Your October Legal Funding News Roundup

October 27, 2017
5min read

Legal Technology

ROSS Intelligence lands $8.7M Series A to speed up legal research with AI 

ROSS Intelligence is using 'machine learning' going after LexisNexis and Thomson Reuters for ownership of legal research. At its core, ROSS is a platform that helps legal teams sort through case law to find details relevant to new cases. This process takes days and even weeks with standard keyword search, so ROSS is augmenting keyword search with machine learning to simultaneously speed up the research process and improve the relevancy of items found. "Bluehill benchmarks Lexis's tech and they are finding 30 percent more relevant info with ROSS in less time," said Andrew Arruda, co-founder and CEO of ROSS. Today ROSS offers products to large law firms in both bankruptcy and intellectual property law but looking to expand further (and to smaller firms). wants to replace lawyers with blockchain technology, a 'blockchain technology' startup is using the blockchain to make it easier to settle smaller claims and intends to eradicate the hundreds, sometimes thousands, of dollars spent on the lawyers needed to win or defend these cases.

How it works: users are connected with randomly selected jurors who make legal decisions and deliver judgment regarding any kind of dispute, and deals are then executed via smart contracts and jurors are paid via the currency/token, the "JOT" (which is expected to be listed on all the main cryptocurrency exchanges).

"It will not replace lawyers for complicated cases, but it is a much cheaper alternative for independent dispute resolution," which is important because the smallest of the small claims often go unchallenged as the costs of litigation are simply too high for the affected party to take the case forward.  

Commerical Funding

Investors courting litigation finance for profit potential 

Endowments and pension funds are starting to take chances on corporate litigation finance investments. Investment managers - and some asset owner executives who've signed on with them - say the strategy provides uncorrelated returns regardless of market volatility or economic conditions. "Managers of litigation finance strategies have seen growing interest, although pension funds are just starting to explore the asset class," said John Greene, managing principal and portfolio manager at Halcyon Capital Management, and that "litigation finance investments are more liquid than other alternative asset classes, with an average of 2.9 years for litigation finance vs. the typical five-year lockup of private equity."  

IMF Bentham Secures $115M in Latest Litigation Funding Frenzy 

Australian-based IMF Bentham Ltd. has reportedly just raised up to USD $115 million from two institutional investors to finance the litigation funder's future cases in Asia, Australia, Canada and Europe. Combined with the funds raised this month and in February, IMF Bentham said it has now raised close to AUD$480 million, or $377 million, through bond issues within the past two years.  

Bentham Announces New Unit to invest in US Bankruptcy Claims

Given the funds raised (see above!), Bentham IMF will begin its new foray in investing in U.S. bankruptcy claims - in which it will provide cash to a bankruptcy trustee to pursue claims in exchange for a percentage of any recovery - a "market in the U.S. is really just starting to take off" according to Ken Epstein, one of two new hires who will lead the new practice. He suggested Bentham would look to invest at least $1 million and would only look at cases where the damage estimate would be several million dollars.  

Odds & Ends

Litigation Finance Disclosure: The Claimant's Choice, for Now

According to Lake Whillans, Claimants in federal courts considering litigation financing do not -- for now -- have to disclose financing arrangements in U.S. courts (save one limited exception), but the U.S. Chamber of Commerce is working to change that. Earlier this year, the Chamber proposed that Rule 26 of the Federal Rules of Civil Procedure be amended to require disclosure of all litigation financing arrangements in federal cases. Rule 26 currently requires initial disclosure of a broad range of information, including (for example) the documents and other materials the party expects to use to support its claims or defenses, the computation of categories of damages, and insurance agreements. But the rule doesn't require all potential disclosures, including litigation financing arrangements.

The Chamber made this same proposal in 2014, which was rejected by the Advisory Committee on Civil Rules. The renewed proposal will return to the Committee, which under its regular process will review the proposal at its biannual meeting this fall. If the advisory committee moves the measure forward this time it will face further review, including by Congress, but the earliest the rule change can become law will be December 1, 2019.  

Third-party litigation funding: a new tool for construction disputes 

Third-party litigation funding is a useful tool to assist owners and contractors in the construction industry in managing the costs and risks associated with significant disputes and claims for several reasons: (a) it's "a smart way for a company to pursue litigation or an arbitration, which is inherently risky without any risk to cash flow, or if the case is ultimately unsuccessful because the funder will pick up any adverse costs (b) it assists companies with their resource allocation," and (c) it allows a construction or mining company (especially those who have multiple cases going on at once) to get certainty on what its litigation spend is going to be.  

The Growing Acceptance of Litigation Finance 

The dramatic increase in the use of litigation finance certainly suggests that companies and law firms have overcome any lingering fears to embrace litigation finance as an important part of the legal industry. A recent study conducted by ALM Media, publishers of the Daily Report, found that 36 percent of U.S. law firms used litigation finance in 2017, compared with 28 percent a year ago (not to mention the astounding increase from 2013, when only 7 percent of law firms reported using litigation finance).  

Litigation Finance & Insurance: 5 Pitfalls for the Uninitiated 

This article focuses on the following 5 pitfalls to avoid when seeking and negotiating litigation finance: (1) failing to understand the deal terms; (2) putting all eggs in one basket;  (3) undercooking the budget; (4) taking your foot off the gas; and (5) assuming the funder will always play nice  

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