Ted Farrell, Founder of Litigation Funding Advisors moderated a panel which included Fred Fabricant, Managing Partner of Fabricant LLP, Molly Pease, Managing Director of Curiam Capital, and Boris Ziser, Partner at Schulte Roth and Zabel.
The topics covered in this panel discussion were:
- Getting up to speed on funding & insurance products
- How to fast track diligence and deal with exclusivity
- Negotiating key terms and spotting red flags
- Benchmarking numbers & making the waterfall work for you
The topic of insurance came up first. Molly Pease began the discussion by noting that it isn’t always the case that funders are looking to lower risk in every situation. “It’s not always the case that we’re looking to minimize risk with insurance, because that comes with a cost,” Pease noted. “We don’t necessarily want to cut into our return, so there has to be a good fit for the insurance product.”
The moderator, Ted Farrell then pointed out that starting a litigation funder isn’t exactly about lowering risk. So, risk mitigation is important, but not the primary driver of investment decision making. Boris Ziser agreed, yet noted how insurance opens the door to lot of other investors. “More than half of our mass tort deals have insurance,” said Ziser, “with either the entire deal or a tranche of deals being insured.” Getting wrapped by a single A-rated carrier allows certain investors to participate in the investment.
On the issue of judgement preservation in the IP space, Fred Fabricant explains that in the patent space, he hasn’t seen a lot of insurance products in the pre-judgement section of the case. “There are too many uncertainties, and it is very hard to assess the risk in this phase of the case.” Fabricant is looking forward to insurance products in this phase. “In post-judgement, much easier for insurance to assess the risk, because you’ve eliminated lots of uncertainties.” For his part, Fabricant is interested in insurance products to mitigate risk, especially in portfolio funding cases, though he hasn’t had much experience with insurance products yet.
Further topics discussed included exclusivity (Fred Fabricant noted he doesn’t shop deals between funders, in order to maintain long term relationships), funder communication with clients (funders want to move just as quickly or even more quickly than lawyers and claimants—the process can be slow sometimes if claimants need to vet whether the terms are appropriate), and funder due diligence (it’s always better to be upfront about the risks of a case, since the funder will find those out eventually anyway—and every case has risks, no sense in pretending you have a panacea of a legal claim).
In the end, it was an expansive panel discussion that covered a range of topics pertinent to securing a litigation funding deal.
