suggests CFPB intentions to attempt to regulate the booming litigation finance industry, which has stayed relatively under the radar.

This is one of three cases CFPB has filed against companies providing cash advances to those awaiting settlement funds.

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Summarized by Meghan Hallinan

Financing Agreements Disclosure is required by Northern District of California in All Class Action Suits

Third-party litigation financing agreements are now required to be automatically disclosed in all proposed class actions in the Northern District of California. The automatic disclosure rule is the first of its kinds in the United States district courts.

The new rule, which states that “in any proposed class, collective or representative action, the required disclosure includes any person or entity that is funding the prosecution of any claim or counterclaim,” was adopted in a court-wide standing order for all judges in the Northern District of California. Although this is a huge step toward greater transparency in third party financing, the rule is unlikely to impact big players in litigation financing like Burford Capital and Bentham IMF, as they do not typically fund class action cases.

A Burford statement indicated that the new rule may even allow courts to see how common litigation financing in class action lawsuits has become.  The new rule is indeed limited—it was adopted after the court previously proposed an even broad requirement of automatic disclosure in all cases.

View full post at TheRecorder

Summarized by Meghan Hallinan

Burford Capital buys Gerchen for USD $160 Million

Burford Capital (LSE:BUR) buys Gerchen Keller Capital for USD $160 MillionOn December 14, litigation funding giant Burford Capital (LON: BUR) announced they were finalized the purchase of Gerchen Keller Capital (GKC) for USD $160 million in cash, shares and loan notes.  GKC also has an incentive to receive an additional $15 million based on performance.

Burford stock price saw a one day 18% rise in price from £480 GBP to £565 GPB per share.   Burford did add an additional ~3.7 million shares onto the LSE (GBP £1.7 Billion / USD $2.2 Billion in value)

Unlike most other companies that issue a single page press release, Burford’s release was a 10 page detailed document filled with facts,  business strategy, financials, and justified their purchase with 3 main reasons.

  • They view market demand for litigation finance having a voracious apetite, rising substantially.  Burford saw a limitation of its ability to scale further.
  • They required investment management arm, which GKC had.
  • GKC specialized in Intellectual Property, an area where Burford was lacking.

Burford Capital now claims to have over USD $1.2 Billion in current investments.  The company now has 86 employees, 40 of which are attorneys.   GKC had 20 employees.

The sale is about 10X earnings, with GKC reporting income of USD $15.4 million for the year of 2016.  Their profit margin ran at about 60%.  About USD $95 million of the $160 Million sale was cash. GKC’s principles remain at the company for the next 3 years.  Adam Gerchen is now the President at Burford.

GKC also has 4 active funds they use for investment.  They charge fees for those funds.  Revenue from those fees range from 1.4% to 20%, depending on the structure.

Burford Capital’s acquisition illustrates an industry with strong market growth and high profit margins.  The purchase also sets expectations among the industry for a 10X earnings valuation of existing litigation finance firms that show high profit margins.

Original Press Release: (PDF)

Summarized by Marc Lesnick

Big Data Suggest How Judges Rule

Big Data Suggests How Judges Rule (Litigation Funding News)Attorneys now can datamine millions of documents with a focus on comments and actions by judges to determine predictability.  Lex Machina, Ravel Law, Bloomberg Law and other new big data services are some of the providers of these tools.

Big data now provides lawyers statistics on average wait times before a trial or chances of a case being dismissed under a particular judge.   Since 2011 for example, motions by San Francisco based U.S. District Judge Susan Illston were examined.   48% of the time she dismissed in full.  Denials for motions in full were 24.5%.

The economics of this are game changing.  It  eliminates hours of monotonous research given to junior lawyers or law librarians.  The tools now allow these individuals to do far more than was possible from their previous assignments.

View full post at Wall Street Journal

Summarized by Marc Lesnick

English Court of Appeals’ Decision Increases Litigation Funders’ Liability

Last week’s ruling of the English Court of Appeal upheld a High Court
judgment from 2013 forcing the litigation funding companies who
invested in the case of Excalibur Ventures v. Texas Keystone to pay
more than 20 million pounds to the prevailing defendants, two of which were U.S. companies represented by the U.S. counsel, pursuant to the English “loser pays” rule.

The decision serves as a cautionary tale for litigation funders, especially newcomers as was the case in Excalibur, likely requiring more in-depth analysis of claims viability and other due diligence.

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Summarized by Samantha Devotes