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February & March Legal Funding News Roundup

April 7, 2017
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4min read

Legal Funding News

  • Open Records Request Exposes Rare Litigation Finance Document - In 2015, after Des Moines Water Works sued the boards of supervisors of Iowa's Sac, Buena Vista and Calhoun counties over high nitrate levels in the state's Raccoon River, the Iowa agricultural group turned to third-party funders to pay for their defense. Documents uncovered through an open records request exposed legal funding attempts. Unlike in the legal funding industry where funding companies assume no control of the proceedings, the funding proposal would have required that the funders approve the choice of counsel and that a joint advisory group be created to coordinate communications between the funders and the defendants. One attorney representing the counties said that such agreements are, "not uncommon" and that the third-party financing was necessary to mount a reasonable defense. The plaintiff, on the other hand, worried that outside money and control meant the counties could afford to not settle and "win by attrition."

  • Litigation Finance for Defendants - If you're looking for a bit more explanation on how litigation finance for defendants works, Michael McDonald recently provided this handy explainer.

  • U.S. Litigation Funding vs. the World - The U.S. is still the largest market for securities and antitrust class action litigation, but most commercial funders in the U.S. focus on intellectual property and B2B claims. Raising funds for class actions in the form of litigation funding is increasingly becoming a trend around the world as it creates a U.S. style scenario for a group of plaintiffs who bring a claim in another jurisdiction. Compared to other advanced legal regimes, the U.S. is a particularly friendly jurisdiction for class actions. Outside of the U.S., for example, most other jurisdictions operate under the "loser pays" rule where the losing side pays for some or all of the winner's fees or expenses, which is why funders in AUS and the UK tend to charge 20-35% return on top of their investment to cover risk of loss.

Commercial Litigation Finance

  • Billionaire Rennert's Loss Is a Quick Boon For Burford Group -The Second Circuit Court of Appeals rejected billionaire Ira Rennert's plea to reverse a $213 million judgment stemming from the bankruptcy of his magnesium company more than a decade ago. This made for a quick payday for litigation-finance firm Burford Group, which had injected money into the case last year.

  • What kinds of claimholders/ law firms are using litigation finance?
  • What was the strongest motivation for doing so?
  • How does adoption vary among industries?
  • What are the major obstacles to adoption?

Referrals were overwhelmingly (about 45%) the way potential litigation finance providers were identified. The strongest motivation for seeking litigation finance? "Lack of funds for legal fees/ expenses" followed by "hedge risk of litigation."

 

International

  • The Future for Professional Third Party Litigation Funding in Ireland - More news from across the pond. The Irish High Court struck a blow to third-party litigation funders seeking to service the Irish market by declaring it unlawful!  This view differs from the position in many other jurisdictions, including neighboring England and Wales, where the law has evolved significantly in recent years. The Court's ruling stated that it is contrary to public policy and an abuse of process for a third party to provide financial assistance to support any litigation, in return for a share of the proceeds, unless that third party has a genuine interest in the litigation. Thus, such funding is still allowed in cases where the funder has a lawful interest or a clear and legitimate concern in the litigation, for example, as a shareholder or creditor of a company that is a party to the matter.

Etc.

  • Marketing To Alternatives Investors - Touching on a number of topics, Michael McDonald puts forth the two ways for fund managers of alternative investments to raise money: 1) turn to a placement agent, or 2) call on institutional investors.  McDonald also explains that marketing materials should contain not only academic theory backing up the asset class, but also present informed market judgment showing sustainable returns above a certain benchmark.

 

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