What a Litigation Funder Learned from A Litigation Funding Conference

I recently attended the LITFINCON conference in Houston, Texas.   This was my first in-person conference I attended in 2+ years, and it was a welcome breath of fresh Texas (blissfully warm) air.

The conference organizers (Siltstone Capital and Litigo Financial) did a great job of creating a diverse set of topics and finding great panelists.  Speakers included funders, law firm partners, general counsel, brokers, investors and even judges.  We covered a wide range of topics including the basics of litigation funding, litigation finance as a maturing asset class, the role of brokers, rise of secondary markets, and even the intersection of litigation funding with block chain.  The stars of the show were probably the judicial panelists, including two federal judges from the Southern District of Texas, and a Texas state court judge.  It’s unusual to get a view from the judiciary outside of the courtroom, let alone one on litigation finance, and this panel was particularly engaged and candid about their knowledge and impressions.

I attended the conference intending to be a student.  What could I, a litigation funder, learn by getting away from my desk and particular perspective and hearing from others in the field?  Turns out, plenty.  Here’s what I learned:

1. There is Education Left to be Done

I’ve been a litigation finance professional for over six years now, and I’ve spent a good deal of time over these years providing education on litigation funding, whether it be through our catalog of articles like this one, speaking engagements, CLEs, or one-on-ones with various folks.  I’ve seen perceptions and knowledge change significantly over that time.   It’s now far less often that I encounter someone who hasn’t heard of litigation funding or the general way it works.  But what I learned from the conference is that there is still plenty of education to be done.

The judicial panel in particular acknowledged little experience and familiarity with litigation finance.  While one judge had experience with a discovery dispute involving a funder, the other two had no experience adjudicating any issues related to funding and were not very familiar with the issues or evolving body of law relating to litigation funding (see here or here for example).  All three judges were receptive to the purpose and utility of funding as it relates to improving access to justice, but more education of the judiciary will be needed.

Other speakers were similarly inexperienced (prior to preparing for the conference) regarding the contours of funding.  One general counsel at a mid-cap public company expressed some surprise that the tool of litigation finance was not more frequently discussed with her outside counsel and peers.  This surprised me given my perspective, but now that I reflect, most of the litigation finance savvy people I know (outside of the funders themselves) are law firm lawyers, which makes sense since they are more likely to be approached by funders, or have peers that have used it, or are part of a firm that has a designee who has focused on it.   The next wave of education needs to be better focused on reaching in-house counsel.  (If you are someone who needs more education, or wants to organize broader education, please reach out!).

2. The Litigation Finance Market and the Asset Class Are Maturing

As a lawyer turned investor, I’m still more comfortable talking legal arguments than finance.   But I’ve learned a lot about finance in the six plus years I’ve been in the business, and this conference made crystal clear that litigation assets are now a legitimate asset class.    Funders now include both former lawyers and finance professionals whose previous experience was with respect to other asset classes.  Traditional institutions have created desks dedicated to investments in this space, either as brokers or investors.  There are more institutional investors in the space and the investor class is widening as the amount of invested capital grows.

The space has other hallmarks of a maturing asset class, including steps being taken to create secondary markets, securitized offerings, insurance products, and even attempts to offer investment in litigation funding assets via the blockchain.  The elements of a maturing market are there; but there is more to come.

3. There is a Growing Emphasis on Trusted Relationships

Law has always been a relationship-driven business, with a foundation of trust that must exist between lawyers and clients.  In the early days of litigation finance, relationships between funders and lawyers were not premised on a history of working together or having credibility in the field and deals were more likely to happen between strangers.   That has changed.

Now that the industry has developed, and there is more capital and more options for claimholders, as well as funders like Lake Whillans who have many years of experience and developed relationships, things have evolved.  Throughout the conference, the theme of the importance of trust in the funder-claimholder-lawyer relationship emerged.  Claimholders and their counsel don’t want to waste their time with a funder who isn’t serious or can’t close the deal or isn’t suited to understand the value in the asset.   So a funder with a history of reliability and experience is a plus.  Likewise, funders (like clients) want to work with lawyers who they trust to be candid in their assessments and can be both steady and resilient as the case progresses in ways that aren’t expected.   Prior experience with the firm or lawyer is encouraging to the funder.  Brokers in the space tout their ability to find trustworthy counterparts for both sides.

In my view, this is a good development for the industry, as the trust that is growing will only encourage and insure more successful deals.

I’m looking forward to upcoming conferences where litigation finance is discussed.    There is more to learn and more to teach.