Legal Business

‘They’re lying’: Muddy Waters retaliates as Burford ramps up stock manipulation claims

‘They’re lying’: Muddy Waters retaliates as Burford ramps up stock manipulation claims

The acrimony between Burford Capital and Muddy Waters has shown no signs of abating, with the litigation funder enlisting Quinn Emanuel Urquhart & Sullivan to chase the identities of traders who allegedly manipulated its shares.

Quinn partner Richard East (pictured) submitted a statement to the High Court on behalf of Burford on Monday (30 September) which argued that the decline in the litigation funder’s share price was the result of ‘unlawful trading activity’. As a result, Quinn formally asked the High Court to obligate the London Stock Exchange (LSE) to reveal the identities of those placing orders and on whose behalf the orders were being placed.

East’s submission added: ‘In the circumstances of this case, there is also good reason to consider that the traders involved in such market manipulation were acting in concert with each other and/or Muddy Waters, thereby also committing the tort of conspiracy to injure by unlawful means.’

However, in a statement US investor Muddy Waters dismissed Burford’s allegations: ‘There are literally dozens of people at our firm, counter parties, and outside accountants who know that when Burford management accuses us of manipulative trading or collusion, they are lying. But given the accounting fantasyland they create, nobody should be surprised.’

Prior to the attack Burford was the most valuable company listed on AIM, the LSE’s junior market, and worth more than £3bn. The broadside by Muddy Waters resulted in approximately £1.7bn being wiped off Burford’s value.

The submission by East also makes reference to a 39-page report by Joshua Mitts, an associate professor at Columbia Law School and the principal of consulting firm M Analytics. According to Mitts, the share price fall ‘was not solely the result of negative market sentiment’ caused by the initial Muddy Waters report.

Meanwhile the ongoing drama has prompted responses from further afield. Andrew Shepherd-Barron, equity research director at stockbroker Peel Hunt, stated: ‘Even if Burford does obtain an official investigation that finds evidence of wrongdoing, the bigger issue is why the share price has not recovered. We think that Muddy Waters had some fair points to make, but not such as to affect materially BURF’s fundamental value. The problem is that whilst Burford has subsequently released some useful information, much more is needed.’

For more detail on the Burford vs Muddy Waters saga, read last month’s news review.

thomas.alan@legalease.co.uk

Legal Business

Mud sticks to Burford amid intense row but dispute funders’ rise looks assured

Mud sticks to Burford amid intense row but dispute funders’ rise looks assured

‘Throw enough mud at a wall, and some of it will stick,’ the proverb says. But since US investor Muddy Waters published a scathing attack on third-party litigation funder Burford Capital on 7 August, the muck-slinging has not stopped.

The charges in the 25-page report were devastating. Having labelled Burford a ‘poor business masquerading as a good one’, and suggesting the company was ‘already insolvent’, more than £1bn was wiped off the listed funder’s value. Five days later, Burford enlisted Freshfields Bruckhaus Deringer, Quinn Emanuel Urquhart & Sullivan and Morrison & Foerster to pursue claims of illegal market manipulation.

Legal Business

Disputes round-up: Burford launches insurance business while Fieldfisher spin-off begins £100m unequal pay claim

Disputes round-up: Burford launches insurance business while Fieldfisher spin-off begins £100m unequal pay claim

Disputes funder Burford Capital is launching a separate insurance company to cover clients’ adverse costs risk, while Fieldfisher’s consumer-led litigation spinoff Roscoe Reid is beginning a potential £100m equal pay claim against retail giant Morrisons.

In other market news, the Law Society has voiced concerns over reforms proposed by the Disclosure Working Group (DWG) to combat voluminous disclosure.

Burford Worldwide Insurance is being touted as closing a gap in the market. The funder argues that it is difficult in the current insurance market to gain cover once adverse costs exposure approaches £20m, a likely outcome in larger, more complex claims.

Burford Worldwide Insurance is expected to have full regulatory approval ‘imminently’, and will receive financial backing from the funder considerable balance sheet. Burford generated more profit in the first half of 2017 than any full year in its history, with total income rising 130% to $175.5m.

Hausfeld litigation partner Lianne Craig told Legal Business: ‘There is a gap in the market, many insurers don’t want to insure in excess of £10m per case and this can lead to complexities where you are looking for cover above that. There is also increasingly an appetite for funders to deal “in-house” with the insurance aspects of a case. This feels like a natural next step to me.’

Other disputes partners have also seen the benefit, as one said: ‘What Burford is offering is relatively new. If you go to any of the other funders, they will usually say they’ve only got between two and five million pounds behind them to cover adverse costs. They don’t have in-house insurance.’

Shepherd and Wedderburn’s Guy Harvey is unsurprisingly supportive of the new business, given his firm’s  ‘substantial, eight-figure’ litigation financing deal it signed with Burford last year. He observed: ‘International arbitration usually involves big sums. I don’t know exactly how many cases there are over the year, but there must be a three-figure number of cases where it amounts to these kinds of numbers. It’s increasingly not unusual in big ticket litigation.’

Meanwhile, Roscoe Reid, an entity set up by Fieldfisher in January to act on consumer-led litigation, is pursuing a potential £100m claim against Morrisons.

The action relates to the alleged difference in pay between the predominantly female workers on Morrisons shop floors and the typically male workers in the grocer’s distribution centres.

Jonathan Hofstetter, who is spearheading the claim, told Legal Business that Roscoe Reid has already attracted 300 claimants. The firm is expecting to spend the rest of the year drawing more to the group, with Hofstetter estimating around 20,000 in total.

‘There’s a lot of momentum to redress this unfairness, which has happened over many years. We believe there has been historical pay differentials between men and women from anywhere between £1.80 and £2.80 an hour, which is very significant.’

Elsewhere, the Law Society has argued that new disclosure reforms should be limited to only cases valued at more than £500,000.

The reforms, drafted last November by a group of lawyers, judges and clients that make up the DWG, suggested scrapping the standard regime in favour of ‘basic’ and ‘extended’ approaches. The proposed system will default to the basic disclosure, which involves parties producing only the key documents necessary to the case. Extended disclosure will be granted at the judge’s discretion.

In a statement, the Law Society said: ‘We have expressed some concern that perceived issues relating to disclosure may exist only in high-value commercial litigation. With that in mind, we have suggested that the working group may wish to consider whether there are existing powers the court could exercise in relation to disclosure.’

The Society also noted that the time and effort required to implement the new regime would put more pressure on the judiciary, which is described as ‘already overstretched.’

tom.baker@legalease.co.uk

Legal Business

Shepherd and Wedderburn secure ‘substantial eight figure’ Burford litigation finance deal

Shepherd and Wedderburn secure ‘substantial eight figure’ Burford litigation finance deal

UK law firm Shepherd and Wedderburn has announced an eight figure sum portfolio-based litigation finance deal with Burford Capital for the first time to fund current and upcoming litigation the firm is handling.

The arrangement is the first to be offered by a top 100 UK firm with a litigation funder. City-headquartered Shepherd and Wedderburn has offices in London, Edinburgh and Glasgow.

Shepherd and Wedderburn’s head of commercial disputes Guy Harvey (pictured) told Legal Business that the firm had some specific upcoming competition damages claims in mind when agreeing the deal, but said the financing package would be used to support existing arbitration and intellectual property disputes.

‘We’re not in the market in looking for a big class actions, we’re a firm that deals with corporate actions between corporates’, Harvey said.

Harvey also stated that once the ‘substantial eight figure’ financing deal runs dry, he expects the firm to return to Burford to negotiate a new deal.

In a joint statement, Burford and Shepherd and Wedderburn insisted the deal would expand the firm’s ‘ability to offer alternative fee arrangements.’

In July, Burford Capital entered into a partnership with competition boutique Hausfeld to offer a financing package for UK claimants to pursue follow-on damages claims against truck makers who had participated in a 14-year price-fixing cartel.

In a statement, Hausfeld said that Burford will fund ‘the ongoing costs of litigation’ and will protect claimants against any adverse cost exposure.

Burford’s recent financial results revealed it had generated more profit in the first half of 2017 than any full year in its history, revealing a total 130% income rise from last June to $175.5m.

The income jump for the company, which also has a legal arm, was a result of a booming investment income which rose by 148% to $161.6m in the same time period, the firm said.

Shepherd and Wedderburn are currently representing oil and gas exploration company Cairn Energy in a $5.6bn arbitration claim against India over a disputed tax assessment.

The Indian government is attempting to claim $1.6bn in unpaid taxes from Cairn Energy, in relation to its $8.5bn sale of a 9.8% stake in Cairn India to Indian mining group Vedanta Resources.

tom.baker@legalease.co.uk

Legal Business

Hausfeld takes the wheel in truck cartel damages claim with funding from Burford

Hausfeld takes the wheel in truck cartel damages claim with funding from Burford

Competition boutique Hausfeld is partnering with litigation funder Burford Capital to offer a financing package for UK claimants to pursue follow-on damages claims against the participants in a truck manufacturing cartel.

In July last year, the European Commission (EC) found truck manufacturers MAN, Volvo/Renault, Daimler, Iveco and DAF had operated a 14-year price-fixing cartel. As a result, the EC fined the cartelists a record-breaking €2.93bn, aside from MAN, which under EU leniency rules received full immunity for revealing the existence of the cartel.

In a statement, Hausfeld said that Burford will fund ‘the ongoing costs of litigation’ and will protect claimants against any adverse cost exposure.

Any business in the European Economic Area that suffered financial loss as a result of paying higher prices for trucks as a result of the cartel is entitled to claim compensation.

The announcement from Hausfeld and Burford means that new claimants in the UK can be funded to come forward and seek damages, adding to other UK-based actions from Royal Mail and the Road Haulage Association (RHA). London-based Hausfeld partner Scott Campbell will be leading for the firm.

Campbell told Legal Business he expects the claim value to rise into ‘the hundreds of millions’ and that a ‘large group of corporate claimants’ had already signed up.

Berwin Leighton Paisner (BLP) partners Andrew Hockley and Edward Coulson are leading for Royal Mail’s claim. The RHA action, which is fully funded by Therium Capital, is being led by Backhouse Jones partner Steven Meyerhoff.

Quinn Emanuel Urquhart & Sullivan partner Boris Bronfentrinker has been instructed on Daimler’s UK defence, with Freshfields Bruckhaus Deringer’s global antitrust litigation head Jon Lawrence and partner Bea Tormey defending Volvo-owned Renault in the UK and several EU jurisdictions.

Iveco has enlisted Herbert Smith Freehills partner Kim Dietzel, while MAN has instructed Slaughter and May.

tom.baker@legalease.co.uk

Legal Business

‘Our business has evolved’: Burford Capital income rises by 60% as demand for litigation finance grows

‘Our business has evolved’: Burford Capital income rises by 60% as demand for litigation finance grows

Litigation finance outfit Burford Capital has seen its turnover soar 59% to $163.4m in a year which saw the financer aggressively expand with a US merger. Profit after tax was also up 75% to $115m, while the listed company now manages $2.3bn for legal finance.

The eight-year-old company expanded its US offering with the acquisition of Chicago-based investment manager Gerchen Keller Capital for $160m, giving Burford a 20-person team in Chicago and an overall headcount of 80, including 40 lawyers.

The move combined the two largest litigation funders globally and added a diversified portfolio in the management of private capital and investment income.

Burford made $378m in new legal investments in 2016 and recovered $216m in cash from investments, up 48% on the previous year.

The firm’s annual report said that demand for the company’s services was on the up, in litigation and more broadly: ‘Our business has evolved so much that “litigation finance” often seems to narrow a term for what is really “legal finance”.’

According to Burford, the number of US private practice lawyers saying their firm has used litigation finance has grown four-fold in four years to 28%, however in the UK only 2% of in-house lawyers had used litigation assets and as many as 67% were unaware it was possible to do so.

The global litigation finance market is also opening up, with key litigation and arbitration centre Singapore and Hong Kong both introducing legal frameworks to open up their markets to litigation finance.

Last year Burford also appointed Fried, Frank, Harris, Shriver & Jacobson’s former head of competition and antitrust Craig Arnott as its new managing director after the sudden resignation of Nick Rowles-Davies.

matthew.field@legalease.co.uk

For more on third party funding see the feature: ‘The bigger short – third party funding bets on new markets and models’

Legal Business

‘The clear leader’: Burford Capital merges with US rival Gerchen Keller to create funding powerhouse

‘The clear leader’: Burford Capital merges with US rival Gerchen Keller to create funding powerhouse

Litigation funding company Burford Capital is set to acquire Chicago-based investment manager Gerchen Keller Capital for $160m to create a firm with $1.2bn in assets in ongoing cases.

The merger will create a company with 80 staff combining UK-based Burford with the US outfit. Gerchen Keller will add $15.4m to Burford’s top line and give the company a 20-person team in Chicago.

The pair are the two largest litigation finance funders globally and their combination creates a giant in the industry. The move also allows the firm to diversify its portfolio, adding Gerchen Keller’s portfolio in management of private capital as well as investment income.

Burford chief executive Christopher Bogart said: ‘Burford and Gerchen Keller are widely regarded as the world’s two leading litigation finance providers. We know each other well and we approach the legal market in similar ways. The opportunity to combine the largest public player and the largest private capital manager is unique and will create the clear leader in this rapidly growing and evolving industry.’

Burford recently appointed former Fried, Frank, Harris, Shriver & Jacobson head of competition and antitrust Craig Arnott as its new managing director, following the resignation of Nick Rowles-Davies.

The litigation funder has also moved to expand its portfolio in Europe, having invested €30m in US competition law boutique Hausfeld so it can open in Germany. Burford’s investment was the largest-known facility established to fund litigation in Germany, where Hausfeld claimed there is significant demand, particularly in anti-trust litigation. The office opened in January this year.

In October Burford also launched its own Alternative Business Structure in the form of Burford Law with the hire of Akin, Gump, Strauss, Hauer & Feld partner Tom Evans.

matthew.field@legalease.co.uk

For more on third party funding see the feature: ‘The bigger short – third party funding bets on new markets and models’

Legal Business

Revolving doors: Shoosmiths appoints five new partners as Burford and RPC make hires

Revolving doors:  Shoosmiths appoints five new partners as Burford and RPC make hires

The front door was spinning at Shoosmiths this week as it swooped for hires from three City firms, while Ashurst‘s exits continued, and Burford Capital and RPC Perform both recruited.

Shoosmiths’ recruitments hot up an otherwise quiet August with a spate of hires from Hogan Lovells, Charles Russell Speechlys, King & Wood Mallesons and a move for Iconix’s senior in-house counsel.

The UK firm hired Hogan Lovells corporate partner Amit Nayyar and senior real estate associate Ed John, who joins the firm as partner. Shoosmiths tapped Charles Russell for planning partner Tim Johnson, and added to the exits at King & Wood Mallesons by recruiting Angus Evers, who will join as the firm’s head of environment.

As well as grabbing a raft of new partners from the City, Shoosmiths added Richard Millington who joins from Iconix, the home of brands including Umbro, where he was VP international counsel. Millington will join Shoosmiths’ technology, media and commercial team in the firm’s Manchester office.

As the firm continues to struggle with a string of exits, Ashurst has lost a key member of its Africa team, with oil & gas and mining project partner Nicolas Bonnefoy leaving the firm to start his own practice. Bonnefoy has advised clients such as Mitsui & Co, oil company OMV Group and Sasol as well as Republic of Equatorial Guinea and the Democratic Republic of Congo. Bonnefoy is the latest in a wave of recent departures, including the firm’s CFO Brian Dunlop earlier this month.

While Burford Capital, the global litigation financing firm, has appointed former Fried, Frank, Harris, Shriver & Jacobson head of competition and antitrust Craig Arnott as its new managing director. Arnott takes over after the sudden resignation of Nick Rowles-Davies.

Arnott will focus on the UK, Europe and Asia-Pacific. Burford chief executive Christopher Bogart said: ‘We’re very pleased to welcome Craig to Burford. He brings over 20 years of commercial law experience in multiple legal jurisdictions that will assist us in meeting the increasingly global demands of our clients.’

Finally, RPC’s general counsel consulting arm, RPC Perform, has hired Royal Bank of Scotland consultant Varun Srikumar in the latest addition to the team. RPC Perform was founded early in 2016, headed up by former T-Mobile GC and Huron Consulting legal managing director Julia Chain. Srikumar is the fifth new signing for the fledgling practice.

matthew.field@legalease.co.uk

Legal Business

Litigation finance for trustees

Litigation finance for trustees

Nick Rowles-Davies of Burford Capital talks facilitating recovery while mitigating risk

Litigation is an ever-present issue to trustees, whether bringing claims or defending cases. Now more than ever there is a need for trustees to be aware of the options available for funding this litigation.

There has been a significant increase in certain types of litigation in the last few years, for example, fraud cases such as the Stanford and Madoff matters, media litigation caused by events at News Corp and the largest area of litigation in recent times – banking and finance litigation.