Q&A - Charlie Morris

POMERANTZ MONITOR | JANUARY FEBRUARY 2022

By The Editors

The Monitor recently interviewed Charlie Morris, Chief Investment Officer, EMEA & APAC, at Woodsford Litigation Funding.

Monitor: What led you to a career in litigation funding?

Charlie Morris: Although, as the son of a criminal law judge, the law is in my blood, I studied modern languages at university. But after living in Japan for a couple of years after graduation, I took the plunge to become a commercial solicitor in the U.K. Several years of study and training later, I qualified as an English law litigator. Right from the off, and for the next seven years, I acted for plaintiffs in funded matters as well as for funders in various disputes about costs. Joining Woodsford allowed me to work in a business in which I continue to use my legal training.

M: Under what conditions might it be advantageous to pursue securities litigation outside the United States?

CM: Put simply, where a listed issuer has failed in its obligation to disclose material information to the market in a timely manner and that failure causes loss to its investors, those investors may have good cause to bring a securities claim. But the devil is in the detail. The specific ingredients required for a good securities claim vary from jurisdiction to jurisdiction. Some regimes are more claimant-friendly than others. For example, in some jurisdictions there is no requirement for claimants to prove ‘reliance’ (e.g. on published information or misrepresentations) or scienter (i.e., that a defendant was, at a sufficiently senior level of management, aware, negligent, fraudulent and/or dishonest in relation to the company’s relevant disclosures). Whereas other jurisdictions do require that claimants prove reliance and scienter.

M: What is litigation funding and what is its role outside the US?

CM: The costs of litigation (anywhere in the world) can be prohibitive. Many claimants with meritorious claims either cannot afford to litigate or lack the appetite to do so. A litigation funder can fund the claimant’s claim in return for a share of any recovery (if the claim succeeds). And if the claim does not succeed, the funder, not the claimant, bears the costs of a loss. Litigation funding is available for all sorts of claims, particularly high value commercial claims. The advantage for institutional investors of having their non-U.S. securities claims funded by a reputable litigation funder like Woodsford is that the merits of their claims will be independently assessed by litigation experts, with the funder bearing the financial risk of it not succeeding. Funding allows institutional investors to comply with their stewardship obligations, by holding their investee companies to account, and to recover losses suffered without having to risk throwing good money after bad. Rarely will it make sense not to participate, even where it is necessary to actively ‘opt-in’ to participate.

M: What are the criteria for a case to be eligible for funding?

CM: Given that funders typically only recoup their investment in a claim and make a return if a sufficient recovery is made, a claim will typically only be eligible for funding if the funder has a clear line of sight to such a recovery. For example, if a claim is meritorious and likely to result in a favorable judgment, but the defendant is unlikely to be able to pay that judgment, the claim is unlikely to be eligible for funding. In a nutshell, a funder typically looks for a trustworthy claimant with a meritorious claim (in respect of liability, causation and quantum), to be heard by a reliable court or tribunal in an efficient manner, against a solvent defendant with sufficient assets in a jurisdiction where effective enforcement (if required) is possible.

M: What is the relationship between Woodsford and the legal team running a case?

CM: Although Woodsford can and does fund law firms, it will typically fund claimants. The claimants, in turn, will instruct and be the clients of the lawyers. The funder and lawyers may also have a direct contractual relationship in that scenario, but that is not always necessary. In securities actions that Woods[1]ford funds, Woodsford typically identifies the law firm that it wants to act for the claimants, agrees to the best possible terms for the claimants and then presents the opportunity (sometimes jointly with the lawyers) to eligible investors.

M: In your 6+ years at Woodsford, what changes have you seen in international securities litigation?

CM: Ever since the U.S. Supreme Court’s 2010 decision in Morrison v National Australia Bank, which saw the U.S. Courts limit the jurisdictional scope of the U.S. securities laws to U.S.-listed securities, international (or non-U.S.) securities litigation has grown significantly. This growth has been fuelled by the simultaneous growth in litigation funding. Funders have become more comfortable with the risks involved in securities litigation in various jurisdictions across the globe while investors are becoming ever more accustomed to what is involved in securities litigation outside of the U.S. Woodsford funded its first international securities litigation in 2017 and has funded many more since. It is funding more English securities claims than any other funder in the market. In a number of jurisdictions, there is little jurisprudence in securities litigation, primarily because most claims settle before trial and judgment. This lack of jurisprudence means that the parties to the litigation are often defining the boundaries of how securities litigation works in a particular jurisdiction. For example, in England, the court has been asked to intervene in some cases to determine what is required for a claimant to have the requisite title to sue. In the Netherlands, there is a question mark over which law governs the dispute where the issuer is seated in the Netherlands but its securities are listed elsewhere. The more securities claims that are brought, the more defined the parameters in these non-U.S. jurisdictions will become, but for the time being, there are various uncertainties. It may be, however, that these uncertainties increase the prospects of settlement, as they exist for the defendant as much as they do for the claimants.

M: Are there common hurdles in persuading investors to join international group actions?

CM: Yes, most investors have the same concerns. They typically want to minimize or extinguish any costs risk, maintain as low a profile as possible, and minimize the management time required to progress the claims.

M: Can you describe a personal career highlight at Woodsford?

CM: In 2018, Woodsford funded a securities litigation against a bank that had engaged in serious, undisclosed wrongdoing. Within a year of commencing proceedings, the investors achieved a highly positive settlement without having to engage in substantive litigation. That outcome was satisfying for me personally and catapulted Woodsford’s securities business into what it is today.