A new website, LexShares.com, gives investors access to a new class of assets: potentially lucrative commercial lawsuits. Media reports in outlets like the Wall Street Journal, Bloomberg Newsweek and Forbes described the new venture as a crowdfunding platform meant to help level the field for plaintiffs suing better-funded defendants.

Here’s how it works: LexShares invites applications from plaintiffs (or their lawyers) seeking funds for litigation costs, like fees for lawyers and experts, and also for working capital and personal expenses. LexShares’ staff then reviews those cases, weighing legal merits, quality of plaintiffs’ counsel, litigation costs, and defendants’ financial resources.

Unlike some legal funders, LexShares won’t participate in personal injury cases; it instead focuses on commercial lawsuits, dealing with areas like contracts, intellectual property, and securities law. If a case meets LexShares’ standards, cases are posted to the platform where accredited investors can make funding commitments for non-recourse financing. LexShares investors get paid if plaintiffs win a settlement or a successful verdict; if plaintiffs lose, investors forfeit their stake in the case.

After a registered broker-dealer sets up a separate pooled investment fund for each financing, the LexShares portal posts the case details for up to 60 days, allowing accredited investors to make an indirect investment in the case for a minimum of $2,500.

LexShares says it aims to post opportunities that require between $100,000 and $1 million in funding, in cases with a potential value of $5-$40 million.

Hedge funds, corporations, trusts and partnerships have long invested in legal funding. What’s new about LexShares: it provides a vehicle for individuals who are “accredited investors” to do likewise. Under an SEC definition, an individual who’s an “accredited investor” has either a net worth, excluding primary residence, of at least $1 million, or had upper-level earned income (at least $200,000, or $300,000 for a couple), in each of the last two years, and can reasonably expect to earn at least as much this year.

Just as it vets legal claims, LexShares checks whether would-be investors qualify. If so, they’ll receive additional details on the investment vehicle (though plaintiffs can choose to share detailed information on their cases only with potential investors they approve in advance). If investors commit, they can access status updates on their cases, including court documents, via the LexShares website.

So what would make buying into a commercial lawsuit attractive to a well-heeled individual? Novelty aside, the lure is likely to be LexShares’ professed goal of delivering its investors annualized returns of 50% or more. In addition, LexShares notes the performance of legal claims, unlike that of most other types of assets, is not closely correlated with other financial markets like stocks, bonds, and real estate.

Currently listed on the LexShares website are capsule descriptions of investment opportunities in three lawsuits. Two have already met fundraising targets: a product liability case against an unnamed Fortune 500 consumer packaged goods maker, for which investors promptly ponied up $250,000, and a breach of contract/fraud case a finance company is bringing against the oil and gas developer it contends failed to pay several million dollars owed on a successful project (investors provided $110,000).

Still seeking funds is a whistleblower case against an unnamed Fortune 1000 government contractor, for allegedly overbilling the federal government; only $30,000 of its $100,000 goal has come in so far.

Co-founders of LexShares are former Deutsche Bank technology banker Jay Greenberg, who serves as the new venture’s CEO, and veteran lawyer and legal funding executive Max Volsky, the Chief Investment Officer. (Full disclosure: Max authored the industry guidebook Investing in Justice in 2013).

Assessing the new enterprise, officially launched November 19 with financial backing from Atlas Ventures, a Cambridge, Massachusetts-based investment company, and “angel” investors, Volsky sees it having the potential to “revolutionize the legal industry, by creating a more rational system of allocating litigation risk, while increasing access to the legal system.”

Alternative litigation finance (ALF) has received substantial press recently, highlighting instances in which the financier has received an astonishing return. However, ALF investment is not a “one-size-fits-all” proposition. There are various types of ALF transactions that can provide investors with a range of options in line with their individual appetites for risk; this paper will outline the basic steps evaluating those opportunities

In a traditional ALF transaction, a third-party financier makes a non-recourse advance to the plaintiff in an ongoing commercial dispute, in exchange for an interest in the plaintiff’s potential recovery. The plaintiff uses those funds to pay ongoing litigation expenses and, in some cases, a portion of the plaintiff’s legal fees. The ALF provider receives a priority distribution from the proceeds due to the successful plaintiff. Payment is typically protected by a perfected first lien security interest in favor of the ALF provider.

The first step in rigorous pre-funding due diligence is determining whether ALF is permitted, or if any of its structural components are limited, in the jurisdiction where the case was filed. State statutes do not currently present a concern, since the handful of relevant statutes only focus on living expense advances made on a retail basis to individuals, typically made to personal injury plaintiffs. In some states, however, case law prohibits or limits commercial ALF funding by holding that this financing is usurious or violates either “public policy” or legacy common law doctrines that at one point in history might have barred ALF transactions. However, since many states do not reach the same conclusions under their case law, the use of this type of financing should continue to grow in those jurisdictions.

A detailed analysis of the restrictions, if any, imposed by applicable professional legal ethics is the next due diligence focus. In some jurisdictions, for example, ALF arrangements are prohibited since the exchange of relevant due diligence information between plaintiff’s counsel and the ALF funding source may waive attorney-client privilege and/or confidentiality. In other instances, the requirement that the ALF provider approve all proposed settlements has been held to violate the obligation of plaintiff’s counsel to exercise independent professional judgment throughout the dispute. Some states—such as Texas – permit ALF commercial arrangements under this analysis, while others – such as Ohio — do not.

Assuming that ALF is permitted in this jurisdiction, the specifics of the plaintiff’s case should then be assessed in detail. Given the inherent risk in this structure, this final step includes a thorough analysis of both the plaintiff’s legal claims – including an assessment of the probability of success, the amount of the projected potential recovery, the amount and purpose of the advances made at each stage in the dispute, an estimate of the time period from initial advance to final recovery, the risk of non-collection in the event of a successful result and the substantial cost of due diligence as well as the quality, reputation, record of success and experience of plaintiff’s counsel in this type of litigation.

ALF funding has traditionally been used in large intellectual property infringement cases, international arbitration and class-action matters, all of which: involve a substantial financial commitment by the ALF provider, typically take a long time to resolve and may be quite difficult to handicap both the law and/or the egos of key participants in such high-risk/high-return “bet the company” cases. Since it is inherently difficult to reach a definitive conclusion on present value and inherent non-recourse risk, it is not surprising that publicly traded ALF sponsors have reported IRRs in excess of 60% in these types of traditional ALF cases. However, recent legal decisions and political headwinds –such as the continuing pursuit of “patent trolls” — may reduce the attractiveness of financing only these types of cases in the future or, perhaps, lead ALF funders to seek other types of financeable cases.

Indeed, many ALF financiers use portfolio theory in the analysis, investment and management of this uncorrelated investment class in order to pursue a broader range of potential returns and diversify against the legal risks inherent in these larger cases. Following this trend, ALF funding sources are more willing to expand their product lines to other situations that may present less risk, such as the partial monetization of successful judgments, even though such judgments can be overturned – either in whole or in part — or reduced.

Given the breadth of possible financings and the available ranges of potential returns, risk capital can assess the available combinations in a number of ways. Since some ALF sponsors are publicly traded, we can learn something about their investment philosophy and investment results. However, many of the more interesting details — such as pricing metrics and specific structural details of particular investments — are not available since the transactions are subject to nondisclosure agreements.

Unfortunately, even less information is generally available about the numerous privately-held ALF sponsors — some of which have access to a pool of committed capital, while others need to secure financing on a deal-by-deal basis. Plaintiffs may view the ready availability of such committed funds as reducing execution risk, thereby enabling the ALF source to obtain even more attractive terms. The need for such committed capital suggests that ALF sponsors – both public and private — may welcome additional investments, whether through the initial purchase of their publicly traded securities, individual contributions to their investment pools or in some select instances, in the form of sidecar investments to fund particular litigation.

Since this type of funding is relatively new to the USA, experienced ALF professionals are in relatively short supply. As a result, investors wanting to participate in other types of litigation and/or accept different risk/return scenarios may consider investing with professionals with comparable experience — such as teams with top-drawer litigators and former general counsels with significant litigation management experience – even though those professionals may have less hands-on ALF background.

Situations may also arise in legal markets outside of the traditional ALF funding radius – such as floor planning the portfolio of contingency personal injuries cases being pursued by an excellent, but undercapitalized attorney – that enable investors to exploit niche legal opportunities. This approach may merit legitimate review if these teams focus on cases – such as commercial real estate insurance coverage disputes and construction defect claims – where a successful plaintiff may recover attorneys’ fees, expenses and/or punitive damages. The possibility of such awards increases potential returns, which may compensate of the sponsors’ lack of an ALF track record.

In some instances, investors may also be able to realize attractive returns separate and apart from the ALF transaction itself. For example, real estate savvy ALF sponsors and/or investors with access to construction and property management expertise may be able to acquire the real estate property involved in a drawn-out insurance coverage disputer at an attractive discount from a “deal-fatigued” plaintiff while negotiating a resolution with the existing mortgagees. While perhaps not a condition of the ALF funding, this separate potential return may be more readily analyzed and valued, and thereby enables investors to accept a different risk/return scenario from the stand-alone ALF investment.

Funding a portfolio of similar, relatively small cases — such as a group of aggregated claims for the underpayment of oil and gas royalties – may present yet another investment approach. Here the damages suffered by an individual mineral owner may be insufficient to support an investment, but the potential damage recovery arising from the successful prosecution of a group of similar claims may be substantial enough to merit an ALF investment. This approach may offer a lower risk/return proposition that some investors may find attractive, especially if the underlying law is fairly well settled, lower aggregate advances are anticipated and the projected time to resolution is relatively short. This approach should be even more attractive to ALF investors if counsel for the ALF sponsor is retained on a contingency fee basis to oversee the aggregation of the claims and the prosecution for aggregated legal claims.

Take, for example, the case of Ma and Pa Kettle, who live on a 40-acre farm southeast of Central City, Nebraska. They have leased the oil and gas rights to their farm to Leviathan Oil Company, for which Leviathan has agreed to pay the Kettles $5 per month as the required oil and gas royalty payment. But Leviathan consistently underpays the Kettles by $1 per month, thinking that the underpayment is too small to prompt the Kettles to file an individual lawsuit. Attorney Smith, who has developed a very successful plaintiff’s automobile injury practice, sees an opportunity to sign up the Kettles and others with similar claims against Leviathan Oil and churn them, as he is done with his automobile claims. Attorney Smith is considering two approaches in bringing these claims.

The first option would be to file a class action on behalf of the Kettles and other similarly situated parties. However, it may be procedurally impossible to win certification of the required class, and even if Smith succeeds in getting the class certified, he fears that he could not afford to advance the significant expenses he would face.

As an alternative, Smith might sign a contingency fee agreement with each individual plaintiff, hoping to handle their cases in the same high-volume/low-individual attention way he deals with automotive personal injury claims. But bringing individual suits will be time consuming, success in any given case will not guarantee success in other cases, and Smith still cannot afford to finance litigation expenses. Faced with two unappealing options, Smith decides to pick up another bunch of automobile personal injury cases instead.

Steve Jones, an experienced oil and gas litigator, believes his experience equips him to be more successful than Attorney Smith in this type of litigation. He is concerned, however, that the management committee at his law firm will not permit him to advance the ongoing litigation expenses, believing that taking such cases on a contingency fee basis is risky enough.

Then Attorney Jones learns that one of his college fraternity brothers provides alternative litigation financing to support meritorious claims prosecuted on a contingent fee basis by exception counsel, like Smith. In another stroke of good luck, another frat brother comes forward and offers to form a new entity to purchase a 50% undivided interest in the aggregated claims of the Kettles and others with similar claims against Leviathan Oil and to vigorously pursue those aggregated claims.

Reasonable investment professionals may choose differently, but the author would invest in the ALF facility to be provided to attorney Jones, rather than support the efforts of Attorney Smith.

As with many alternative investment classes, the range of investment opportunities available to sophisticated investors in the ALF industry presents a generous array of risk-return propositions, some of which may be more attractive than others to various investors. The growing acceptance and increasing global use of ALF strongly suggests this industry will continue to expand for so long as ALF satisfies a significant need in the prosecution of meritorious commercial claims and provides investors with an acceptable array of appropriate risk-adjusted return from which to choose. More transparency may ultimately make this market more efficient and reduce the spread of potential returns. However, for the present and the reasonably foreseeable future, investment in ALF transactions and relationships should continue to provide the possibility of returns aligned with the risk appetite and preferences of individual investors.

Richard A. Blunk is Managing Director and General Counsel of Thermopylae Ventures, LLC, a Dallas, Texas investment group with interests in alternative litigation finance, the deployment of inbound foreign investment, data centers, related “big data” storage technologies, cyber threat detection, internet addresses, Texas real estate and robust, “deep dive” internet search technologies. He can be reached at rblunk@thermopylaeventures.com.

Tennessee’s legislature became the first in the nation to adopt a highly detailed legislative scheme, in the name of protecting consumers in consumer litigation finance agreements, with the passage of the “Tennessee Litigation Financing Consumer Protection Act,” which took effect July 1.

As the new law’s title suggests, it does not extend to litigation funding arrangements with businesses, only to non-recourse transactions where a consumer, in exchange for an advance payment while the consumer’s lawsuit is pending, gives a finance firm a contingent, non-recourse interest in a share of any award or settlement that may be received from the lawsuit.

Gov. Bill Haslam (R) signed the measure on April 29. It had cleared the state Senate easily, 27-2, in mid-January, but in early April barely squeaked through the state’s General Assembly, clearing that chamber on a 52-36 vote, just two more votes than required for passage.

The Tennessee law includes price controls: a 36% cap on annual interest rates litigation funders may charge when recovering payment advances, plus a 10% cap on annual fees, further limited to $360 per year, and a total of $1,000 over the maximum three-year duration the new law allows for such transactions. (The fee caps won’t take effect for one year.)

The measure also mandates that consumer litigation funders provide clients with a completely filled-in contract and a cooling-off period (five days from the date of the contract’s execution or the receipt of funds, which comes later) during which they can cancel the contract without penalty by returning any payment received.

It also requires consumer litigation funding agreements to disclose whether the client has legal representation in the underlying lawsuit, and how clients’ lawyers will be paid. Consumer litigation funding firms must also register with the state, pay a filing fee of $100, and post a $50,000 surety bond.

Some proponents of the measure argued for its restrictions on what consumers may be charged as needed to protect against heavy costs or consumer confusion or exploitation. Legal funding firms opposing the law argued unsuccessfully that, because a litigation funding agreement typically requires no repayment if a consumer lawsuit doesn’t bring an award or cash settlement, high risks to lenders necessitate steeper charges.

But critics of the new law point to less altruistic motives for some sponsors. Illinois-based Oasis Legal Finance, which describes itself as the country’s largest legal funding service for consumers with injury claims, operating in 44 states and the District of Columbia, announced it would stop funding in Tennessee after the law took effect. Firm CEO Ralph Shayne in a press release called the new law a win for insurers “over consumers seeking fair settlements.”

Kelly Gilroy, the executive director of legal funding industry trade group the American Legal Finance Association (ALFA), points to several parts of the new Tennessee law, even beyond the price controls driving litigation funders out of the state, which she says show the new law is not really aimed at protecting Tennessee consumers, but rather “targeted at shutting down the industry,” thus depriving consumers of a way of meeting their income needs that many have found valuable.

These include a provision denying consumer litigation funding companies the ability to assign their contracts, which effectively prevents them from drawing on bank credit lines to fund new contracts, and another that gives payment priority to any related lien, regardless of when or by whom it was created, which could put a litigation funder at the end of the payment line. Another part of the law voids a contract containing any typo, no matter how insignificant. “So, for example, putting the wrong number at the bottom of a page would invalidate the contract,” Ms. Gilroy notes.

ALFA’s Gilroy, whose duties include spearheading industry opposition to bills like Tennessee’s, argues the new law will likely have a negative impact on the state’s consumers, depriving them of access to funds they may need after an injury that brings medical bills or leaves them unable to work. She also notes the industry must actively educate lawmakers and other stakeholders on how it operates and the ways it can offer consumers useful choices.

The long and contentious debate over consumer litigation funding seems in recent years to have expanded in scope and volume. Back in 2008, ALFA hailed passage of an Ohio law removing barriers to consumer legal finance and making the Buckeye State the 50th to allow it to offer short-term financial relief to consumers awaiting the outcome of their lawsuits.

But before the Tennessee legislature acted, five states (Colorado, Kansas, Louisiana, Maryland and North Carolina) had restricted consumer litigation funding by non-legislative means, such as court rulings, attorney-general opinions or financial agency regulations holding that consumer litigation funding comes under rules governing consumer loans.

Last year, Oklahoma’s legislature became the first to bring consumer litigation loans under the Uniform Consumer Credit Code, which governs consumer credit transactions; this year it unanimously passed a follow-up law boosting penalties on consumer litigation funding firms that violate UCCC provisions. ALFA supported Oklahoma bills because they did not declare consumer litigation funding contracts to be consumer loans or impose a rate cap on funders.

By 2012, this publication had reported the industry was facing legislative proposals in seven states; over the past two years, that number has doubled. According to a survey, current as of early June, done by the National Conference of State Legislatures, bills on consumer litigation finance had been introduced during this year’s legislative sessions in 14 states. NCSL financial issues analyst Heather Morton notes a general trend in recent years that legislator interest “seems to be picking up, in terms of the number of states introducing legislation.”

Supporters of the Tennessee law included the property/casualty insurance trade group the National Association of Mutual Insurance Companies, which claimed the measure would deter protracted lawsuits, protect consumers and hold down the costs of consumer insurance. Other backers include such pro-defendant advocates of revised legal rules as the American Tort Reform Association and the Institute for Legal Reform (ILR), an advocacy arm of the Chamber of Commerce of the United States.

Justin Hakes, a spokesperson for ILR, identifies as reasons for his group’s leadership role in pushing state bills to restrict consumer litigation funding “sky-high interest rates” that “short-change consumers.” He adds that, by encouraging consumers to “roll the dice” on bringing lawsuits, monetary advances from third-parties crowd court dockets and raise the costs of the civil litigation system. An ILR-created website, www.lawsuitlendingtruth.com, spells out the group’s case against the industry.

Hakes notes his group has been active in Tennessee and other states weighing bills to restrict the industry, and expects it to “continue to be engaged on this issue” when the 2015 state legislative sessions begin, though the precise form of its proposals “remains a bit uncertain” and may vary from state to state. The group had earlier prepared a model bill and sought Congressional attention to the issue.

The consumer litigation finance industry, however, views skeptically the consumer-protection rhetoric of insurers and their allies in self-described “legal reform” groups, believing their real goal is to abolish — not regulate — the consumer legal finance industry, and thus remove an obstacle to speedier (and no doubt lower) settlements with cash-strapped consumers.

Given their success in Nashville, foes of consumer litigation lending may redouble efforts to enact similar curbs in other states. So for the consumer legal finance industry, a central question is: what new challenges will arise in state legislatures in the not-too-distant future, and what will the industry be prepared to do in response?

Prominent litigation funder Burford Capital is touting as “ground-breaking” its recently completed funding of a British power company’s binding arbitration case at the Court of Permanent Arbitration at The Hague against the government of Bolivia for expropriating a power plant.

Burford, which describes itself as “the world’s largest provider of investment capital and risk solutions for litigation,” notes it reaped a 73% gain in providing a $15 million loan to the power company. Even so, the publicly-owned litigation funder proclaims as the deal’s most significant aspect its innovative structure, which used the company’s arbitration claim as collateral for a below-market loan, which the power company then used as a cost-saving way to expand its business.

In a June 3 release, Burford CEO Christopher Bogart said the deal was a prime example of how creatively structured litigation funding not only can help a client cover its legal costs, but can also “provide an effective alternative method of financing to help companies achieve their strategic goals.” He noted the power company had been shopping for business expansion loans, but had not been able to conventional lenders offering interest rates as low as those Burford provided.

In 2012, Burford loaned $15 million to London–based, publicly-owned Rurelec LPC. But instead of the usual no-recourse provisions giving a litigation funder a share of the recovery if a case proves successful but nothing if it does not, here Rurelec agreed to pay 12% interest on the loan, regardless of the arbitration result. In addition, the deal gave Burford a contingent award based on the value and timing of any recovery in the arbitration case.

The agreement in essence allowed Rurelec to collateralize its arbitration claims, which Bogart’s statement noted, “aren’t given much credit by the banks,” and so are “basically invisible assets.” While typical confidentiality provisions make it impossible to say whether Burford’s deal with Rurelec was the first of its kind, it appears to be the first detailed account of a deal employing the strategy. Details are available because Rurelec consented to the disclosure.

Early this month, the arbitration proceeding ruled for Rurelec, awarding it a total of $41 million. After collecting from Bolivia, Rurelec will repay Burford the $15 million loan, with interest, and send it another $11 million from the arbitration proceeds. Burford calculated the combined $26 million payday will amount to a 73% return on its loan, with a 34% internal rate of return.

Burford’s general counsel Melissa Sobel echoed the CEO’s claims the Rurelec deal “should be of great interest to corporations and to the entire legal marketplace.” Sobel, formerly with Time Inc. and the Debevoise & Plimpton law firm, told Corporate Counsel magazine Burford had “essentially leveraged the value of the claim in the arbitration.”

She added that lawyers for companies with litigation claims should look to litigation funding firms for ways to take “what are traditionally seen as problems… and finance them and use them as an opportunity for leverage.”

Compared with its longer history and greater size in the U.S. and Europe, litigation funding in Asia is generally seen as being in its infancy — but it has made gains and is attracting increased attention.

The largest obstacle to the growth of third-party litigation funding in Asia appears to be holdovers from English common law: the legal doctrines of champerty and maintenance, which since medieval times have discouraged involvement or investment in litigation by unrelated parties.

Great Britain in 1967 removed both its tort and criminal liability for champerty, which had essentially outlawed third-party investment in legal claims. Similar liberalizations in the U.S., Australia, parts of Europe and elsewhere have paved the way for the emergence of the litigation funding industry.

But in Hong Kong, for example, champerty and maintenance laws remain on the books, casting a cloud on the industry’s prospects there. Even so, several decisions from Hong Kong in recent years appear to have opened up a window for litigation funding, at least for bankruptcy proceedings; arbitration funding may offer another opportunity.

Hong Kong Opens Liquidations Window for Third-Party Funders

In the landmark Cyberworks Audio Video Technology Ltd. decision in 2010, a lower Hong Kong court upheld the legality of a liquidating company’s assigning to a third-party funder a share of any proceeds from legal proceedings to collect debts, in exchange for funding for that litigation. It was the first decision in Hong Kong explicitly recognizing assignments by liquidating companies or bankruptcy trustees as a legal exception to maintenance and champerty laws.

The next year, another Hong Kong decision ruling upheld a U.S. bankruptcy trustee’s assignment of debts owed to Hong Kong companies, and the right to sue to collect those debts, to a litigation funder who would share in the proceeds.

Unlike the Cyberworks case, which was grounded in assignment of assets under corporate law, the later decision was based on the argument that firms in liquidation may lack the funds to pursue legitimate debt claims, so the availability of litigation funding works to expand access to justice. Litigation funders would no doubt welcome rulings by higher courts, clarifying any limits to champerty and maintenance laws, or perhaps expanding them.

Arbitration May Offer Further Opportunities

While Hong Kong is already a world center for arbitration, it’s somewhat unclear whether third-party funding will be allowed in arbitration proceedings. Hong Kong’s Law Reform Commission is studying whether reforms are needed to clarify that issue. Industry advocates, including Fulbrook Capital Management founder and chair Selvyn Seidel, argue that abolishing champerty and maintenance laws would add to Hong Kong’s global cachet for arbitration cases.

Singapore, another Asian arbitration center, also currently bars third-party funding in both arbitration and litigation (legal contingency fees are also illegal), but case law there has created an exception when the third-party funder has a legitimate commercial interest in the dispute. Singapore’s government has also announced it’s studying whether its champerty law should be amended or ended; a favorable decision could expand the presence of third-party litigation funders.

Growing Asian Markets Attract More Funders

Many litigation funders see Asia as a potentially rich, largely untapped market. Global litigation funding firms like the U.S.-based Fulbrook and Britain’s Harbour Litigation Funding have said they’re looking for opportunities in India, hoping to gain a share of commercial and arbitration funding as businesses on the subcontinent grow and face increasingly costly and complex litigation around the globe.

Steven Goodman, founder of the Singapore-based Teras Group, which funds international cases worth more than $5 million for Asian plaintiffs in American and British courts and arbitration forums and claims to be “the first litigation funder to focus its business on Asia,” notes an upsurge in offers of funding from firms outside the region.

Similarly, the Commercial Intelligence Funds Group, a Swiss specialist in distressed-debt investment with offices in London and Singapore, last year said it planned to raise an investment fund of $150 million and put about two-thirds of it in Asia. And after Australia abandoned its champerty and maintenance laws, the growing litigation funding industry there is also eyeing expansion opportunities throughout Asia.

Even some of the continent’s more remote regions may give rise to opportunities for third-party litigation funders. One such case involves London-based Calunius Capital, which is funding international arbitration proceedings for a gold mining company which claims the Republic of Uzbekistan expropriated its assets.

Have you heard of the Jackson Reforms? Although these reforms make a number of important changes to the way civil litigation occurs in the UK, most members of the public have never heard of them. Our own informal surveys have found that very few people are aware of the important changes these reforms make to the law.

If we posed the same question to a crowd of lawyers, we would likely receive a very different answer. Although the general public is largely unaware of the reforms, the legal community has made a number of changes in response to them.

Most lawyers will be able to confidently state that the reforms were implemented in April 2013 as the result of a one-year in-depth review into the costs of civil litigation that become a core tenet of the 2012 Legal Aid, Sentencing, and Punishment of Offenders Act.

The 2012 act has resulted in serious changes to Civil Procedure Rules, with a major effect on the cost of civil litigation in the UK. The rules, which are difficult for many in the legal community to understand – are designed to reduce the cost of litigation.

As many people in the legal community, ranging from solicitors and barristers to a large number of judges, have struggled to understand the laws, it’s not surprising that such as large portion of the general public is also unaware of them.

The Jackson Reforms are important, and understanding them is worthwhile. The reforms have some significant effects on the cost of civil litigation in the UK, and understanding them is an important priority for those interested in the law.

Several areas of the law are affected by the reforms. These include:

• Public Liability Claims
• Employers’ Liability
• Personal Injury (PI)
• Road Traffic Accidents (RTA)

The key goal of the Jackson Reforms is to reduce the cost of litigation by simplifying and streamlining the process, as well as establishing clearer regulations. This results in benefits for clients in the form of reduced litigation costs and the simplification of the litigation process as a whole.

A key change introduced by the reforms is the prevention of lawyers collecting fees based on success for defendants that lose their cases. Lawyers also cannot collect premiums from after-the-event insurance (ATE) from losing defendants. Instead, lawyers are paid using contingency fees; these fees are a replacement for damage-based awards and CFAs.

Changes have also been made to the scale of success fees for personal injury court cases. Lawyers can now charge a maximum of 25 per cent of the total damages as a success fee, reducing the amount charged to clients. There is also a £50,000 cap on claims from road traffic accidents.

As well as capping the cost of success fees and claims for certain cases, the Jackson Reforms also provide more detailed and stringent rules regarding budgeting. Case budgets now need to be prepared in advance of a case and approved by the court at several stages in the process. This is to make budgets more appropriate to the case and further reduce the cost of litigation.

The Jackson Reforms are interesting not only for their content, but for the time at which they were implemented. The reforms were introduced alongside a serious reduction in the availability of government legal aid. The reforms, of course, have made alternative means of case funding more accessible for many litigants.

Prior to the reforms, there had been significantly less clarity regarding the approval of the courts for litigants to use third party funding. The reforms show that Jackson approves of third-party funding, giving funders a new level of access.

Since many of the claims made by successful litigants are quite large, paying a small percentage of the winnings to third party funders is an expense that many litigants are very willing to make. This is especially true when one considers the alternatives for these litigants; without funding, many would have to drop their claims.

The Jackson Reforms remain fairly new to the legal world, and many solicitors are still receiving education explaining their effects and outlining how best to comply with the new rules. As we watch the reforms evolve over the next few years, we will see their long-term effects for litigants, lawyers and the general public.

Despite average job growth in the field, the number of graduates from law schools has increased dramatically since 2008. Although the cause of the influx of students returning to school was the recession, these high graduation rates mean that it’s still just as hard – if not more difficult – to generate revenue as a lawyer. More lawyers means more competition. This, in turn, means that law firms and sole practitioners need to be more creative when it comes to generating revenue.

Traditional networking techniques and waiting for clients to walk through your door are no longer enough to build a sustainable firm. To increase revenue, you must increase your client base. Doing so requires relying on modern networking tools and sales techniques not normally employed in legal marketing.

Love What You’ve Got

Usually, the most profitable clients are repeat ones. Therefore, it’s in every firm’s best interest to cultivate the relationships they’ve already established. Even if your past client is fortunate enough to never again need the firm’s services, a happy client is more likely to recommend a firm. Cultivate relationships by investing in the time you have with clients to ensure that you listen and are responsive to their needs. Consider following up occasionally with cards or notes. Past clients can be put on an automatic mailing list or can be invited to be placed on your email list. This will keep your company name foremost in past clients’ minds and can ensure a recommendation.

Embrace Selling

Law firms often consider common sales techniques as inapplicable to the specialized services they offer. However, sales techniques are essential to compete in the legal market because, without them, any action is irrelevant. Review the sales techniques of the top companies in the nation and consider what makes them stand out. For example, Apple uses youth and innovation to sell its products, while Microsoft uses its history of being the founder of computer operating systems. Which is more appealing to your client base? Take a look at the ads and marketing techniques that make you buy products. Start a file of ads and marketing systems that work for you. Occasionally, review and consider what makes these ads effective. How can you apply the same techniques to your own law firm marketing?

Use Social Media

Social media sites, such as Twitter and FaceBook, are how many individuals stay up to date about news and information. Develop a presence on social media sites and use it to reach potential clients. Remember that these sites are supposed to be fun. Keeping your posts on the light side makes it less likely that you’ll be ignored.

Turn off the T.V.

Law firm marketing traditionally involves vast amounts of television appearances. Although commercials work for some firms, many firms don’t get the results they want on television. This is due to the fact that many commercials are expensive and some law firm commercials do not project the image that a firm expects or intends. Social marketing is a better option for many firms. The general exception to this is a large firm willing to invest substantially in a quality commercial.

Refer Business Out

As contradictory as it may seem, one of the best ways to generate revenue is to refer cases to other firms. Whether you refer because you don’t have experience with the type or size of the case or merely don’t have time on your schedule to handle it, referring it increases the chances for reciprocation. Sometimes, referrals even make reciprocation necessary. With a few referrals, you’ll likely begin receiving clients from other lawyers, thereby increasing your client list and revenue.

Develop an Image

An image creates an identity for the firm; rather than being a mish-mash of lawyers, the firm suddenly possesses on an independent character. Cohesiveness is more attractive to potential clients. Every firm’s image differs depending on the firm’s client base, but all should emphasize professionalism and capability.

Revenue generation depends on how well you market yourself and your firm, as well as how aggressive you in terms of catching client interest. Yes, catching. Clients are caught and not pulled magically from the air; nothing will make a client stay and listen or seek you out unless you catch their attention.

It has now been a little over six months since the British government enacted a bill to reduce the budget for Legal Aid across England and Wales. What at first seemed a rather sensible option to reduce the numbers of unnecessary (and taxing) court-cases on the rise across the nation quickly became a symbol of the out-of-touch upper-class Conservatism that is creating an ever-growing class consciousness across the United Kingdom.

Six months on, though, has the promise to create a fairer and just legal system risen from the initial cries of “one law for the rich”?

Six Months on

The first point of note worth considering, and perhaps the most important matter for any possible court case: the quality of advice and help. Following Legal Aid cuts, legal advice charities across the board have noted a significant drop in not only the quality of advice they are able to offer due to the hugely inflated level of need they have to address, but also the level of practical service on offer. In fact, a report into the effectiveness of legal advice charities across the largely working class city of Liverpool noted that over 91% of respondents (those actually delivering the service) reported that they are now significantly less able to supply a suitable level of advice to those in need. Moreover, this has served only to perpetuate a growing trend wherein under-qualified and ill-informed claimants have taken matters into their own hands, through either representing themselves in court, or, more worryingly – giving up their pursuit entirely.

Coles-Solicitors are constantly questioning the motives behind this Conservative measure, especially considering a report into unintended consequences published by KCL in 2011 (over eighteen months before the proposed measures were passed). This thesis proposed with Nostradamus-like precision these very consequences which are now ripe in our legal system. Consider in principal the words on pages 30 – 42: A reactionary ailment which has only proven true following the cuts earlier this year.

Miscarriages of Justice

This plight of the lower-classes: the axing of legal aid reforms is proving to result in more discontent in the justice system and proliferating a mood of defeatism for those wanting to access legal representation. The resulting legacy is perhaps a little too early to state, but one can perceive that maltreatment by a body of representation does not discourage people to re-offend. In fact, a study by a New York based non-profit indicated that:

“when defendants perceive their treatment to be fair, they are more likely to accept the decisions of the court, comply with court-imposed sanctions, and obey the law in the future.”

At present, the current state of Legal Aid in England and Wales does not instill respect in a system that is founded solely on principals of fair representation. In another six months, perhaps we will be a little more in the know regarding the true legacy of this spate of cuts, but it doesn’t take Nostradamus to note that very little joy can be extracted from a system where currently 623,000 people are now excluded from the justice system.

Before this September was half over, judges on each side of the Atlantic had thrown out a pair of dubious but long-running lawsuits seeking damages running into the billions. Each of those ill-fated mega-dollar cases had been primarily funded by hedge funds, which ended up sinking millions into spectacularly unsuccessful cases.

On September 10, a British court dismissed all claims brought by the US-based Excalibur Ventures, a consulting firm which persistently but unsuccessfully claimed it was owed $1.65 billion from a deal it once had with a company that later won contracts to develop oilfields in the Kurdistan region of northern Iraq (“In Setback to New York..”). That litigation, and an abortive arbitration bid, were funded by now-defunct litigation funding specialist BlackRobe, plus the Platinum Partners hedge fund, both based in New York, and by a funding venture set up by two Anglo-Greek brothers in the shipping industry with ties to the plaintiff’s lawyers. The final tab can’t yet be tallied, but the funders collectively are likely to have lost around $50 million backing Excalibur’s legal dry hole.

Just days earlier in the US, a federal judge in Colorado on September 5 had dismissed with prejudice a $5.5 billion lawsuit brought by what remained of a media production and marketing firm once headed by former Marvel Entertainment leader Stan Lee. Still an iconic figure in the comic-book industry, the 90-year-old Lee (born as Stanley Martin Lieber) long ago severed his connection with the plaintiff, Stan Lee Media Inc. (SLMI).

In a welter of litigation spanning more than a decade, Lee, his namesake firm, and Marvel battled over who actually owned the copyrights to a passel of superhero characters Lee had helped create while at Marvel — including Spiderman, Iron Man, the Incredible Hulk, the Avengers, the X-Men, Thor, the Fantastic Four, and others. The just-dismissed Colorado lawsuit may have ended SLMI’s long-running efforts to persuade a procession of courts — including other federal district courts in California and New York — that it owns those characters.

In October 1998, soon after setting up Stan Lee Entertainment, a production company, Lee assigned it his rights in the Marvel characters; the next month, however, he disclaimed that deal and transferred them back to Marvel. Soon, Lee’s original firm would merged into SLMI, an Internet animation and marketing business founded near the tail-end of the Internet bubble by Lee and former Miami lawyer-turned Hollywood operator Peter F. Paul. SLMI operated for about two years, but by early 2001, it had merged with a shell corporation in Colorado, filed for Chapter 11 bankruptcy and virtually shut down.

It couldn’t have helped the firm’s prospects that co-founder Paul, who had drug and fraud convictions even before joining the firm, would soon flee to Brazil to avoid arrest on federal charges of manipulating SLMI stock; he later pled guilty and is currently serving a 10-year sentence. (Paul’s other claim to notoriety comes from being the main organizer of a 2000 Hollywood gala fund-raiser for Hillary Clinton’s first Senate campaign. The Federal Election Commission later charged that low-balled reports of the event’s costs concealed an illegal campaign contribution.)

After SLMI’s collapse, shareholders in the firm brought unsuccessful derivative suits in California and New York; the latter also went up to the Second Circuit. Several state courts in Colorado heard corporate governance challenges involving SLMI, and various other disputes resulted in SLMI’s bankruptcy proceeding taking five years.

The languishing SLMI gained new life, and found funding for more litigation over the Stan Lee copyrights, after the Walt Disney Company purchased Marvel late in 2009 for $4 billion. In 2011, an investor in SLMI arranged funding for a new round of litigation, aimed at wresting from Disney the estimated $5.5 billion that Marvel’s purchaser had made from the Stan Lee characters. The investor has said that most of the litigation funding came from Elliott Capital Management, a New York hedge fund founded in 1977 and still run by billionaire Paul Singer; it manages $22 billion in assets. Neither the amount Elliott Capital poured into the case, nor the identity and stakes of any other funders, has been revealed.

But the latest decision from Colorado, in which federal judge William Martinez pointedly noted the earlier New York and California decisions had ruled against SLMI on grounds of standing, laches and statute of limitations, invoked the doctrine of res judicata. Finding those issues conclusively settled, the judge ruled SLMI could not continue to litigate ownership of the copyrights based on Lee’s transfer of rights in 1998 to an SLMI predecessor firm. That decision likely marks the last reel of the epic litigation over Lee’s costumed creations.

One thing is clear about first-generation immigrants in America. When they make into the country, they are much more likely than the average citizen to start a business. This correlation between entrepreneurship and immigration is well-established, and some countries are asking questions about this. Is America stealing its talent from across the globe? Is the country pulling in motivated, ambitious people who might have started businesses in their home country if they’d stayed there? Though one might believe that the correlation between immigration and entrepreneurship suggests intent on the part of the United States, some experts are now suggesting a different cause. According to those people, America’s immigrants are simply opening businesses in response to the hiring practices and poor conditions offered to immigrants by American business owners.

The link between immigration and business creation

Both recently and over the long term, there has been a proven correlation between immigration and the propensity to start a business. This trend has intensified over the last few years, as today’s immigrants are forced to deal with both a difficult economy and a political environment where immigrants are not exactly popular with a large portion of the population. While this trend continues, the more important question is whether immigrants are more enterprising than the rest of the population or whether some other factor is at play.

The challenges of securing employment for immigrants

In order to understand the trend, one must first understand the challenges faced by people coming to America. These people must deal with more than just the logistical hurdles of moving from one country to another. In addition, they are increasingly faced with discrimination in hiring practices, as employers balk at providing jobs for certain immigrant groups. For immigrants who are used to making their own way, the natural response to this phenomenon is to find another income source. According to experts and at least one study, the new wave of immigrant entrepreneurs is more a response to these discriminatory practices than it is anything else.

Connecting the dots on entrepreneurship

Sociologists at Ono Academic College of Israel have done the heavy lifting in linking American immigration with the challenges of securing employment. This study found that the majority of first-generation immigrants who started their own business in America were not business owners in their old countries. In fact, many of these people weren’t inclined toward entrepreneurship at all. It was only when they came to America that they realized their dreams of business ownership. Though the study makes no conclusions on its own, it provides the important bridge necessary to debunk the theory of America stealing its entrepreneurs. More likely, America is forcing its new immigrants into small business ownership by closing the doors to traditional employment.

Entrepreneurship in a non-traditional form

The American dream of making it big has always relied upon entrepreneurship. Data from Forbes indicates that roughly 20-percent of the richest Americans got there by starting their own businesses. Most of these big money businesses were in high-tech sectors, and there is a thought that America is stealing business people capable of starting more of these businesses. Entrepreneurs come in all forms, though, and many of today’s immigrants aren’t coming to the country to start and grow a business with their specialized knowledge. Instead, many of these people are using what they know to scratch together enough money to make it. The majority of these entrepreneurs are restaurant owners and service industry purveyors, and their choice to start a small business hasn’t been a choice at all. It’s been an innovation born out of necessity, as more American employers are discriminating against people new to America.

Derek is currently blogging for Ed Shulman  an immigration attorney located in northern New Jersey. He enjoys blogging about immigration reform and business law news.