Episode 25 - Omni Bridgeway celebrates its anniversaries in North America with reflection, and predictions, on the state of the litigation finance industry
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Hello, and thank you for tuning in to the Beyond Hourly Podcast, hosted by Omni Bridgeway one of the world's most experienced dispute funders and enforcement specialists. Our podcast focuses on commercial disputes around the globe and innovative ways to maximize value for clients and law firms. Episodes of this podcast can be found on our website, omnibridgeway.com, iTunes, Spotify, and other podcast networks. We welcome you to subscribe to the podcast and leave us reviews.
My name is Gretchen Koehler, and I'm your host for today's episode. I am the North America Chief Marketing Officer for Omni Bridgeway. I'm delighted to be joined today by two executives from our company, US Chief Investment Officer, Allison Chock, and in Canada, Chief Investment Officer, Paul Rand.
Allison and Paul oversee all aspects of Omni Bridgeway's investment management, due diligence processes, and operations in their respective regions. Allison has more than 20 years of experience in the legal profession. Prior to joining Omni Bridgeway in 2013, she litigated large-scale commercial disputes, specializing in opt-out securities fraud cases on behalf of institutional investor clients, including insurance companies, hedge funds, and pension funds.
She assumed the role of US Chief Investment Officer for Omni Bridgeway in 2017. In her current role, she guides all decisions pertaining to the US company’s investment portfolio, which currently is Omni Bridgeway's largest. Over the past decade, she and her team have achieved many notable successes investing in cases that have returned victories for the plaintiffs and the lawyers litigating the claims.
Paul brings more than 15 years of experience in the legal profession, as a litigator and as a transactional lawyer working in senior roles in private practice and in-house. At Omni Bridgeway, Paul has focused on disciplined risk management and a mandate to help clients apply innovative financing to their litigation assets. He also works with law firms seeking to accelerate profitability with a funding partner.
Allison and Paul, there is so much more I can say about your impressive backgrounds and the impact each of you have made in building our business in your respective regions. I know our audience is keen to hear about today's topic though, which relates to anniversaries we're celebrating this year in the United States and Canada. For that reason, I'll keep the introductions relatively brief. Welcome to the Beyond Hourly Podcast.
Allison, let's start with you. You joined the company just under two years after it expanded to the United States. Omni Bridgeway launched its Los Angeles office upon your arrival. How would you describe the US litigation finance industry at that time? And what early successes has the company experienced in the US that made expansion beyond its New York headquarters feel appropriate?
When I joined in July 2013, I would say the state of the US litigation finance industry was very much nascent. There were a handful of litigation funders operating in the US at that time, but on a fairly small scale. One of the things that I really liked and what convinced me to come to Omni Bridgeway (which was then known as Bentham in the US), was because of the depth of experience that the company had globally, being the world's oldest commercial litigation finance company. And so whilst the industry was nascent in the United States, I felt confident in joining the company because of its long history and track record, which at that time was I think would have been 12 or 13 years. In addition, the company had experienced some early successes already. Although we launched here in 2011, our company had done a little bit of dabbling in investments in the United States prior to our official launch out of New York, and those cases had resolved successfully.
One of the reasons that we were looking to launch a Los Angeles office was because there was a fair amount of opportunities and interest coming out of California, and Southern California in particular. One of the things that we did, and still do, is opening brick and mortar offices in the jurisdictions where we're already seeing a lot of interest and activity in the funding sphere so that we can better service our clients on the ground in those jurisdictions. So, we took that approach in Los Angeles, followed by San Francisco and then in Houston. And it's played out for us pretty well so far.
What types of financing solutions was the company focused on in those early days in the United States, and how and why has that evolved over the past 10 years?
When I first started, a prototypical litigation finance deal was a David versus Goliath dispute—what we call now to distinguish it from all the other types of financing that we do—"single case” funding, where we would fund a claimant in a piece of litigation or monetize the claim on appeal and provide essentially the client or the claimant the wherewithal to survive through what can be a very long, drawn out, and expensive process.
Nowadays, we of course have expanded into all sorts of other areas, including not only law firm portfolios, which we began doing—we had offered them earlier, but they really began to pick up in earnest in about 2014. And then later corporate portfolios for some larger companies, who have a large suite of affirmative side litigation. Then of course the newer things that we're doing now are claims and judgment purchasing, as well as the whole enforcement side of our business, which is new to me, but that branch of our company that has been doing that has been doing so for 30 plus years. And they've experienced some great successes there, so that's a really exciting new component of financing that Omni Bridgeway now offers that we absolutely did not when things started 10 years ago.
Paul, the company began looking North to Canada just five years after it entered the United States. What about the Canadian legal and business market made litigation financing a good solution to offer there?
First a quick funny story, when our Global Chief Investment Officer came to visit Toronto, I think for the first time, it coincided with the Raptors (the basketball team in Toronto), winning the NBA Championship. So, Clive arrived from Sydney—and the streets of Toronto are usually pretty conservative, a quiet-ish town—are packed with people. They are out on the streets celebrating, hundreds of thousands of people, and of course we told Clive that they were there for him, and this was somehow recognition of the great strides that litigation funding had made in Canada.
Now, we're not quite having litigation funding parades in Canada, but there has been incredible change since we've started the business here.
There are many factors—to get to your question—there are many factors that I've explained why litigation funding makes sense in Canada, but I'd point to three in particular. I think frankly, some of them are going to be consistent across all of our jurisdictions, but starting off the top, commercial litigation is expensive. So lawyers are under enormous pressure to provide their clients with effective solutions. And, of course, non-recourse finance of the sort that Omni Bridgeway provides really gets to this.
In Canada, like in a couple of other jurisdictions that we operate in, there's the structural issue of adverse costs. This exposes claimants to the risk of having to pay another party's legal fees. While it's generally an effective mechanism for preventing frivolous litigation, it can also dissuade access to the courts for those who have strong claims. And so our solution can back up a litigant on the risk of having to pay adverse costs. That's also a hugely attractive feature of what we offer.
And then lastly, I guess I would just point to the fact that we offer Canadian businesses a new source of capital. The ability to monetize claims is still a bit of a novel concept for many general counsel and CFOs, but when they learn about the option, it's always received with a high degree of interest. On that note, I guess I would just reflect on a comment shared with me by George Hendy, who's our senior advisor in the Quebec market. George used to be the Montreal office managing partner for Osler, which is a very highly regarded Canadian firm. George said to me that you'll always be popular when you show up with money. So that's not just a Canadian phenomenon, but it's one that I think is consistent across our market and our markets and our experience.
Thanks Paul. Litigation funding parades aside, I'm curious to hear how you've seen the interest in financing evolve from your audiences in Canada and what factors do you think are contributing to that evolution?
Listening to Allison's comments, I'm reminded of the fact that Canada is often following on the experience in the US—just a couple of years behind. What I would point to as one overarching trend that we're witnessing is this increased interest in funding that's being shown or received from well-capitalized parties.
Gone are the days where we would really be targeting or hearing from lawyers who are representing impecunious claimants, insolvent parties, and so on. Now more and more we're hearing from counsel who are representing significant companies, those who would historically have provided their litigation budget out of their balance sheet.
I suppose the biggest factor driving that is the effort that Omni Bridgeway has put to educate the Canadian market. I think we're past that point where there might have been this sort of “ick” factor of well, litigation funding is for someone who doesn't have the money to bring their claim and so they should somehow not be afforded the same opportunities in court. Now, I think it's just understood that litigation funding is a tool and a really useful strategic option available for any party.
Allison, what were the common challenges encountered in funding matters back in the early days of commercial litigation finance in the United States? How have they dissipated, and what are the challenges you see now and predict for the years ahead?
Paul has given me a really nice segue into some of those common challenges. There was definitely an education curve that we had to get up and make it very clear—you know certainly, as I described before, people well understood the David versus Goliath prototypical funding arrangement. But if you think of a very strong claim in litigation or in arbitration as an asset, there are many ways that you can utilize it, with professionals like us who are available and able to evaluate the strength of those claims—you can do a lot of things with that litigation, or arbitration, or other type of dispute asset.
Something that Paul mentioned about educating the corporate market and—and certainly in the US—educating some of the law firms who are very well-established and have a good suite of clients, who previously were happy to pay their hourly fees. They, in the beginning, in the early days, were fairly dismissive of litigation finance and said, "We're good how we are, and we don't need it and our clients don't need it, so we don't really need to talk to you." That has shifted significantly, lawyers and clients alike are beginning to realize the advantages of using financing in different ways for different purposes. That has really dissipated quite a lot in terms of who is interested in utilizing our financing.
We do still have something of an education gap I would say. There's a lot of folks out there who still have a fairly low level knowledge of litigation finance and all the different things that you could do with it. But I would say that the resistance to it has changed significantly. Even those companies that would have said, "Eh, not for us, and we're not interested." They are now open to hearing more. Whilst we haven't gotten everyone over the learning curve and the things that we're doing continue to evolve, we continue having to educate folks on exactly what we can do. It is the interest level and the openness to being educated about all the ways that litigation finance can help a client, or a law firm, that have changed significantly. The challenges that I see now, and the years ahead, have to do both with that education curve.
And then of course, the litigation finance industry has grown pretty exponentially. There's competition now on almost every matter that is a desirable matter. And so we have to continue to find ways to deliver value and be the best funder in different ways—other than just providing capital—because the color of our money is the same as our competitor's money. We try to make sure that we are delivering more than money.
Omni Bridgeway seems to be in a constant state of growth. Allison, can you tell us about the demand fueling that growth and what you've learned about the role that litigation finance can play now as firms and companies weigh economic uncertainties?
I alluded to this a little bit in my last answer, and that is the companies and law firms that we service with our financing, the landscape of those has grown exponentially. Therefore, the demand has grown in tandem with that, as it has become not just a thing that impecunious and insolvent companies use, as Paul said, but actually is a viable option for all sorts of different types of companies, so long as the merits of the claim or the judgment appear to be strong.
That's really fueled growth. And the role that we can play now is helping companies for instance, to utilize financing to help rebalance their P&L for instance, by utilizing financing to pay for various legal expenses, or monetizing claims with a judgment that is perhaps on appeal. They can then remove the expenses from their balance sheet and instead have the litigation financier paying those expenses along the way. Yes, they will pay a price at the end, but given the way the accounting rules work, that doesn't have the same impact on the P&L that paying expenses along the way does.
There's quite a bit of attraction that's grown. Particularly as companies--even non-distressed companies—are looking for ways to maximize their liquidity in these somewhat uncertain economic times.
Paul, hearing what a role education has played in the US market, what do people in Canada still need to understand about the role that litigation finance can play? And where do you expect to see the most significant adoption in the years ahead?
The first thing I would say is that as we talk with more and more lawyers, and speak with them once and twice and sometimes for the third time, there seems to be increasingly an appreciation that a litigation funding relationship will benefit the law firm that we're working with—giving them the opportunity to generate more business, hold onto clients, create more revenue, maybe enjoy success-related returns with an offset of some of the risks that that would otherwise accompany a pure contingency.
Then their clients also benefit because they're able to derive greater certainty around their legal budgets. They're able to have greater cost control when they have a funder working at their side. And of course, we as their funder benefit because we do our very best to invest in winning cases and take our return. And so there's this “win-win-win” dynamic, which as terribly corny as it sounds, is so obvious and clear to I think all of us in the company and ultimately to lawyers with whom we speak once they really turn their minds to the option of working with a funder like Omni Bridgeway.
One of the other points that I think is always in the back of my mind is this idea of innovation and what constitutes innovation. We seem to default to this exercise of conflating innovation and technology, especially in legal services. We hear a lot about legal tech and the importance of getting new software, new systems, and automation and so on. That's all really important. A lot of it has already proven itself to be useful and valuable. But I think we do have a bit of a risk of overlooking innovations that are in front of us, and maybe don't appear to be what we think of as innovation and litigation funding to me is really just an absolute fantastic example of that. Litigation funding is truly and purely an innovation in the legal market.
For clients who have a mandate to improve their legal functions for lawyers, and law firms that are eager to try to do things differently, litigation funding is a new strategy for creating value. It really is to my mind, something we need to begin to look at as a way to innovate.
In terms of the direction of where things are going Gretchen, again back to some of the things that Allison has shared, we're going to see more and more portfolio type opportunities being funded in Canada. Most of all, I expect that major Canadian law firms are going to increasingly look to establishing a litigation portfolio. And those that don't are going to find themselves either exposed to more risk in order to win clients who are expecting contingency work or are going to be missing out on those opportunities. I think that's where I would look to for the real growth opportunities in the near term.
Paul, you have very astutely predicted the crystal ball question that I had coming for you later in the podcast. I wonder if you might be able to give our listeners a little bit of a peek behind the curtain and tell us about the team that you've built in Canada and what's important to understand about Omni Bridgeway's offering.
I would love to speak for the rest of the podcast about the Canadian team, if you guys don't mind! It really is a fantastic bunch of people. I'm going to say a lot of kind things about my colleagues, who all deserve it. I should just asterisk right off the top and say that equally these comments could apply to people in our US team, in our European operation, in Asia, Australia, really wherever we are, the company has done a phenomenal job of attracting top-caliber people.
But to speak a bit about the Canadian team, we've got a group of 10, three of whom are former clerks to the judges of the Supreme Court of Canada. We've got partners and lawyers from top commercial litigation boutiques and firms in the country, an internationally recognized arbitration expert, we've got lawyers with real firsthand in-house counsel experience. So we have a fantastic group of people in terms of their experience and their skills. And they're also a really excellent bunch of colleagues. They're really wonderful to work with.
Why does that matter? Well, from our own personal enjoyment, obviously we want to be working with top-notch people. But in terms of the company's benefit and client's benefit, we have excellent lawyers for the purpose of due diligencing potential investments. So, the skill and insight that our team brings helps minimize the risk of us making a misstep on an investment. But even more than that, the market increasingly is understanding that when Omni Bridgeway puts its seal of approval on a case, that's a really strong endorsement of a plaintiff's position. That's hugely valuable.
We're members of the legal community in the jurisdiction where we fund, and that has all sorts of really significant benefits and meanings. Critically, what it promotes is a level of trust that is invaluable when it comes to a new offering like litigation funding.
Then just really quickly, the last point I'd make is the type of strategic advice that we can help bring to a funded client—and Allison referred to this that we want to be more than “just capital”—so to maybe illustrate with a really quick example, my colleague PJ Bouchard, who is a former McCarthy's litigation partner, he heads up our Montreal office. He was helping a client, actually a client that I think was connected through Allison who needed recommendations for litigators in Quebec.
No one would be better positioned than PJ to identify some suggestions for top caliber counsel to deal with an issue. That could be particularly valuable for major corporations, when they're either looking to litigate in a jurisdiction that perhaps is not entirely familiar to them or if they're looking for recommendations for litigation specialists where their preferred counsel might otherwise have been conflicted out on the matter or something of that sort. So we really do add value as a team. Anyway, as I said, I could quite happily go on for the rest of the podcast, but I'll just cut it there.
Thanks Paul. Allison, what important milestones has the company achieved since opening its doors in the United States?
This is a little bit of a tough question for me in that it's hard to say—when you begin at nearly ground zero, what are the important milestones? There are so many things that we have achieved. And certainly, when I joined the company in 2013, I had hopes that the company would progress in a positive direction.
But I would say that the company has now well surpassed the expectations and hopes that I had then. In addition to just growth in terms of personnel, we've gone from—I think that I was employee #4—and we now employ over 25 in the United States. This has allowed us not just to put more bodies on the ground, but also has allowed us to start specializing a little bit in certain practice areas.
We now have engaged investment managers in the US who have real depth of experience in things like international arbitration, in patent litigation, in insurance coverage, in securities litigation—and that is a real benefit when I talked about being “more than money.” It's a real benefit to those who are utilizing our services, not only because we can offer two cents and an objective viewpoint on their claims and the possible defenses to those claims, and how they might like to position things, we can offer some valuable insights for free.
But in the nuts and bolts of a litigation finance transaction, speed is often really important. Having lots of internal expertise means that we can take a pretty deep look at things very quickly, whereas smaller litigation finance companies tend to have to go outside to get an external viewpoint on a certain type of case. That is not to say that we never go outside to get additional due diligence opinions, but in some of our most popular areas of financing which I just named—and I forgot insolvency and bankruptcy matters in addition to the international arbitration, patent, and insurance specialties—it really does make a difference in terms of how deeply and how quickly we can react and deliver a pretty good read on whether we would be interested in funding a case. So that's a pretty important milestone.
The other that is really significant is—and I'm not sure exactly when this happened, I would say it was about a year or so, a year and a half ago—but the US took over as being the largest part of the company's business. That is no surprise given the United States is the largest market in the world in terms of legal spend, but it was certainly the original thought behind our Australian leadership in coming to the United States and opening up here. And so although the company has grown globally, the United States (and our litigious nature!) has made us the biggest part of the company, which is really exciting.
What are some of the most significant lessons the company has learned during its first 10 years in the United States?
A couple of things again, to hearken back to Paul's comments on the team, I think that we have heard from the marketplace that one of the things, one of the reasons that in a competitive landscape that our financing proposal is often chosen—sometimes even though we're a little bit more expensive than other proposals—is because of the quality of the team that we have and what a pleasure we are to work with. And what Paul said about how great our team is, it's not just that we're great substantively, but we've made it a priority to hire really great people that really enjoy what they do. I think that really shines through, and the clients love it as well. So niceness counts, as it turns out. That's a pretty good lesson and it's one that we've been really careful to preserve—having no sharp elbows and really working collaboratively. I've been so impressed that not only is our US team like that, definitely the Canadian team is like that. But as we've grown and started to encounter more of our global counterparts at various conferences and things that we've done together, it is true across the organization, which is really impressive.
The other big lesson that I would have to say is an old one, which is to say, one of the things that I think that we may be known for—in addition to being “nice”—is we're known for being “picky.” But lessons have taught us at least in the US that we need to “stick to our knitting” in that, and we may lose deals on that basis. But we would much rather pass up the occasional good case for the wrong reason than to invest in a bad case. And so we will remain picky, and I think that's a really good thing.
Paul, you mentioned innovation earlier and I'm going to circle back to that topic for a moment. Omni Bridgeway has long been a pioneer in the commercial litigation finance industry, including as the first funder to establish offices in Canada. What innovations are currently underway at the company and how do you expect it to demonstrate industry leadership in the years ahead?
I think one of the most interesting things that is building and that we're spending a lot of time thinking about is around claims purchasing and the ability to monetize claims early on in the process, certainly pre-determination. That is something which has been talked about for quite a while, and I think now we're beginning to get closer and closer to realizing on it. And when I say “talked about,” I mean, talked about mostly within funding circles—and even within funding circles probably within a fairly small circle.
Part of the reason I think that's coming to a bit of a head has to do with the increased awareness of litigation funding on the part of commercial lawyers. And so as transactional lawyers begin to turn their minds to whether litigation funding is a tool that they can put to use or that their clients can use in connection with a transaction, I think we'll just see more pull than push in terms of appetite and interest in trying to make a claims purchase transactions function. We've already been busy doing that in respect of appeal funding and purchasing claims that are in an appeal context to some considerable success. So, we like those deals when they can work.
Another area that is really interesting and has been part of what's now the Omni Bridgeway family for decades, as Allison has indicated, is our ability to push forward with enforcement activities. And from the perspective of Omni Bridgeway in Canada and not to speak for Allison (but I have heard her make this point a number of times in the US), we really would look forward to developing enforcement capabilities that can match what we have in other parts of the company, in other jurisdictions. We already benefit immensely from the skills and knowledge and expertise of our colleagues in those other jurisdictions where this has been an activity, a funding exercise, for years and years. But I think the company would all agree that this is an area that we can grow.
Allison might expand on that. One thing which I think we have both witnessed is the excitement, the gleam in lawyers’ eyes when we begin to talk with them about our enforcement funding opportunity and our enforcement funding offering. That's certainly an area for expansion.
We've heard some predictions already. Let's discuss where the industry is likely to move in the future. Allison, what do you predict in terms of industry evolution?
I think there are a number of things. Paul had touched on one of them—which is connected to another that I'd speak about—which is growing our enforcement capabilities in North America. As Paul alluded to, we're learning a ton from our experienced colleagues on the other side of the pond and that’s a really interesting potential growth area for us. In that vein, I think that one of the macro trends that I expect to see in the next 10 years will be some consolidation in the industry. We've already merged with another company, Omni Bridgeway. I think that some of the biggest players will gobble up some smaller players that have unique features that they want, that work for them as Omni Bridgeway did for us. And so there will be some further consolidation in the industry. There will always be some smaller funding players, but I think that the larger companies are going to gravitate together. You'll see some more combinations of firms, combining capital and the ability to do some larger scale deals for large firms and large clients that the smaller market and middle market funders are going to have trouble competing on.
The other trend that I think is really interesting is in the US: we have what is generally known as “the rule prohibiting fee-splitting with non-lawyers.” There is a growing movement to abolish that rule, and it already has been abolished in a couple of jurisdictions and is under consideration to be abolished in others. The impetus behind it is that it stifles innovation in the field of law and services that might be provided by non-lawyers to a less well-moneyed market: individuals, and middle-market, and smaller companies.
That is really an interesting area I think that we will see. It's connected to my “larger companies gobbling up smaller ones” vein, but I think you may see some of the larger companies launching their own interesting—or pairing with other firms—in terms of offering some different kind of innovative legal services if we start seeing this fee splitting rule (which frankly is a little antiquated and doesn't really make very much sense anyway)—if we see that beginning to fall over and it catches steam, I think you'll see quite a bit more innovation in terms of litigation financiers being able to invest directly in law firms and/or alongside law firms that offer some of these unique new services.
And Paul, what predictions would you make about where the industry is likely to move in the years ahead?
I love listening to Allison because she always has really useful insights. As I've already mentioned, it tends to be that she's just a little bit further down the road than we are in Canada, so it's important for me to listen carefully. As for my predictions short-term, medium-term, long-term I can give three different ideas, outlooks.
I think in the near term, short-term, I expect it's going to become commonplace, if not required, that lawyers, when consulting clients, will be talking about funding as part of their discussions around pricing. I imagine that will be, to the extent that it's not already, a reality in many jurisdictions. I predict that in Canada, in the near term, that will be a default.
Medium-term, while Omni Bridgeway is fortunate to have some very serious and thoughtful major institutional investors, I think broadly, we'll see in Canada an increased appetite and interest in the institutional investing markets in litigation funding, as more and more folks in this country begin to appreciate the pure uncorrelated nature of the asset class.
And then long-term, as data sets develop in Canada—and I think again, in the US, it's already much, much more of a reality—but as data sets develop, I think the ability to make fruitful use of AI in case review and using predictive technologies will become more and more meaningful. That would be my long-term prediction for the market.
Thanks Paul. Allison and Paul, thank you very much for appearing on Omni Bridgeway's Beyond Hourly Podcast and sharing your knowledge with our listeners.
Thank you. It’s been fun.
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