Naomi Loewith is investment manager, legal counsel and director of strategic partnerships at Omni Bridgeway, an international dispute financing company. She described litigation finance as a tool that sophisticated companies use to help manage the cost and risk of litigation.
“Litigation, as you know, can be both expensive and unpredictable,” she said. “When companies are trying to make decisions about whether to advance a claim or not, they need to balance their competing priorities, and if they can find someone else to finance their litigation, then they’re able to vindicate their rights and also preserve their capital for some of their other needs.”
Naomi Loewith, Omni Bridgeway
“The cases we look at are hugely complicated. They’re big, complex commercial claims. So it’s having someone who can help assess those claims, understand the big picture, what a judge is likely to do, how the evidence is going to flow, where different motions are going to be brought, what the strategy should be.”
In the U.S., many former Supreme Court clerks have gone on to litigation finance, and the same is being observed in Canada. On Loewith’s team alone are eight lawyers, four of whom are former Supreme Court clerks. Loewith herself, after graduating from Harvard Law School, went on to clerk for Justice Morris Fish.
“We have this multifaceted job where we have to analyze disputes and figure out what the courts are likely to do have a good understanding of the jurisprudence of the theories underlying the jurisprudence, looking at the financial implications of major cases following the trends in the case law. So those are skills we gained as clerks that really transfer well to the practice in this role.”
She noted that litigation finance is a relatively new sphere in Canada, only starting up and gaining traction around 2015. After her clerkship, she went on to be a litigator at Lenczner Slaght for about a decade handling corporate and commercial disputes before transitioning into litigation finance. Other members of her team had previously practised at Blake, Cassels & Graydon and McCarthy Tétrault.
“I think anything new and innovative in the legal space takes a lot of work to bring people to be comfortable with it. So I love the idea of defining people’s expectations about helping establish the industry, helping clients realize why it’s so attractive and important to them. Why it can be a really valuable tool that employers should be telling them about and doing that with litigation skills. … We joke that we have a unicorn job because we get to build something using litigation.”
Now, in addition to analyzing commercial disputes, she assesses domestic and international arbitration. Clients who seek to have their disputes financed are typically those who either have a meritorious claim but don’t have capital to advance, or smaller investors up against well-funded giants, or simply those who have capital but are careful in how they use it. Clients also approach funders at any step of the litigation process, from the beginning of the legal issue to the award enforcement stage.
Financing becomes an attractive option since the uncertainty of budgets and timelines can be passed off to a third party. The funder will pay the legal fees, disbursements and indemnify against any costs in the event that the case is unsuccessful. This type of financing is mostly used where financial recovery, such as a pool of funds from which to take a return.
Having the option to finance litigation helps access to justice, Loewith said, because it allows clients to advance cases who would not have done so otherwise. Not advancing claims is not only bad for access to justice, but there would also be a lack of development in law and jurisprudence, and less learning about rights and responsibilities of parties since no decision would be published.
Further, having the option to finance ensures that cases can make their way to a fair conclusion, instead of parties settling early for a low amount because they lack the resources to see it through, allowing for a level playing field good for the development of law and fair treatment of all parties involved. It allows parties to look at litigation as an asset and opportunity rather than a risk.
Financing is distinct from lending since it is advancing capital and making an investment, secured against proceeds upon success, Loewith said. If successful, the funder will receive a portion of the amount depending on the arrangement. This could mean that a claimant will receive 70 per cent of the amount awarded instead of 100. Since it is on a non-recourse basis, the investment is lost and there is no recovery. The funder will pay the other side’s costs.
In times when the unsuccessful party refuses to pay the award, mostly seen in the international arbitration space, Loewith said that her company has an enforcement team dedicated to identifying strategies for seizing or garnishing across different jurisdictions to ensure recovery.
Working with a funder can give a party a sound second opinion of their case and discuss whether the case is likely to succeed, which is said to be valued by lawyers and clients alike.
“We’ve had really positive feedback from lawyers who say, ‘I love being able to send my draft factum to a team of former Supreme Court clerks to give their opinions and it helped make the factum better,’” said Loewith.
“We care deeply about the case, but we're not in the weeds. We’re not the lawyer. We're not the client. We’re there to provide capital and assistance if they want it.”
She went on to discuss future practice in this area, saying that there’s going to be a trend of increased growth of sophisticated companies opting for litigation finance as risk is always a top concern for them and their in-house legal departments.
“Another trend we’re likely to see is law firms working with litigation finances to enable them to offer more creative fee arrangements to their clients. A lot of the commercial firms these days are still operating on the hourly fee model. And we are seeing in the U.S. that many more top tier firms are comfortable acting on a partial success fee basis. I think we’ll start to see that a bit more in Canada, particularly for the innovative firms.”
Loewith noted that in Canada, funders have been careful to get guidance from the courts at various points about their business. There have been a number of test cases leading up to the Supreme Court to make sure that the legal community is comfortable with this practice.
The Supreme Court had also endorsed Omni Bridgeway’s litigation funding in 9354-9186 Québec inc. v. Callidus Capital Corp., [2020] S.C.J. No. 100, where an insolvent debtor known as Bluberi brought claims against its main lender for acting in a predatory manner.
Loewith said there is a supervisory role for the courts in class actions and insolvency matters, where a funding agreement might affect the interests of a party who’s not before the court but was a party to the contract. Court approval of the funding agreement is sought in those contexts.
“The environment is comfortable with litigation funding. It’s attractive to companies operating in Canada that they can get this financing; the courts are comfortable with it and sophisticated lawyers know about it. It’s something that can ultimately help them and help their bottom line.”
If you have information, story ideas or news tips for Law360 Canada on business-related law and litigation, including class actions, please contact Anosha Khan at anosha.khan@lexisnexis.ca or 905-415-5838.