June 26, 2020

Presenting a Case to a Litigation Funder

My industry colleagues wrote a great article on LAW360 that attorneys and claimants should read before presenting a case to a litigation funder.  See https://www.law360.com/articles/1278450/practical-tips-for-presenting-your-case-to-litigation-funders.  Below are some thoughts, with specific examples of how this comes up in practice, that will provide additional guidance to those seeking funding.   

(1) Do not try to hide or hold back negative information about your case. Your credibility and trustworthiness are your number one asset as an attorney. All of the underwriters at Curiam moved into litigation funding after years of experience litigating.  We will find the weaknesses (both major and minor) in your case whether you present them to us or not.  So be candid about them.  We do not expect attorneys to have thought of every possible issue in a case, but do not try to hide easy to find problems.  We may be unwilling to fund that particular case, but your future cases will continue to get serious consideration from Curiam because we will trust that you are presenting us an accurate picture of the case.  However, if we are the ones to discover obvious weaknesses of your case on our own, not only are we unlikely to fund that case but we may be skeptical of any claims you may bring to us in the future. 

For example, Attorney Z requested funding for a patent infringement case against retailer X for selling widgets ABC.  We had an introductory phone call where Attorney Z discussed the basics of the case and then Attorney Z sent us the materials we would need to perform our diligence.  What Attorney Z did not mention on the phone call or in the diligence materials was that they had already sued the manufacturer of widgets ABC for infringement of the same patents and lost at trial.  While there may be valid reasons, in some instances, why a lawsuit against the retailers of a product would succeed where it failed against the manufacturers, by hiding this easy to find fact, Attorney Z lost all credibility with us.  It is now highly unlikely that we would consider looking at a case with Attorney Z in the future.

(2) Sometimes long shots win, but it requires flexibility.  I agree that funders do not want to be presented bad cases.  But that doesn’t mean that cases with certain difficult initial hurdles to clear are necessarily bad cases; rather, it may mean that the claimant and lawyers have to be open and honest about those risks and have some willingness to assume more of the risk at the outset.  Funders such as Curiam assess risk on every case, can price that risk accordingly, and can provide flexible funding structures, but that does not mean we are willing to assume all of the financial risk for your case to clear those initial hurdles.  If the claimant and attorney are open to alternative funding structures where they share more in this early risk, cases with difficult initial hurdles may still be viable for funding. 

For example, an attorney brought us a patent infringement case against a Fortune 500 technology company.  Infringement and a high level of damages would be relatively straightforward to prove, but there were significant concerns about whether these patents would survive the inevitable IPR challenge(s). We were able to come to a funding structure where Curiam funded a smaller percentage of the costs and fees associated with the IPRs, but provided no initial funding commitment for the parallel District Court proceedings.  However, upon a successful defense of the IPR challenges, Curiam’s funding commitment would increase such that the law firm could be made whole on their outstanding legal fees (with a success bonus), the case would be fully funded moving forward, and the claimant would receive some amount of monetization of their potential gross proceeds. 

(3) Do not underbudget your case.  Funders expect you to prepare a realistic budget to get through the completion of a trial.  It is not in the claimant’s benefit for the law firm to provide budgets that are either excessively low or excessively high; rather, law firms should think of themselves as Goldilocks and find a budget that is just right.  While it may be obvious why an excessively high budget is an impediment to obtaining litigation funding, an excessively low budget may actually be a bigger problem.  There are several reasons for this, but I will highlight two: 

  • First, funders want to make sure that firms have the resources they need to get through trial and succeed.   It is in no one’s interest for a law firm to underbudget a case and then run out of funds part way through.  This results in the law firm needing to devote less resources to the case moving forward, the claimant requesting more money from the funder (which may not be easily obtained or possible in all instances, depending on the funder), or the claimant needing to bring in an additional third party funder (requiring multiple layers of negotiations before the funds are available).  None of these scenarios provides an optimal path to a successful litigation.
  • Second, funders will partly judge an attorney’s competency based on their budget.  We see a larger number and variety of cases than even the most prolific litigators, and, as such, we know appropriate budget ranges for cases and can account for differences in law firm market, size, and reputation.   If the budget for a particular case is excessively low, we may doubt whether the attorney has the competency and the experience to successfully prosecute the case.  For example, a claimant brought us a potential litigation for which they were seeking funding for expenses only.  The targeted defendant was a large technology company known for aggressively defending against patent infringement claims and for which the accused technology was at the core of the defendant’s business.  While the case appeared to have merit after an initial review, the expenses budget proposed by the claimant’s counsel was 2-3 times lower than what a reasonable low-end budget for the case would realistically require.  This led us to believe that the attorney simply did not have the experience necessary to successfully pursue the litigation, and we declined to fund the case. 
Curiam Capital
Anup Misra

Anup Misra

Director

Anup Misra primarily assists with the underwriting of financing opportunities related to intellectual property litigation. He also works on business development and the monitoring of ongoing litigation for Curiam’s investments. Learn More