As it appeared in Forbes
Mary Juetten, CONTRIBUTOR
Lawsuits are in the news constantly and in dealing with small businesses over the past almost decade, I have heard many CEOs complain about attorney fees. Particularly with respect to patent litigation, companies cannot afford the millions and also cannot find a firm to take the case on contingency. This can lead to the David versus Goliath situation where a small company literally has to shut down because they cannot either defend themselves or go after someone who has infringed their rights or breached a contract.
However, litigation financing by either the firm or the company is a relatively unknown solution to the above problem. I sat down with Molly Pease, Managing Director of NYC-based Curiam Capital LLC to discuss how this works.
Mary: First, tell us about a bit more about the origins of Curiam Capital.
Molly: Curiam Capital LLC was founded in January 2018 by Ross Wallin and Owen Cyrulnik, formerly litigators at New York law firms representing both plaintiffs and defendants in complex commercial litigation. Curiam’s main external investor is Michael Platt, co-founder and CEO of BlueCrest Capital Management, a private investment partnership and formerly one of the world’s largest hedge fund managers. (To be clear, BlueCrest is not an investor in Curiam; Michael Platt is the investor.) Curiam launched with committed capital of up to $100 million.
Mary: How does this litigation financing work?
Molly: We provide financing for large-scale commercial litigation of all types, including securities litigation, antitrust litigation, high-value contractual disputes, patent litigation, and others. Legal fees and expenses in those sorts of cases quickly can run into the millions, and sometimes tens of millions, of dollars. Litigation finance can help claimants pursue strong claims with the law firm of their choice without being limited by their own financial means.
We can also provide financing to law firms for either individual cases or portfolios of cases. Financing allows a law firm to offer contingent fee agreements to its clients without exposing the firm to the traditional risks of such agreements. More specifically, financing allows a firm to share some risk and reward with its clients but still ensure that the firm will collect a significant percentage of its hourly rates as it brings cases to conclusion. In many cases, financing from Curiam will allow a law firm to take on cases that it otherwise might not have been able to handle or expand into new areas.
Mary: How does this financing help the companies and the firms?
Molly: Financing helps claimants: (1) hire the best possible lawyers for each case, including law firms that otherwise would have been unwilling or unable to accept a fully contingent fee; (2) free up capital to pay operating expenses or invest their businesses; (3) alleviate the accounting burden of ongoing litigation expenses on a company’s balance sheet; and (4) reduce the overall risk and cost of litigation.
Financing helps law firms: (1) pursue individual cases or portfolios of cases, that would be too costly for the firm to take on without an ongoing stream of revenue; (2) reduce the risk of traditional contingent-fee arrangements; (3) invest in expansion, lateral hires, and marketing; (4) make cash flow more predictable; and (5) accelerate the collection of receivables.
Mary: Can you give some examples of how you work with firms and with businesses?
Molly: If a claimholder or law firm were interested in obtaining financing from Curiam, the first thing we would do is execute a non-disclosure agreement to protect the confidentiality of any discussions going forward. At that point, we begin our legal and financial due diligence on the investment opportunity. This typically includes a review of key court filings, factual background of the claim, a projected timeline to trial, and a budget for the litigation with a best estimate of lawyer fees and expenses. This is a crucial step in the process – and often the most time-consuming. If both parties agree on terms, we prepare the necessary investment documents and finalize the financing arrangement with the party seeking funding. Once the investment is made, we can be a valuable resource for parties and their lawyers based on their decades of experience working on some of the largest and most complex litigations in the country, but Curiam does not control litigation strategy or settlement.
Mary: Why do you think litigation finance is not well-known?
Molly: Five years ago, Curiam would have agreed that litigation finance was not well-known and poorly understood in the United States. But that is changing rapidly. Now it would be more accurate to say that litigation finance is underutilized. The legal industry is relatively conservative when it comes to financial innovation, and candidly, the traditional structure of U.S. law firms does not promote financial innovation.
Mary: What’s the long-term vision for your company?
Molly: We believe that there is considerable room in the market for a funder that is lean enough to move quickly, but well-capitalized enough to compete for large opportunities. We want to preserve our nimbleness, even as we grow. Over time, we also aim to offer a broader array of financial solutions than the solutions that are currently available in the market.
Mary: How do you measure success and what is your favorite success story?
Molly: We believe a financing transaction is successful when the claimant has the financial backing to select the counsel of its choice and enjoys substantial recoveries from the litigation even after the cost of financing is considered. With these goals in mind, we anticipate that Curiam will build many strong financing relationships with its recipients of funding. Because of confidentiality constraints, however, success stories are not available for public reporting. And we just started the firm, so most of our success stories are ahead of us.
So, for those companies facing litigation or contemplating litigation, litigation financing may provide an opportunity for your day in court. #onwards.