Patrick is the chief investment officer for Therium’s US operations, heading up the investment team based in New York. Patrick is responsible for deploying capital to the US legal market, including through litigation finance, judgment enforcement, and other forms of risk management solutions. Before joining Therium, Patrick was a litigator at both Hogan Lovells and Proskauer. He received his JD from Tulane University Law School, magna cum laude and Order of the Coif.
What motivated you to move to a third-party funder?
I’ve always struggled with the efficiency of the “billable hour model” at most law firms and saw funding as a catalyst to change the way the legal market works – or, if not, to at least arbitrage the disconnect between clients looking for results-based engagements and firms structured around the billable hour. When the Therium opportunity presented itself, I jumped at it. Plus, it was a chance to reunite with my former colleague and friend, Therium’s US CEO Eric Blinderman, to launch Therium’s footprint in the USA.
What types of cases does your organisation usually look to provide funding for?
Therium has a broad mandate and can fund disputes in most jurisdictions of the world. At its core, we focus on commercial disputes. Beyond general commercial claims, we also fund banking and financial markets cases; securities and shareholder disputes; international commercial arbitration; investment treaty arbitration; antitrust; IP disputes, including patent and trade secret litigation; insolvency; insurance disputes; tax litigation; fraud litigation; shipping/trade disputes; and the enforcement of judgments and awards.
What criteria do you look at when deciding which cases to fund?
We typically focus on five core areas. First, the likelihood of success on the merits – are the claim holders going to win? Second, quantum of damages – how much will they win? Third, collection risk – can the other party pay the judgment or award? Fourth, the time frame of the investment – how long will it take from initial investment to recovery? And finally, we look at the judgment and calibre of the lawyers handling the case.
What kind of capital can you provide for a case?
The most common use of our capital is to fund legal fees or expenses for a single case – whether at a law firm’s full budget, with Therium carrying all of the risk; or sharing that risk with the law firm or client by funding only a portion of the legal fees, or even just the out-of-pocket expenses, with the firm carrying the rest of the risk themselves. We also finance portfolios of cases with capital that can be used to fund those cases or for broader, business-related purposes. We also provide capital to accelerate the monetisation of a legal asset – whether at the beginning of a case, after a judgment or appeal, or during enforcement.
How do you usually structure the deals on cases you agree to provide third-party funding for?
Every deal is different, but our funding is typically structured as a non-recourse investment into a particular case, with the claim holder having no obligation to return the funding if the case is lost. The funding is usually delivered in tranches, with the client paying a return only on the incepted tranches of funding. Though funding terms are case-specific and dependent on the risk we are taking, the cost of a typical single-case funding is the return of capital, plus a preferred return equal to the greater of some multiple of the amount of tranches incepted or an agreed-upon percentage of the total recovery.
What types of cases and parties are you seeing currently attracting third-party funding?
Traditionally, the recipients of our funding are usually smaller companies that have found themselves wronged in some way by a much larger company and who do not have the ability or resources to bring the claim forward – perhaps because they have been crippled financially, forced into dire straits, or have had necessary payments withheld. Our funding levels that playing field for these claim holders against better-resourced adversaries. Increasingly, though, the companies that are coming to us have the balance sheet to fund the dispute but are instead looking to free up cash to be used for core aspects of their businesses, separate and apart from the litigation or arbitration.
The law firms we work with range from small litigation boutiques who are very comfortable taking risk, but need more regular cash flow, all the way to big international law firms that are not set up to take risk and are looking simply to be paid by the billable hour.
Do you expect the types of cases and/or parties attracting third-party funding to vary as a consequence of the coronavirus pandemic?
The types of cases haven’t really changed all that much, although we have seen an uptick in insolvency, insurance and intellectual property claims. What has changed is the number of firms and parties that are inquiring about funding – more and more companies are faced with uncertain balance sheets and revenues, and are increasingly turning to us to help them unlock the value of their litigation assets or otherwise preserve cash on hand. And we are seeing more opportunities with firms that are traditionally focused on defence-side work that are exploring ways to develop their plaintiff-side practices as a way to generate more revenue.
What tips would you give to a lawyer or client looking to bring a claim to a funder for consideration?
Be honest about your claim – cases are rarely the “best case I’ve ever seen” and are going to have drawbacks or unhelpful facts. Don’t hide those when presenting the claim but rather deal with them upfront, so that we don’t uncover them later during our diligence.