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Commercial Deals

A Recap of the Opening Panel at LF Dealmakers

Day 1 of the LF Dealmakers conference has begun. The opening panel saw Ted Farrell, founder of Litigation Funding Advisors, moderate a wide-ranging discussion on the state of legal finance. Panelists included James Bedell, Associate Director of Legal Finance at Yieldstreet, Cindy Chen Delano, Partner at Invictus Global Management, Stephen Kyriacou, Managing Director of Aon, and Michael Nicolas, Co-Founder and Managing Director of Longford Capital.

The discussion began with the evolution of the sector as a maturing asset class, away from discussions between ‘smart lawyers’ and into the mainstream. The panel underscored the range of players in the space now—3M, J&J, and others—which illustrates how far the industry has come. Additionally, the size and scope of claims—large-scale, nine-figure claims—which highlights the impact the asset class has had on the broader Legal Services sector.

Additionally, the embrace of litigation funding by Big Insurance is a signal of the industry’s ongoing growth prospects. Michael Nicolas of Longford noted how his firm can now protect principal investment, and even some of the profit they’d like to return to investors, which is ‘a game changer,’ as now credit investors can consider becoming LPs because they can grow more comfortable with the risk profile of the sector. Cindy Chen Delano echoed the ‘game-changer’ remark, noting the different types of debt structures that can be originated now that insurance is on board, all the way up to high-yield bonds, which she sees coming down the pike. Stephen Kyriacou of Aon also pointed out how he was one of two insurance providers at last year’s conference, and there was no discussion of the subject. This year, there are more insurers in attendance, and the subject has already come up in the first discussion, and will continue to as the event progresses.

Perhaps something unique about this conference is the encouragement of questions from the audience. The first panel took a question from an inventor who stressed the importance of funding in the inventor space, and lamented that in his experience it’s been so difficult to obtain the financing needed. The panel acknowledged his concern, and noted the industry’s emphasis on IP investment, while also pointing out that selectivity is paramount if a funder is going to survive long-term.

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Community Spotlights

Community Spotlight: Jeffrey Stern, Partner, Reed Smith

By John Freund |

Jeffrey Stern plays a leading role as partner in the Financial Industry Group resident in Reed Smith's New York office. With more than 30 years’ experience in structured finance and derivatives, Jeffrey brings a deep commercial sensibility to his practice.

He has completed securitizations, structured credit facilities, and derivatives/structured products transactions involving an exceptionally wide range of esoteric (and mature) asset types. His practice includes CLOs (including private CLOs), CFOs, and rated feeders, litigation pre-settlement funding, consumer loan finance, equipment lease finance, music royalty finance, financing and securitization of insurance-related assets (including life settlements and broker commissions), and specialty finance. Additionally, Jeffrey has worked in Latin America and the Caribbean for nearly 20 years, focusing on cross-border assets and cash flow financings.

Company Name and Description: Reed Smith is a dynamic international law firm dedicated to helping clients move their businesses forward. With an inclusive culture and innovative mindset, they deliver smarter, more creative legal services that drive better outcomes for clients. Their deep industry knowledge, long-standing relationships and collaborative structure make them the go-to partner for complex disputes, transactions, and regulatory matters.

Company Website:  https://www.reedsmith.com/en

Founded: Pittsburgh in 1877

Headquarters: New York

Areas of Focus: Finance, Structured Finance, Financial Services, Collateralized Loan Obligations, Latin America

Member Quote: “The field of litigation pre-settlement funding (and litigation funding generally) is an increasingly important category, and a particular area of innovation in documentation and structuring, within the esoteric structured finance market. As a result, it has become an area of real focus for the Reed Smith structured finance team.”

Commercial Regulatory Issues

Industry Leaders Share Views on the State of Third-Party Funding

By Harry Moran |

Legal funding has never before achieved such widespread adoption and acceptance within the legal industry, whilst simultaneously attracting increasingly vociferous opposition from those who wish to see limitations on its influence enforced. 

In its latest Quarterly Focus, Commercial Dispute Resolution (CDR) looks at the prospects for the third-party litigation funding market in the year ahead, highlighting both the tremendous progress the industry has made and the persistent critics who continue to call for enhanced regulations. In the article, CDR garners insights into what the coming year may hold from senior executives at some of the largest litigation funders, as well as those working with funders at law firms and consultancies.

The established and accepted position of legal funding is a key talking point with funders, as Burford Capital’s David Perla emphatically states that “legal finance is mainstream”, whilst William Marra from Certum Group points out that after many years of educating and raising awareness, “litigation funding is integral to the business models of many and maybe even most law firms.”

Despite the achievement of becoming a mainstream feature of the legal services industry, critics of third-party funding have not relented in their vocal opposition to its use, and if anything, have turning up the heat on lawmakers to introduce restrictions. Boris Ziser, a partner at Schulte Roth & Zabel, offers the straightforward rebuttal to these critics that he doesn’t “see how anyone can argue with the fact that litigation funding increases access to justice.”

Similarly, Avenue 33’s CEO, Rebecca Berrebi points out that the most prominent critique of third-party funding, the US Chamber of Commerce cannot be considered an unbiased observer as it “is funded by the big defendants in many of the cases that are funded”.Additional analysis from these top executives on the various legislative efforts to restrict legal funding, and the role of the courts, can be found in the CDR article.

Commercial Legal Innovation

A Funder’s Top Tips on Litigation Valuation for GCs

By Harry Moran |

As litigation funders strive to forge closer relationships with lawyers, one benefit for all participants in the legal industry is the opportunity to share best practices.

In an article for Today’s General Counsel, Jeffery Lula, principal at litigation funder GLS Capital, suggests that in-house legal departments and GCs should adopt the litigation valuation approach used by litigation funders. Lula argues that in-house counsel “often take an ad hoc approach to valuation—which can lead to biased or imprecise evaluations”, whilst funders’ very longevity is tied to their ability to repeatedly evaluate lawsuits accurately. As a broad framework for litigation valuation, Lula highlights four key components that should be assessed: legal merits, damages, duration and collectability.

On the legal merits of any individual case, Lula suggests adding a level of ‘qualitative rigor’ by evaluating the probability of success for each significant milestone of the litigation, such as the probability of losing a motion to dismiss or motion for summary judgment. When it comes to assessing the scale of possible damages, Lula emphasizes that ‘damages are not created equal’, and that ‘this nuance regarding the certainty of damages is key to valuing a case.’

Whilst Lula acknowledges that the duration of a lawsuit is often hard to predict, he does point a particular spotlight on the scheduling order for courts, and the importance of understanding ‘whether the current scheduling order is likely to change.’ Lula closes his piece by noting that of all these components, collectability often receives less focus than others, and that it is of utmost importance for ‘in-house counsel to inquire whether the defendant entity is expendable.’