The Dugal litigation finance contract, which provides insurance against adverse cost orders in a Canadian shareholder class action, allows the Funder and Plaintiff to terminate for cause, and allows the Funder to terminate by refusing to insure the adverse cost order risk during appeals. This structure closely parallels that of the draft model, which allows each to terminate for cause, and which allows the funder to terminate by refusing to make additional investments. One key difference, however, relates to what is considered “cause.” Section 11 of … Continue reading →

This post continues our series contrasting the terms of the contract financing the Canadian shareholder class action in Dugal with the draft model. This one looks at the terms relating to conflicts of interest and buyer’s remorse. Our draft model contract requires disclosure of myriad conflicts of interest and attempts to regulate them through various prohibitions and the imposition of a fiduciary duty. There is much less detailed on this issue. The Dugal contract has one section, Section 10, which is called “Good Faith Dealings”, which addresses conflicts … Continue reading →

The Canadian contract we posted last week (used by the plaintiffs in the Dugal matter) addresses information sharing in slightly different ways than our draft model, presumably because privilege law is different. It is not obvious which contract mandates greater disclosure. In the draft model, plaintiff must disclose all material information prior to the initial funding and on an on-going basis, except that information protected only by the attorney-client privilege cannot be shared without the informed, written consent of the plaintiff. That restriction is imposed notwithstanding the … Continue reading →

This post looks at the financial terms of the funding contract that financed the Dugal case (see last post), to highlight important similarities and differences with the model. By reading Dugal’s recitals and provisions 4.1 and 4.2, we see that the funder is only directly investing $50,000, which is for “out of pocket expenses incurred by the Plaintiffs in the proceeding”. The funder is not financing the conduct of the claim itself, in contrast to the terms of the draft model contract. However the funder is … Continue reading →

Many thanks to Professor Jasminka Kalajdzic, of the University of Windsor Law School, who provided the funding agreement (pdf at link.) In future posts we will contrast this contract’s approach to our draft model contract’s. Two overarching differences between this contract and the model are important to note at the outset, however. One is that it finances a class action, which is different than the kind of claim considered by the model. The second is that the financing contract is mostly a kind of insurance against … Continue reading →

Commercial litigation funding is still nascent in Canada, particularly in the field of class actions.  The first known third party funding arrangement in a class action occurred in the mid-90s, when a plaintiff and his counsel organized a syndicate of investors to fund the litigation in return for a share of the eventual settlement.  The arrangement was approved by the case management judge, without issuing reasons for decision.  At about the same time, a similar investment scheme was proposed in another class action; in this … Continue reading →

The last two posts laid out what a material breach by either party is. The question then is, what happens if a party commits such a breach? While the question cannot be too narrowly and definitively answered, because parties should have available to them any remedies available at law or equity, we believe that consequences in addition to such remedies would correctly align incentives.That is particularly true given the hypothetical nature of the damages from breach. Consequences of Plaintiff’s Material Breach As we noted in … Continue reading →

Like the Funder, the Plaintiff can terminate the contract for cause. The provisions we consider so central to the deal that any breach is presumptively material relate to the funder’s capital and its handling of the Plaintiff’s privileged, and, if used, Proprietary Information. 7.2 Material Breach by Funder 7.2.1 Material Provisions: Funder recognizes that its representations regarding its ability to honor its capital commitments and its commitments to protect Plaintiff’s privileged [and Proprietary] Information are of the essence of this agreement. For the avoidance of … Continue reading →

As we explained last post, the termination for cause provisions of the draft model contract are of two types; breaches of material provisions, and material breaches of other provisions. Today we share the terms enabling the Funder to terminate for cause, interspersed with comments: 7.1 Plaintiff Breach 7.1.1 Material Provisions: The provisions of this contract relating to complete and accurate disclosure of material information about the claim; to cooperation in conducting the claim; and of non-impairment of the claim, the potential award and any proceeds … Continue reading →

One of the biggest challenges in litigation finance is striking the right balance of risk between litigants and funders, consistent with the norms of the legal system and the ethical duties constraining counsel. Striking the right balance increases the chances meritorious cases are funded and that plaintiffs get their due. Key to striking the balance is determining the circumstances under which the funder can refuse to invest additional money in the case. On the one hand, funders need to be able to exit in certain circumstances. … Continue reading →