David Prager of Duff & Phelps, Howard Brod Brownstein of The Brownstein Corporation, Tatiana Markel of BakerHostetler, and Ken Epstein of Omni Bridgeway engaged in a virtual discussion on dispute funding for financially distressed companies. This two-part podcast was produced by Turnaround Times.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
David Prager of Duff & Phelps, Howard Brod Brownstein of The Brownstein Corporation, Tatiana Markel of BakerHostetler, and Ken Epstein of Omni Bridgeway engaged in a virtual discussion on dispute funding for financially distressed companies. This two-part podcast was produced by Turnaround Times.
Below are some key highlights from part 1 of the Turnaround Time podcast, which can be found here.
DP: What makes litigation funding such a breakthrough opportunity?
HB: I’m a turnaround pro, so I get called in when a company has some degree of distress—the company may not even know how much distress until we start to dig. If there’s distress, there is neither the appetite nor the resources available to prosecute claims. It’s a potential asset for the company—but they may not have the wherewithal to realize.
In the context of bankruptcy, there’s an inability to pay obligations. Litigation funding provides an opportunity to create a level playing field. Companies can recover assets, pursue cases, etc.
DP: As you counsel your clients, when do you bring funding into the mix? What’s exciting to you about this structure?
TM: I work at a big law firm. Litigation funding and contingency were not really something Big Law firms did—and traditionally don’t do. Five to ten years ago we talked about litigation funding, but only recently have we begun doing these deals in earnest.
Our firm is a risk-averse midwestern firm. Litigation funding allows us to bridge the gap between large cases with huge potential recoveries, and the firm’s reluctance to accept that much risk. The sweet spot is a large-damages case, but it will take a long time and be costly.
All in all, I’m a fan of litigation funding—we’re grateful for the industry.
DP: We talk about plaintiff work—a small guy with a claim as a wronged party. Is that the limit of litigation funding, or are you looking at other things?
KE: There is single case funding, and then portfolio case funding where you can fund a law firm, or several contingency cases. There’s also client-side funding, you can provide funding to a trust—which provides a lower risk profile.
DP: There’s been discussion about ethical issues with fee sharing, or confidentiality issues. What are your main ethical concerns?
TM: From the perspective of what a funder needs to consider when assessing a deal—from an attorney perspective—attorney-client privilege. When assessing a case, a funder needs to review the underlying documents. While privilege doesn’t attach to discussions with a funder, but funders don’t need to see privileged documents. The laws in that are a bit unsettled.
DP: So what safeguards do we take?
Sign an NDA. Funders have their own form, which is similar and ironclad, to provide for the common interest. This confirms the intent for documents to be confidential.
