commercial lawsuit funding

Lake Whillans Investment Featured in MEDCITY News

Lee Drucker

An in depth article about a fabulous entrepreneur and promising cancer therapy almost derailed by impropriety. This was one of Lake Whillans’ first investments:

http://medcitynews.com/2015/03/entrepreneur-nearly-lost-company-heres-litigation-finance-helped-fight-back/

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Litigation Finance & Private Equity

Lee Drucker

About a month ago, I discussed the venture capital landscape, and why litigation funders are attractive partners for VCs and VC-backed companies in need of resources to adequately defend their businesses. A similar, but distinct, phenomenon exists in private equity.

Private equity firms (which invest in a broader class of companies and employ a wider array of value generating techniques than venture capital) share some common characteristics that make litigation finance a useful product within the industry.

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Delaware Decision on Work Product for Funding Documents

Lee Drucker

The Delaware Chancery Court handed down a favorable decision on work product protection for funding documents last week. Here are links to an article discussing the decision and the decision itself.

http://www.bloomberg.com/news/articles/2015-03-04/litigation-finance-communications-protected-business-of-law

http://law.justia.com/cases/delaware/court-of-chancery/2015/ca-7841-vcp.html

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Cost of Capital in Litigation Funding

Lee Drucker

At Lake Whillans, I spend most of my time valuing litigation related assets. There are many considerations in this exercise, some of which I wrote about here.

Today, I am going to write about cost of capital, which is a key component in valuation. Aswath Damodaran recently wrote:
“If there were a contest for the most measured number in finance, the winner would be the cost of capital. Corporate finance departments around the world compute it as an integral part of investment analysis. Appraisers estimate it as a step towards estimating intrinsic or discounted cash flow value. Analysts spend disproportionate amounts of their time working on it, though not always for the right reasons or with the right inputs.”

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Venture Capital & Litigation Finance

Lee Drucker

Venture capitalists invest in early stage growth companies, typically in high technology industries, such as biotechnology, energy, or IT. While many of these investments go on to become Tesla, Amazon, or the next life-saving pharmaceutical, about 65% of venture financings return 0-1x. Many of these investments fail simply by virtue of the high-risk nature of…

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Lake Whillans Featured in Crain’s New York

Lee Drucker

Lake Whillans was recently featured in an article in Crain’s New York on the role of litigation finance in helping small and mid-size companies to receive justice when victimized by larger companies. Link to the article after the jump.

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Financial Analysis of Litigation Funding

Lee Drucker

The emergence of litigation finance has enabled CFOs to better manage and finance a once dormant asset – potential litigations. Many of the companies that we finance are emerging businesses with promising new products that have the ability to transform an industry. Businesses such as these are often characterized by a high ROI (return on investment) and a constrained budget (often having recently raised capital from the venture community). Imagine that the wrongful conduct of a third party has damaged such a business, and the company now faces the prospect of an expensive and lengthy litigation if it is to secure compensation. Before litigation finance, the decision might well have been between bringing litigation or not – now the decision is between self-financing or third party financing.

In order to determine which option is preferable, the CFO would likely attempt to value the potential litigation. In an older post (which you can find here), we discussed the framework for valuing a litigation. For the sake of simplicity let us assume that the expected damages are $30 million, and the chances of losing the case are estimated to be 30% – therefore the estimated value is $21,000,000.

Next, the CFO would likely attempt to calculate the cost of monetizing the asset. In order to estimate the true cost of allocating capital to the litigation, a CFO might undertake the following analysis:

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Champerty, Maintenance, and Barratry

Boaz Weinstein

Champerty, maintenance, and barratry are related doctrines that trace their roots back to medieval England. The United States Supreme Court has succinctly described the three doctrines as follows: “Put simply, maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome; and barratry is a…

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Ethical Considerations for Counsel

Boaz Weinstein

As we discussed in our article on the process of securing commercial litigation finance, the first step in the litigation finance process typically involves a decision by a company, perhaps with its counsel, that it makes sense to explore whether litigation finance is an attractive option. Let’s view this from counsel’s perspective. Imagine the following…

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The best way for companies and their counsel to determine if litigation finance is an attractive option is to discuss it with us.