By the Numbers: Five Big Things in Litigation Finance in 2023

The decade-old litigation finance industry saw twists and turns this year. It faced increased scrutiny from regulators in the US and abroad. It made headlines with large payouts and messy legal disputes. And it dealt with a federal judge committed to investigating the ties between funders and plaintiffs.

Here are the five biggest developments in litigation finance for 2023.

Sysco Sues Burford

Sysco Corp. filed a lawsuit in March against litigation funder Burford Capital. The food distributor accused Burford of meddling in efforts to settle several antitrust suits against poultry processors and meatpackers. Burford invested $140 million in the cases and obtained a New York arbitration award stopping Sysco from finalizing settlements, saying the deals to end the suits were too low compared to the value of the claims. The fight ended a few months later when Sysco assigned its claims to an affiliate of Burford, Carina Ventures LLC. Sysco removed itself from the docket jointly with Burford and substituted with Carina, which is now a real party in the interest.

YPF Case

Burford had a major victory as it positioned itself for a 37,000% return on an investment in claims against Argentina. The claims had to do with concerns by investors over the process Argentina used for nationalizing state-owned oil company YPF SA. Burford in 2015 acquired the right to pursue the claims for $16.6 million. In September, a New York federal judge ordered the country to pay $16 billion. Argentina has since appealed and a US judge agreed to temporarily delay enforcement of the judgment.

Disclosure

The push to require lawyers to publicly disclose the use of litigation finance in cases had mixed results in two states. Montana Gov. Greg Gianforte (R) signed SB. 269 into law. The statute requires litigation funding disclosure in all civil cases before Montana courts. In Louisiana, a bill that required disclosure passed in the legislature but was vetoed by Gov. John Bel Edwards (D). With a new governor starting in January, there will be a renewed effort to advance legislation.

Federal legislators introduced disclosure bills that face long odds of passage in a divided congress. In September, House Speaker Mike Johnson (R-La.), Senator Joe Manchin (D-WV) and Senator John Kennedy (R-La.) introduced legislation (H.R. 5488, S. 2805) that would require disclosure of foreign entities funding lawsuits in US courts. It would ban sovereign wealth funds and foreign governments from engaging in the practice.

PACCAR

The UK made waves with a Supreme Court decision that dramatically affected litigation finance agreements in the country. In a class action involving truck manufacturer PACCAR, the court found that litigation funding agreements in which the funder’s recovery is a percentage of the damages secured in the underlying funded claim are unenforceable. Many litigation finance agreements are written in this fashion and it caused a stir as funders were forced to redo contracts with their clients.

The case is a class action brought on behalf of buyers of heavy goods vehicles who alleged they suffered loss due to a cartel found by the EU Commission to have operated between major truck manufacturers. An amendment to the Digital Markets, Competition and Consumers Bill could offer a partial solution. A new clause in the bill would partially reverse the PACCAR decision by providing that third party funding agreements, where the funder receives a percentage of the proceeds, will remain enforceable in opt-out collective proceedings. The bill is going to undergo a detailed review in the House of Lords.

Judge Connolly

Delaware federal Judge Colm F. Connolly has made it his mission to uncover the presence of litigation funding in cases in his courtroom. In April 2022, he published a standing order that required such disclosure.

In November, Connolly published a 105-page opinion which detailed his plans to refer lawyers associated with Houston patent monetization firm IP Edge LLC to the Justice Department, U.S. Patent & Trademark Office, and state lawyer ethics officials.

He wrote that the lawyers violated professional conduct rules in a scheme involving some 60 patent infringement suits in Delaware against Buzzfeed Inc., Imagine Learning Inc., and CNET Media Inc. IP Edge oversaw the litigation but used LLCs to shield its involvement in the cases, Connolly said. The District of Delaware is one of the most popular venues for patent cases.