Litigation funding is an increasingly-popular tool for attorneys and clients to share the risk and reward of litigation with third-party investors, and for investors to capitalize on the uncorrelated returns generated by legal-driven revenue. However, the term "litigation-" or "legal-" funding actually encompasses a handful of products, which vary based on borrower profile, stage and sector of litigation, use of proceeds, and ultimately, cost of capital and risk-reward profile. This webinar examines three funding products -- case fundings, law firm loans, and portfolio fundings -- and aims to inform attorneys on best solutions for their firms and clients, and provide an overview for institutional investors looking to allocate capital to litigations. To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/a-menu-of-products-for-investors-and-lawyers-2020/

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Practical and entertaining education for
attorneys, accountants, business owners and
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5. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
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6. Meet the Faculty
MODERATOR:
Jeremy Waitzman - Sugar Felsenthal Grais & Helsinger LLP
PANELISTS:
Dave Kerstein - Validity Finance LLC
Christopher Freeman - Burford Capital
Joel Cohen - Stout
Jeffery Lula - GLS Capital, LLC
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7. About This Webinar
A Menu of Products for Investors and Lawyers
Litigation funding is an increasingly-popular tool for attorneys and clients to share the risk and
reward of litigation with third-party investors, and for investors to capitalize on the
uncorrelated returns generated by legal-driven revenue. However, the term "litigation-" or
"legal-" funding actually encompasses a handful of products, which vary based on borrower
profile, stage and sector of litigation, use of proceeds, and ultimately, cost of capital and risk-
reward profile. This webinar examines three funding products -- case fundings, law firm loans,
and portfolio fundings -- and aims to inform attorneys on best solutions for their firms and
clients, and provide an overview for institutional investors looking to allocate capital to
litigations.
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8. About This Series
Commercial Litigation Funding 101
This webinar series discusses advanced topics in the field of litigation funding. Once a fledgling
industry predominantly used in the Commonwealth nations, litigation funding has over the past ten
years becomes a well-accepted and prevalent practice in the United States. As the industry has
evolved, so too have the menu of available products, strategic decisions made by funders and
practitioners, and types of investors. This three-part series is geared towards educating attorneys
and clients on legal/ethical, strategic, and business decisions when considering litigation
funding, and investors seeking to learn about an increasingly mainstream asset class. Panelists
include preeminent experts in the field of litigation funding, including academics who have written
on the topic, investment managers at preeminent litigation funders, litigators who have used
funding products, and independent litigation funding advisors.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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9. Episodes in this Series
#1: An Introduction to a New Yet Old Funding Alternative
Premiere date: 5/12/20
#2: A Menu of Products for Investors and Lawyers
Premiere date: 6/9/20
#3: Three Case Studies
Premiere date: 7/14/20
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10. Episode #2
A Menu of Products for Investors and Lawyers
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11. Litigation Funding: A Broad Definition
Litigation or legal funding is the “funding of litigation activities by entities other than
the parties themselves, their counsel, or other entities with a pre-existing
contractual relationship with one of the parties.”
 Source: American Bar Association Commission on Ethics 20/20, “White Paper on Alternative
Litigation Finance”
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12. How firms and companies use legal finance
Law firms
• Maintain hourly clients and expand into new areas
• Manage risk on large-dollar contingency or
alternative fee matters
• Use going-forward portfolios to offer faster, more
flexible financing solutions to prospective clients
• Leverage financing as a marketing and new
business tool
In-house legal teams
• Reduce cost and risk of litigation
• Monetize litigation assets at beginning of a
case, or after judgment or appeal
• Secure corporate debt facilities
• Finance, sell, or collect uncollected judgments
• Secure litigation-related insurance and risk
solutions
• Trace assets and enforce judgments against
litigation debtors
74%Three quarters of lawyers
whose firms have not used
litigation finance expect to do
so in the next two years
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13. Typical Litigation Funding “Parties”
• Plaintiffs
• Attorneys and Law Firms
• Funders
• Investors
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14. Litigation Funding: Segmentation
• Consumer vs. Commercial Funding
• Early vs. Late Stage Funding
• Domestic vs. International Funding
• Funder Structures
• Lawyer & Law Firm Characteristics
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15. Metrics for Analysis
• Risk
• Use of Proceeds
• Alignment
• Costs of Capital
• Funded Party Profile
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16. Metrics for Analysis: Risk
• “Risk” is the probability of occurrence of losses relative to the expected return on any
particular investment
 Litigation is an inherently risky underlying investment
 Risk varies dramatically based on type of litigation -- e.g., contract, intellectual
property, antitrust
 Litigation risk is not constant, but rather fluctuates based on litigation
developments
 Funded parties may own diversified litigation risk, depending on the circumstances
 Risk also includes headline and regulatory risk
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17. Metrics for Analysis: Use of Proceeds
• “Use of Proceeds” -- for purposes of this presentation -- will refer to how the funded
party (the plaintiff or the attorney) intends to use the funding
 Proceeds may be used for direct litigation costs, i.e., attorneys’ fees and/or costs
 “Hard costs” includes discovery costs, experts’ fees, filing costs; basically anything
other than attorneys’ fees
 Funding arrangements may be used for non-litigation needs, such as operational
needs of plaintiff or so that plaintiff can recognize revenue
 In other situations, attorneys may seek funding for use across firm-wide activity, not
just one specific litigation
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18. Metrics for Analysis: Alignment
• “Alignment” is the extent to which investor and investee have parallel incentives:
 Popular new “buzzword” in investing world
 Investors’ desire to protect downside by not dis-incentivising funded parties
 Protection against information asymmetry between buyer and seller
 Preserve upside in high-end, best-case scenarios
 Create opportunity for recurring or repeated business
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19. Metrics for Analysis: Cost of Capital
• “Cost of Capital” is the required rate of return on a portfolio’s existing securities
 Used to evaluate new projects
 Minimum return investors/funders expect for providing capital--thereby setting a
benchmark
 Impacts the types of investments palatable to institutional investors
 Impacts the “pricing” of individual funding products offered to clients
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20. Metrics for Analysis: Funded Party Profile
• “Funded Party” -- for purposes of this presentation -- will refer to the party, i.e., the
attorney or the plaintiff, ultimately liable to repay the funder
 Decision is driven by a variety of factors
 Volume and diversification of litigation risk owned by Funded Party
 Appetite for risk-sharing by the Funded Party
 Willingness to contribute additional collateral to funding arrangement
 Legal/ethical considerations--including champerty and attorney fee-splitting
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21. Types of Products
• Single case fundings
• Portfolio fundings
• “Other”- e.g. Loans, “insurance like” products, factoring
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22. Product #1: Case Funding
• “Case Funding” is providing capital for a case (or group of cases) owned by one
particular plaintiff (or group of plaintiffs).
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23. | 23
L A W F I R M
Invest Portion
of Fee Budget
Portion of
Recovery
Client Recovery
Pays Portion of Costs
Invest Portion
of Fee Budget
Agreed upon
Contingency
Single-Case
Risk Sharing
H O W D O E S I T W O R K ?
Funder
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24. Case Funding Example
• XYZ, a failing technology company, seeks $5M in litigation funding, potential damages of
$50M
 Alternative Fee Arrangement: $3M to support attorney, who is working under
“hybrid contingency fee arrangement”
 Hard costs: $1M for out-of-pocket expenses associated with litigation
 Operational costs: $1M as an “advance” to plaintiff, secured by litigation proceeds
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25. Case Funding: Risk
• Two assumptions: (i) client is requesting funding before complaint and (ii) litigation
is “bet the company” intellectual property and trade secret litigation
 Type of litigation
o Risky issues relating to intellectual property
o Early phase of litigation means no benefit of defendants’ discovery
 Phase risk
o Litigation has not passed any substantive or procedural litigation hurdles
o No meaningful track record of litigant behavior
 Opportunity for diversification
o Litigant not likely to be a repeat litigant
o Each claim is likely correlated to first litigation; litigation may be scalable, but not
diversifiable
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26. Case Funding: Use of Proceeds and Alignment
• Use of Proceeds & Alignment tend to be analyzed together
 Alternative Fee Arrangements
o Attorneys may invest in (take on contingency) the cases they “love,” and have
funded the cases they “like”
o The greater the attorney contingency, the greater the alignment
o What is the optimal “skin in the game”?
 Hard Costs
o The greater the ratio of hard costs to attorney costs, the greater the alignment
o Participation by client and/or attorney adds to alignment
 Advance to Client
o Client has final settlement authority
o Amounts funded to client raise the “optimal settlement” figure
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27. Case Funding: Funded Party and Cost of Capital
 Inherent risk requires high cost of capital
o Multiple of invested capital (MOIC)
o Plaintiff must recover at least 10-figure recovery
o Must satisfy funder’s principal plus priority return
o Attorney’s contingency: further “equity”
o Substantial “venture capital-like” risk is best suited for plaintiff, not attorney
funding
 Fee Splitting
o N/A
o “Advance” to client creates structural impediment to funding attorney
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28. Case Funding: Take-Aways
• Case Fundings -- typically thought of “Litigation Funding 1.0” -- are not perfect:
 Case fundings entail substantial risk, which (i) requires high cost of capital, and (ii) is
challenging to diversify
 Use of Proceeds makes alignment challenging, further adding to risk
 High cost of capital means case funding is best suited for investors seeking multiples
of invested capital -- i.e., equity-, not debt-like returns
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29. Case Funding: Take-Aways
• In describing a shift from 100% case funding in 2009 to 5% case funding in 2017:
• “The reason for this dynamic in the business is that single-case litigation finance is
expensive. That’s because single-cases come with a significant risk of loss, so when
you lose a single case investment, you lose everything.” -- Chris Bogart, CEO of Burford
Capital, quoted in The Lawyer
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30. Product #2: Portfolio Funding
• A “portfolio funding” is a transaction secured by proceeds from a plurality of
unrelated litigation due either to a law firm or a particular client
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Portfolio
Risk Sharing
H O W D O E S I T
W O R K ?
L A W F I R M
Legal Services Firm Receives Portion of
Proceeds
Invest Portion of
Hourly Fees/Costs in
Tranches
Recover Agreed Upon
Portion of Fees
FUNDER
Plaintiff Plaintiff Plaintiff Defense
Client Case 4Client Case 1 Client Case 2 Client Case 3
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32. Portfolio Funding Example
• SmallBall LLP, a newly-formed firm of former BigLaw attorneys seeks $10M to support its
fees and expenses of three, unrelated cases it intends to litigate under alternative fee
arrangements
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33. Portfolio Funding: Risk
• Risk falls between Case Funding and Law Firm loan
 Litigation risk
o Litigations are typically commercial; individually, they entail risk similar to case
fundings
o But, collectively, they create a diversified portfolio
 New risks:
o Complexity of fee-splitting rules -- fundings are a “hybrid”
o It is well-established that a funder can receive a capped multiple of invested
capital
o But, what about an uncapped percentage?
o With plaintiff portfolios, no fee-splitting concern
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34. Portfolio Funding: Use of Proceeds and Alignment
• Confronting “alignment” among personalities
 Use of Proceeds
o Funds are best suited for a portfolio of cases among one or more attorneys or
plaintiffs
o Contracts can be difficult to structure--need to convene unrelated clients and/or
attorneys
 Alignment
o Litigator incentives may differ from those of other attorneys at the firm
o Funding contracts may require restructuring in the event of attorney shake-up
o Funded Party must strike a balance between ability to service funding agreement
with desire to have cash remaining
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35. Portfolio Funding: Funded Party and Cost of Capital
• Portfolio Funding is a healthy mix of risk, return, and aligned incentives
 Funded Party achieve lower cost of capital than case funding
o Uncorrelated assets provide lower risk profile, allowing lower cost of capital
o Unsecured nature of assets commands cost of capital greater than law firm loans
o Diversified portfolio means opportunity for early generation of cash to service
funding agreement
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36. Portfolio Funding: Funded Party and Cost of Capital
 Funders have found promise in scalability
o Major, mainstream funders have demonstrated some shift from case fundings to
portfolio fundings
o On law firm side, increasing acceptance of use of funding and comfort with
legal/ethical concerns
o On plaintiff side, large appetite for portfolio funding in bankruptcy and technology
litigation
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37. Product #3: The “Others”
• An “attorney loan” is a loan secured by all or a portion of a law firm’s and/or the
partners’ assets.
• Adverse Costs “Insurance” are products that cover the adverse costs (e.g., attorneys’
fees) due to a prevailing party.
• Legal Receivable Factoring is the purchase of a legal “receivable,” where the receivable
is no longer subject to “litigation” risk, just collection and timing risk.
• Litigation-driven special situations trade is the trade of a public equity
(stocks, bonds, options) on the basis of a hypothesis concerning litigation impacting that
company.
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38. About the Faculty
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39. Jeremy Waitzman - jwaitzman@sfgh.com
Jeremy Waitzman advises his clients on significant transactions and operational issues in their businesses. Described by
clients as “an essential business advisor” and “a partner in the success of my business,” Jeremy has substantial experience
representing businesses of all types and sizes from inception, guiding them through significant growth, and often through
ownership’s exit. His clients include privately-held middle market and emerging growth companies, family offices/funds,
investors, C-level executives, boards of directors, family-owned businesses and entrepreneurs. Jeremy counsels clients in the
areas of corporate law, mergers & acquisitions, private placements, general contract law and often acts as outside general
counsel for his clients. Jeremy represents individuals, closely held businesses, start-up companies and serves as outside
counsel to several large corporations. His work with companies often includes strategies for creation of enterprise value. A big
firm-trained corporate and M&A deal attorney, his experience is transactions-intensive and includes work involving business
and capital structure, mergers and acquisitions, indemnification, private equity and venture capital, private placements and
securities offerings, investor rights and preferences, licensing and subscription agreements, intellectual property protection,
customer agreements and T&C’s, joint ventures, distribution and supply, executive employment, management equity and
incentive compensation, corporate governance including board and advisory boards, and corporate contracts and agreements
including enforcement. Jeremy has been included in various panels and lectured on topics related to corporate law, venture &
angel financing and mergers & acquisitions. Industry sector experience includes software, healthcare, specialty chemicals,
mobile, IT, eCommerce, transportation, insurance, marketing and public relations, construction, auto body, specialty
consumer, real estate, manufacturing, distribution and tech-enabled services. Prior to law school, Jeremy worked at a Fortune
500 company where he gained invaluable insight into the operations of large business.
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40. About The Faculty
Dave Kerstein - dave@validity-finance.com
As Chief Risk Officer and Senior Investment Manager at Validity Dave brings unparalleled
experience helping clients and law firms mitigate litigation risks with innovative funding
models. Prior to joining Validity, Dave was an Investment Manager for four years for a leading
litigation finance company. In addition to designing financial solutions to litigation, Dave
provides strategic advice in cases funded by Validity. With fifteen years experience handling
complex commercial disputes at Gibson Dunn, Dave has litigated on behalf of both
plaintiffs, for whom he has recovered substantial sums, and defendants, for whom he has
achieved trial court victories or favorable outcomes. He also possesses extensive experience
across jurisdictions, having tried cases in state and federal courts and before arbitration
panels across the US and internationally. Dave earned his J.D. from Penn Law where he was
a Toll Scholar, and his B.A. in diplomatic history from UPenn, where he was a BFScholar.
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41. About The Faculty
Christopher Freeman - CFreeman@burfordcapital.com
Christopher Freeman is a Vice President with responsibility for assessing and underwriting
legal risk in patent matters. As part of Burford’s investment team, Christopher evaluates
intellectual property cases and patent monetization campaigns and crafts investment
structures that align incentives between funder, law firm and claimant. Prior to joining Burford,
Christopher was Vice President and Head of Litigation at Blackbird Technologies, a company
he co-founded in 2014. At Blackbird, Christopher oversaw all business operations and
successfully built and managed one of the most prominent patent acquisition and licensing
entities in the US, growing the firm to a dozen employees and a portfolio of over 100 patents
and applications. Earlier in his career, Christopher was an IP partner at Kirkland & Ellis and
practiced at Latham & Watkins and at Quinn Emanuel. Christopher graduated from the
Boston University School of Law and earned an undergraduate degree from Northwestern
University in Industrial Engineering and Economics.
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42. Joel Cohen - JCohen@stout.com
Joel Cohen is a Managing Director in the Dispute Consulting group. Joel comes to the firm with over 17 years of
experience in the dispute, forensic, and insolvency practice areas, most specifically focused in the financial services and
asset management industries. His experience encompasses a number of significant cross-border insolvency and
litigation matters, where he has served as financial advisor and consulting expert to fiduciaries, offshore liquidators,
bankruptcy, and litigation trustees. He has assisted these clients in a variety of litigation consulting services, including
asset tracing, fraud, Ponzi schemes, industry custom and practice for investment managers, and forensic analysis. Joel
has also led several internal investigations within the context of family office, investment advisors, and various corporate
structures. Before joining Stout, Joel was a Managing Director at a boutique financial advisory and consulting firm. Prior
to that, he spent a number of years with a global financial advisory firm in its Dispute & Investigations group where he
helped manage a team of CPAs, economists, attorneys, and finance professionals in executing a diverse array of
complex engagements related to the various hedge fund/private equity fraud, insolvencies, and litigations that
characterized the global financial crisis of 2008-09. He was a leader in the disputes practice at a Big 4 accounting firm
and senior vice president at a prominent investment bank in charge of internal investigations. Joel has worked with
premier law firms on accounting malpractice, business insurance disputes, fraud detection, and economic investigations.
Joel has expertise in managing the expectations of various stakeholders involved in insolvency proceedings, liquidations,
litigation settlements, and receiverships, namely in his capacity of assisting a board, trustee, receiver, or official liquidator
with their duties, including U.S. and cross border considerations. He has extensive experience within the offshore world,
regularly handling cases out of the Caribbean.
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43. Jeffery Lula - jlula@glscap.com
Jeffery Lula serves as a Principal at GLS and is responsible for due diligence and monitoring of commercial
litigation and arbitration-related investments.
Prior to joining GLS, Jeff was a litigation partner at Kirkland & Ellis LLP in Chicago. During his nine years at
Kirkland, Jeff’s practice focused on a wide variety of complex commercial litigation, including contract
disputes, bankruptcy litigation, corporate mismanagement, fraudulent transfer litigation, and insurance
litigation. His experience extends to all stages of litigation and appeal, and he also counseled clients during
internal investigations prior to litigation or arbitration. He has represented clients in a variety of fields, including
private equity firms, insurance carriers, and large Chapter 11 debtors.
Jeff holds a J.D. from the University of Chicago Law School, where he served as an Articles’ Editor of the
University of Chicago Law Review, and a B.S. from University of Illinois.
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About The Faculty

44. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
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the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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45. About Financial Poise
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