Transactions

Funding transactions can be structured in myriad ways, including arrangements to cover operating expenses or a fixed return rather than a contingent interest. Explore how litigation finance transactions are customized to meet the individual needs of a claim holder.

Why A Delaware Supreme Court Decision Affirming Shifting a Contingency Fee to the Losing Party Could Have Applications to Recovering the Costs of Litigation Funding

Marla Decker

n general, the U.S. legal system requires parties to bear their own costs, and does not automate “loser-pays” rules like other jurisdictions or arbitral institutions. There are certain exceptions, notably when the dispute arises under a contract providing that the prevailing party will be entitled to its fees and costs. An incentive to both parties to include such a provision is so that each party will truly be “made whole” after any dispute, rather than netting from any recovery the costs of legal fees and expenses. 

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Can a Prevailing Party in Arbitration Recover its Litigation Funding Costs?

Marla Decker

In addition to providing finance for commercial litigation cases in the U.S. and Canada, Lake Whillans routinely funds claimants in arbitrations. In recent years there has been increasing attention to litigation funding arrangements in arbitrations, and a number of arbitral institutions have inserted rules to address the practice, both to increase transparency and to promote fairness to both sides.  One emerging question in the field, where cost-shifting to the losing party is a typical part of awards, is whether tribunals will award a prevailing claimant the value of its litigation funding costs, in addition to damages and other legal costs. The confidential nature of most commercial arbitral awards makes it difficult to know how often this occurs (or has even been sought), but tribunals have permitted claimants to recover funding costs in some instances. And there is growing precedent to indicate that where tribunals award funding costs, courts will not second-guess the decision — at least for arbitrations sited in England and Wales.

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How to Choose a Litigation Funder

Marla Decker

Litigation finance is growing in prominence in the legal industry, embraced not just by lawyers but also increasingly by courts and state bars.  As lawyers and claimholders have come to understand the utility and flexibility of litigation finance, the demand for funding has increased, and so too has the number of funders in the market.  Some funders (like Lake Whillans) focus exclusively on litigation financing, whereas others are incorporating litigation finance investments as part of a larger investment portfolio.  Some funders are interested only in the highest-value disputes, whereas others target smaller investments.  Some will fund a strong case in any area of commercial litigation, whereas others specialize in a more focused range of cases.

How are claimholders choosing among the increasing diversity of funding options?  How should they be choosing?  In this article we first present some empirical evidence on considerations in funder selection and then offer our advice, gleaned from our long experience in the litigation finance market.

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Litigation Finance Sounds Good — But What Role Will The Funder Play?

Marla Decker

Much of the discussion of litigation finance naturally focuses on the underwriting phase of the funding process. We’ve written previously about the variety of flavors of litigation finance deals and the fact that it’s never too early or too late to seek funding. We’ve also discussed the pricing that a claimholder should expect in negotiating a litigation funding agreement.

But what about when all the terms have been agreed and both claimholder and funder have signed the funding agreement? What role does the funder play? Who controls settlement? And what type of interaction should a claimholder expect to have with the funder on an ongoing basis? And how do the mechanics of funding work? How does the money flow both for covering litigation expenses and for dividing the proceeds from a successful claim? Lake Whillans has seen many litigation funding investments through to their conclusion, and although each case has unique elements, there are some standard practices.

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Litigation Finance – Quickly Evolving Beyond “Traditional” Uses

Marla Decker

In its early days (not so long ago), litigation finance entailed a straightforward proposition. A claimholder with a meritorious claim, but without the resources to litigate it, would seek funding from a litigation finance provider. The funder would conduct due diligence on the claim and negotiate investment terms. If the claim succeeded, the funder would recoup its principal, plus a return; if it failed, the claimholder would walk away with no liability. Funder and claimholder had no particular expectation of any longer-term partnership.

This type of one-off, single-case funding is still going strong today. But the field of litigation finance has expanded considerably, and funding now comes in a variety of flavors. A growing proportion of funding deals involve neither a single case nor a poorly-resourced claimholder. Today, entities seeking funding are often more concerned with managing risk than with acquiring sufficient resources to litigate.

This article will explore three growth areas in the current funding landscape: (1) deals involving funding for larger corporations, (2) law firm portfolio funding, and (3) acquisition of claims by litigation funders. Lake Whillans has extensive experience investing in each of these structures.

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Litigation Finance 2020: ‘Flavors’ Of Litigation Finance

Marla Decker

The growth of litigation finance (also known as litigation funding or third-party funding) has been a hot topic in recent years, but even if you’ve heard of the general concept, you may be less familiar with the range of litigation finance options. Much like other forms of finance, there are different structures that can meet the needs of a particular claimholder, matter, and/or firm. This article will review the basic features of a litigation finance investment and describe some of the different structures or “flavors” of litigation finance. Lake Whillans has and will transact in any of the “flavors” described below.

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Litigation Finance: Work Product & Discovery in the Wake of Gharabe v. Chevron

Garrett Ordower

The closely watched case of Gbarabe v. Chevron – a class action against the oil giant based on an oil rig explosion off the coast of Nigeria – has been portrayed as a cautionary tale for the world of litigation finance. The defense attorneys’ dogged pursuit of the details of plaintiff’s outside funding, the story goes, succeeded, and aided in the attack on the adequacy of plaintiff’s counsel. The defense did successfully defeat class certification, but litigation funding ultimately played little or no role in the case’s demise.

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Defense-Side Litigation Funding – In Practice

Lee Drucker

Litigation funding is not just for plaintiffs. We, at Lake Whillans, provide defense-side financing using a unique transaction structure. While our approach does not work for all defense-side litigation or arbitration, in the right circumstances, our structure provides for a straight forward transaction that allows a defendant to optimally protect its business.

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Litigation Finance: Creating a Code of Conduct

Lee Drucker

In mature industries, there is usually a set of rules outlining best practices for individuals and organizations. In newly developing industries, however, best practices are less clear, and once established spread more slowly. In order to promote the development of best practices in litigation finance, we recently identified key aspects of a funding arrangement that we believe will lead to the best results for a claimholder. Companies considering a litigation financing offer should consider the following principles and their importance:

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Pick the Right Lawyer for a Royalty Contract

Lee Drucker

Role play with me for a moment. Imagine you’re going in for surgery and you can choose between two surgeons: a doctor who performs that surgery twice a year, or one that does it twice a month?

It’s a no brainer. The same should apply to lawyers – particularly when it comes to the mission-critical task of negotiating royalty contracts. These key agreements will make or break a company. Plus, if things go bad between your company and other parties, these documents will be what separates losing millions (and sometimes more) and remaining intact.

Here are some ways to vet your attorneys to see which ones know enough about royalty agreements.

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The best way for companies and their counsel to determine if litigation finance is an attractive option is to discuss it with us.