The explosive growth of litigation funding has led to a boom in the class action market. Recently, a panel of experts gathered to discuss class action funding in the EU, including how we got to where we are today and where we might be headed in the near future.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
The explosive growth of litigation funding has led to a boom in the class action market. Recently, a panel of experts gathered to discuss class action funding in the EU, including how we got to where we are today and where we might be headed in the near future.
As reported in CDR, David Greene, a senior partner at UK law firm Edwin Coe, noted that he has been working in the class action space since the 1980s, and that the sector was more of a ‘cottage industry’ until the global financial crisis. After that event, the amount and sizes of claims grew exponentially, which in turn led to the growth of class actions worldwide.
Litigation funding has played no small part in accelerating that growth. Tim Mayer of Therium Capital Management explained that class actions in involve many passive claimants with a bundled claim that is extremely large. That affords funders the opportunity to get creative with their financing schemes, such as offering funding terms that are inclusive of ATE insurance.
However, there is a lot of diligence on these types of cases. Often, law firms will approach funders with a claim that is only half-baked, and it can be up to the funder to decipher if there is actually a robust class with a viable claim. Adverse costs are another issue to consider, when it comes to EU and UK group actions.
Of course, the number one priority for funders is the budget. Class actions can drag on for extremely long periods, and given how time-sensitive funders are, they have to be extra careful when writing extremely large checks. Class action jurisprudence is also somewhat underdeveloped in the UK, given how nascent the industry is there. Courts are expecting claimants to ‘come with their house fully in order,’ which implies extra due diligence and prep work when it comes to bringing a successful class action claim.
Lucy Pert, formerly of Harbour Litigation Funding, and now with law firm Hausfeld, encourages broader support for a more robust collective redress framework. Currently, the European Commission is considering whether to allow EU member states to develop their own collective redress initiatives. Pert applauds the UK for trying to reform some of those measures, and hopes other nations will soon follow suit.
