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Commercial Special Features

An LFJ Conversation with Chris Baildon, Co-Founder and Chief Operating Officer of Lex Ferenda

By John Freund |

Lex Ferenda is latin for “the law as it should be”. The firm includes a team of seasoned lawyers, financiers, general counsel, and retired jurists who bring value to every aspect of the cases they commit to, resulting in better outcomes for all.

Below is our LFJ Conversation with Chris Baildon, Co-Founder and Chief Operating Officer of Lex Ferenda:

Lex Ferenda recently announced the launch of its first fund. Tell us a little about the company, its focus, and what you’re investing in. 

Lex Ferenda Litigation Funding’s (“LF2’s”) investment mandate is primarily geared towards commercial claims in the United States, with funding available for cases at any point in the dispute resolution timeline. We typically target funding towards single commercial cases averaging $1-10 million per investment, however the firm has the resources and capital to make substantially larger investments in a broad range of single cases, portfolio investments, and law firm financing.

Our team consists of seasoned litigation funders, lawyers, and investors with substantial legal and financial expertise. LF2 was founded by Michael German and Chris Baildon. Michael is an experienced litigator, trial lawyer, and litigation funder with more than a decade of experience litigating, resolving, and investing in complex commercial litigation and arbitration matters. Chris has three decades of global investment banking and finance experience, with substantial capabilities in management, business development, and capital raising across investment verticals, including litigation finance. LF2’s investment underwriting is directed by Andrew Kelley, who has more than two decades of complex commercial litigation experience, both as head of commercial litigation for a large publicly traded company and as an external advisor at international law firms, where he created and led programs that resulted in recoveries of almost $1 billion for his clients. The Advisory Board consists of Honorable Vanessa Gilmore, who recently retired after serving over 25 years on the federal bench, and Scott Mozarsky, who is a former GC to a public company and former President of a major legal technology outfit, and as such adds substantial legal and technology expertise.

Litigation Finance is quickly maturing into a mainstream alternative asset class. Where do you see the evolution of the industry from here?   

The market for litigation finance is seeing a rapid expansion in both the number of active funds as well as the amount of committed capital from institutional investors. Additionally, the penetration of third-party funding in the US is still low compared to other global markets. Recent research from Westfleet Advisors and Research Nester predicts that cases funded in the U.S. will grow by 17% year over year to 2035. As the asset class matures, I believe you’ll see a far greater volume of high profile/high value lawsuits financed through litigation funding. Similarly, I believe you’ll continue to see increasing commitments from large asset managers who are weary of market volatility and attracted to impressive returns in an uncorrelated asset class.

What makes Lex Ferenda different from other funds operating in this space? What can the industry expect to see from the firm going forward?

LF2 is unique in that it’s anchored by institutional-grade capital from a leading global investment manager, with the discretion to invest within its target based on good judgment without the delay of seeking investor approval. This structure allows the firm to be incredibly nimble while still operating an investment platform and system of controls of the highest standard to satisfy all of our different investor groups. Our market focus on domestic commercial litigation/arbitration (within our investment target of $1-10 million per case) has allowed the firm to seize upon attractive funding opportunities with a growing pipeline.

LF2 adds value before and after investment with strategic case advice available from experienced legal and finance professionals with a best-in-class track record. LF2 tries to live up to its exponent so-to-speak – we use the broad experience and capabilities of our day-to-day employees and the Advisory Board to offer insight and experience as the dispute resolution process progresses so that our clients can secure (hopefully exponentially) better outcomes. Of course, LF2 maintains the highest level of ethical standards in funding, and our clients retain control over the litigations they fund with us.

The industry can expect to see LF2 make major advances in medium to large commercial case investments, while also serving as a thought leader in the litigation finance space through education and philanthropic initiatives.

Speaking of those initiatives, you recently launched a pair of them—LF2 University and LF2 Gives.  Can you provide some background on each?  

LF2 University is a first-of-its kind educational initiative that aims to provide a greater understanding of the litigation finance industry. The program offers educational seminars to law firms, attorneys, businesses, students, and individuals interested in learning more about this growing field. Recently, we’ve launched Lit Finance 101 which covers the fundamentals of legal finance, and we’ll soon be launching a seminar on Litigation Finance Ethics which will cover the rules and ethical considerations involved in litigation funding.

We’re equally excited about LF2’s new philanthropic initiative, LF2 Gives, which seeks to make positive impacts in the communities in which LF2 operates through community action programs and legal service offerings. During multi-annual “Action Days”, LF2 personnel partner with local organizations to participate in various volunteer services. This past Summer, LF2 Gives had its first Action Day where LF2 members volunteered their time with the Food Brigade in New Jersey as well as the Food Bank of the Rockies.

For those interested in learning more about (or participating in) these initiatives, we encourage you to visit our website (LF-2.com). We look forward to further collaborations with those who share our dedication to service and education as we grow.

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Case Developments Commercial

Australian Federal Court Approves $24.5M Funder’s Commission for Galactic 

By John Freund |

Reporting by Lawyer’s Weekly covers a major development in two Australian class actions, where litigation funder Galactic obtained a favourable ruling from the full Federal Court to double its commission from its funding of lawsuits brought against 7-Eleven and ANZ Bank. Justices Craig Colvin, Bernard Murphy and Michael Lee, overturned a 2023 judgement by Justice O’Callaghan that refused to make Galactic’s CFO order. As a result, Galactic’s commission from the class actions will drastically rise from $12 million, to a total $24.5 million.

The Federal Court’s ruling on 2 May found that Justice O’Callaghan had been wrong to refuse making the CFO order on the basis that the court did not have the power to do so. The three Justices wrote that Galactic’s $24.5 million commission “is commercially realistic and properly reflects the costs and risks Galactic took on by funding the proceedings.”

The class actions brought against 7-Eleven and ANZ Bank focused on allegations that the fuel and convenience store chain’s standard Franchise Agreement had ‘unfair contractual terms’ that violated consumer law. ANZ Bank were targeted by the second class action over claims that it had failed to meet its obligations under Australia’s Code of Banking Practice, ‘by lending to buy into the franchise system, often up to 100 per cent of the franchise license.’

Case Developments Commercial

London’s Black-Cab Drivers Bring £250M Claim Against Uber

By John Freund |

An article The Financial Times covers legal actions being brought against Uber on behalf of London’s black-cab drivers, centred on allegations that Uber misled Transport for London (TfL) to obtain its license. Specifically, the lawsuit focuses on the claim that Uber misled TfL around its booking model, and that the company allowed its drivers to receive direct bookings from customers rather than through a central system.

The claim is being brought in the High Court by RGL Management and is representing more than 10,500 black-cab drivers, who argue that they were harmed by unfair competition and are seeking up to £25,000 in compensation per driver. The claimants are represented by Mishcon de Reya and Katch Investment group are providing the litigation funding for the claim, with the total value of the group litigation reaching £250 million.

In a statement, Uber continued to deny the allegations and said that the claims “are completely unfounded”, maintaining its position that the ride-hailing company “operates lawfully in London, fully licensed by TfL.”

More information about the group litigation can be found on RGL Management’s ‘Black Cabs v Uber Litigation 2021’ (BULit21) website.

Commercial Regulatory Issues

Legislation to ensure the enforceability of LFAs is progressing smoothly through Parliament

By John Freund |

The following is a contributed piece by Tom Webster, Chief Commercial Officer at Sentry Funding.

So far, the Litigation Funding Agreements (Enforceability) Bill has been passing through Parliament without a hitch.

The government is bringing the legislation in response to the Supreme Court’s decision last summer in PACCAR Inc & Ors v Competition Appeal Tribunal & Ors [2023] UKSC 28, which called into question the enforceability of LFAs.

The Bill was briefly introduced into the House of Lords on 19 March, and was debated at second reading on 15 April. During the debate, while some peers discussed the need for regulation of the litigation funding industry and for careful consideration of whether the retrospective nature of the legislation was justified, no peers opposed the Bill – and many welcomed it.

More recently, during scrutiny at grand committee on 29 April, the relatively small number of peers who attended the session broadly supported the Bill, and several spoke in favour of the need for its provisions to be retrospective.

In terms of the Bill’s drafting, the government proposed some small changes at committee stage, which were waved through by peers. The most significant was to address a potential problem with the original drafting where the LFA relates to the payment of costs rather than funding the provision of advocacy or litigation services.

The problem was that, in the original wording, it could be argued that the Bill only applied to the funding of costs that relate to court proceedings, but not those relating to arbitration, or settlements. This has now been resolved by new wording to make clear that an LFA may relate to the payment of costs following court, tribunal or arbitration proceedings, or as part of a settlement. An LFA may also relate to the provision of advocacy or litigation services.

Meanwhile another government amendment was aimed at avoiding problems for litigants-in-person, by ensuring that the definition of LFAs in the Bill includes agreements to fund the expenses of LiPs, for example where they need to pay for an expert’s report.

During grand committee, peers also expressed their approval of the broad terms of reference that have now been published by the Civil Justice Council for its review of litigation funding, which will include an examination of whether the sector should be regulated; and if so, how. Peers commended the speedy timescale that the CJC has set itself, aiming to produce an interim report by the summer, and a full report by summer 2025.

As the Litigation Funding Agreements (Enforceability) Bill continues its journey through Parliament and the CJC begins work on its review, there are clearly significant changes on the way for the litigation funding sector in the UK.

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