Burford German Affiliate Sued Over Ties to Hausfeld Law Firm (1)

Burford Capital’s German affiliate is being sued by a client who said the litigation funder hid its relationship with a law firm it tapped to lead trucking industry antitrust cases.

Burford didn’t disclose that its law firm, Hausfeld Rechtsanwälte LLP, owns a stake in its German affiliate, Burford German Funding, before signing a deal to fund the cases for client Finacialright Claims GMBH, the company said in a complaint filed June 27.

Burford allegedly also “concealed” the relationship when it directed Finacialright to hire Hausfeld to lead the cases. The arrangement meant Hausfeld would receive additional compensation for its work beyond standard legal fees, according to Financialright.

“German law prohibits attorneys from receiving contingency fees because of the risk of compromising an attorney’s independence,” the company said in the complaint. “This is a de facto contingency fee arrangement, and Hausfeld’s participation is thus illegal under German law.”

In the new complaint, the company is asking a Delaware state court to scrap an arbitration agreement that was part of the deal with Burford, which the funder and the firm said requires the dispute be handled outside of court.

Burford agreed to back Financialright in lawsuits against German truck manufacturers accused of price fixing. Financialright pursued the cases after consumers assigned their claims to the company. It agreed to give Burford a piece of any winnings from the litigation in return for an unspecified investment.

Financialright said it did not realize that the arbitration requirement extended to parties who were not part of the agreement when it landed the deal with Burford in April 2017. It also didn’t know until late 2022 that Hausfeld was a part owner of Burford German Funding through a third entity, German Litigation Solutions LLC.

Hausfeld in 2015 announced a €30 million German venture between the firm and Burford, focused on competition claims and complex commercial litigation.

“The US-based Hausfeld LLP and the UK-based Hausfeld & Co LLP hold indirect economic minority interests in Burford German Funding,” said Lisa Sharrow, a Hausfeld LLP spokesperson, in a statement. “These are separate legal entities from Hausfeld Rechtsanwälte LLP that do not practice law in Germany. Burford German Funding was of course developed and set up in a way that was fully compliant with all relevant regulations.”

Finacialright is suing Hausfeld over the arrangement in a German court. It’s seeking discovery from Burford and the affiliate, which have asked a federal court in Delaware to force the matter into arbitration.

The company in the new complaint asks the Delaware court for a declaration ruling that the arbitration agreement is invalid and unenforceable.

“There is a dispute in Germany between a client Burford has funded and its lawyers,” Burford spokesman David Helfenbein said via email. “Burford is not a party to that dispute and its outcome has no impact on us. This Delaware proceeding is a third-party discovery request to Burford for material for the German litigation, which Burford believes should be adjudicated in arbitration and not in the Delaware courts.”

Potter Anderson & Corroon is representing Financialright.

The case is Finacialright Claims v. Burford German Funding, Del. Super. Ct., No. N24C-06-263, 6/28/24.