The following is a transcript of a live panel recorded at the Information Management Network (IMN) 2nd Annual “Financing, Structuring & Investing in Litigation Finance” Event in New York. It was moderated by Stuart Grant (Managing Director, Bench Walk Advisors LLC), and the panel included Jay Greenberg (CEO, LexShares), Jo Burgess (Strategy & Operations Director, Affiniti Finance), Jim Batson (Investment Manager, Bentham IMF), Stephen Tountas (Partner, Kasowitz Benson Torres LLP), and Patrick Dempsey (US CIO, Therium Capital).


Stuart Grant:
We're going to jump right in and pick up where, sort of, Eric left off, in talking about the growth areas in the U.S. Jay, let me start with you. Is it becoming easier or harder to do business in the U.S?


Jay Greenberg:
I think it has become a lot easier to do business in the U.S. since we started investing in commercial cases and I think, like you allude to, Stuart, it's become easier to transact because of the growth that's really underpinned our market, right? The first litigation panel that I sat on, five years ago, the number of panelists outnumbered the folks in the audience. Obviously today we've come an extremely long way and I think what that growth has really done and what our industry has done a great job at is educating all of the constituents in these transactions- investor, plaintiff, and attorney- on the benefits of litigation finance and I think, through that education and sort of shortening the education gap that previously existed in the market, that has made it easier to transact. I think the impediments to growth and the objections over the last five years, they certainly still exist but they have changed. So I think five years ago we were talking about, is litigation finance legal? We were talking about things like champerty and maintenance, and now we're talking about things like disclosure and institutional constraints and some other topics that I think we're going to touch on in this conversation.


Stuart Grant:
Jim, any thoughts?


James Batson:
Sure, and I echo what Jay says about the increasing awareness of litigation finance and certainly, in some regards, an increasing understanding of how to use it. But it's interesting- what's gone hand-in-hand with all of the capital raises that were just described in the opening remarks is a far greater awareness but still a misconception about what litigation finance is and how it works, not just as a result of the Chamber's efforts but lingering misconceptions out there. I think education's done a great job at an initial level of teaching a number of active litigators how litigation finance works, but there's still more inquiries and many of those inquiries still have a misconception of exactly what it is and so there's sort of an ongoing... it's great to have the awareness but there's still an education process of how to use it.


Stuart Grant:
Thank you. Well, there are clearly those who are trying to make life a little bit more difficult for those of us in litigation finance. Steve, let's talk about some of those trends about disclosure of litigation financing in the U.S. and some of the other roadblocks that are trying to be thrown up.


Stephen Tountas:
Absolutely and Stuart, and you know, lawyers love to be difficult so it is no surprise to me that, at every turn, members of the Defense Bar, likely acting at the behest of the Chamber of Commerce, are trying to meddle and mandate the disclosure at various points of cases. Whether it's class certification and class actions, at the outset of a securities case for the appointment of a lead plaintiff, or even just during discovery at the outset of discovery, turn over every agreement. Turn over every communication. I think, fortunately for everyone in this room, the courts are not having it. Time and time again, especially in very recent cases, courts have said, "You are not entitled to that information." The defendants have tried to claim that they get it because they want to know what the motives are for filing the case. They want to know what the credibility of the plaintiff is. They want to be able to test the plaintiff's standing. Courts have said, every time, "not entitled, not entitled, not entitled."


There was a very good and very helpful case that was just published a few months ago in the eastern district of New York where the court provided a very helpful distinction, I think, for all of us. Not only did the court reject each of those requests but it said there's only a limited circumstance that we can tell where the judiciary's ever permitted disclosure, and that's when something improper is going on. Because in the instance where it was required to be disclosed, there was evidence that the plaintiff had used the funder's money to potentially pay off a key witness in the case. So, stay away from that type of conduct and hopefully the courts will stay on our side going forward.


Stuart Grant:
Patrick, anything to add to that?


Patrick Dempsey:
Yeah, I think perhaps because the trend in the jurisprudence is toward protecting the litigation funding agreement and other related documents you see, as we heard in the keynote, this push towards legislation, whether it's at the federal level with the federal rules of civil procedure. Rule 26, the advisory committee to that attempting to modify those rules to require disclosure. The Grassley Bill seeks to require disclosure of litigation funding agreements in class actions or multi-district litigations. And then on the state level as well you have various states considering the mandatory disclosure of litigation funding. West Virginia and Texas have looked at that recently; it has passed in Wisconsin where it is required to be disclosed and I think other states will continue to do that. So if you can't get it through the courts, legislate. That seems to be the path to get at this information.


Stuart Grant:
What would be the benefits or detriments of disclosing the actual existence of litigation finance? Because I can hear someone argue to say, "you know what, might be a good idea because, quite frankly, that eliminated the scorched earth opportunity because you think I'm a small company but I've got 10, 12 million dollars sitting right here behind me." Could that actually help resolve litigation?


Patrick Dempsey:
I think it could but I think that should be left up to the plaintiff to decide. I think the problem is disclosure for disclosure's sake; it doesn't make sense in every case. It could be appropriate but there are many instances where it wouldn't be.


James Batson:
You could have a whole panel on this, but I think one obvious answer is if there's mandatory disclosure as opposed to permissive disclosure, as Patrick was just mentioning, then people that don't have litigation finance are at an immediate disadvantage. One of the great benefits of litigation finance is that it enables people that have meritorious cases to level the playing field. If you mandate disclosure, the people that don't have that are at an immediate disadvantage. So, permissive disclosure, sure, if somebody wants to disclose it, great, but also, mandatory disclosure if it's going to happens, should go hand-in-glove with some type of presumption, at a minimum, against satellite litigation on discovery for all the reasons that were just discussed.


Stuart Grant:
Fair enough. Let's leave the U.S for a moment. Jo, we're going to get to, you and I can have a little discussion on insurance but before we get there let's sort of set the stage and talk about opportunities outside the U.S. and outside the Commonwealth because that's generally where we see most of the business but, as Eric mentioned, there are different funders who are having offices pop up in different areas including Asia and continental Europe. So Jim, talk to us about Asia.


James Batson:
Sure. And obviously I think Bentham's in a good place to talk about the worldwide market. We actually started in Australia, where we have five offices and, as Eric mentioned at the outset, four in New York, two in Canada, one in the U.K., and very recently in the last few years, an office in Singapore and Hong Kong. When you think about Asia, at least in that part of Asia, really you're talking about international arbitration, and international arbitration is one of those practice areas where litigation finance has taken route longer and more thoroughly in this much greater understanding of that. Partly because London being one of the hot seats of arbitration, international arbitration.

But there was an interesting survey that just came out that I just throw three points on before that, it was the 2018 Queen Mary White & Case International Arbitration Survey. When talking about preferred seats for international arbitration, Singapore and Hong Kong were number three and four after London and Paris, but ahead of Geneva, New York, and Stockholm. So that goes to show just how important that area can be in that particular market. And then when they ask the practitioners about litigation finance, first, generally, they rank them one to five, one being negative and five being positive. 88 percent of the respondents said it was either neutral or positive. And then when you asked people that used litigation finance- oh and by the way, for the general respondents only four percent designated as negative- and then when you talked about the people who use litigation finance, 92 percent had a neutral or positive reaction to it and zero percent had a negative reaction to it. So if you take an area of litigation practice that's mature in the sense of understanding litigation finance, you see a very strong, positive impact on it. And then when you look at international arbitration hubs- Singapore and Hong Kong- making a concerted effort to become prominent centers for international arbitration, they recognize that litigation finance can be a big driver of that.


Stuart Grant:
Patrick, continental Europe, where litigation can take decades, how do you deal with that? And is there growth and opportunity there?


Patrick Dempsey:
There is; we're actually seeing a good number of interesting opportunities in continental Europe, particularly in Spain and Germany, the Netherlands, the Nordic countries, and I think that's because most of those jurisdictions one, are civil jurisdictions and so they don't have the legacy legal issues like champerty and maintenance that you have to get over. And two, lot of those jurisdictions don't allow for contingency arrangements and so there is an access to justice problem and we find that the lawyers there and the clients there are very receptive to funding. I think those markets, too, they're very comfortable with assignment of claim. So you can literally take over the claims yourself. So I do think there is a lot of opportunity there. That said, it is generally cheaper to litigate there, so these are smaller, generally speaking, smaller opportunities than here in the U.S. than in the U.K. and Australia.


Stuart Grant:
Jo, let's talk a little bit about litigation finance and insurance, particularly ATE insurance after the event, which covers adverse costs, particularly in the U.K. and Australia. How does litigation finance and ATE insurance jive?


Jo Burgess:
So, ATE insurance has been around for a lot longer than people often expect. It's about 20 years, actually, that the product's been available but I think it's now working a lot closer with litigation finance as most of you will know in the U.K we have loser pays, so to be able to go and litigate, the court will check that the plaintiff has enough funds to cover, should they lose the opposition's costs, which in a lot of instances can actually rack up significantly especially if it's a small business or an individual going against a corporation. So that's something that we have to work quite closely with, the ATE providers, as we do a lot of consumer lending and affinity.


One of the things that we've actually started doing is working with the ATE providers to teach them a little bit about how we underwrite. ATE providers don't understand law as much and they certainly don't understand the way that we write our risks, the outcomes that could come from the case. So we've been working with them to not only understand the way we underwrite but also actually to put in the policy wording of exclusions. So as you said, typically the expert costs, the court costs, and we actually insure the insurance premium so we insure the insure the insurance so if you lose, you don't even lose that. So there are risks to it; we have had ATE providers go under recently, one very recently has closed, so any policy you had with that is now null and void. Luckily we didn't take any of those, but that's something that you have to be aware of. But it's definitely a huge education piece between the funding world and the ATE providers.


But what we are starting to see is more people internationally in countries that don't typically have the loser pays, maybe international arbitrations, so we're using ATE to actually do more of a risk spread. We've seen, typically in cases if you want to also include the cover of the law firm costs, 30 percent is about the average that you can cover. So it allows law firms to insure their costs and if they do lose they could potentially take on a wider range of cases that they might not have had the risk appetite for before. It allows some free of capital and cash flow within the firms. I think it's something that's definitely going to be used more in the future as potentially people take on a wider risk appetite; rather than doing five cases you could potentially do 15, insure up to 30 percent of your costs, and if, in the cases that you do lose, you've got that security and the spread of that.


Stuart Grant:
So let me ask you about the relationship between the ATE insurer and the funder. So you've got a case in the U.K., the plaintiff files the claim, the court, I guess at the very first hearing, demands some kind of security for adverse costs and your range for the ATE insurance early on. What happens at the end if there's an adverse cost award that is greater than the insurance coverage? Does the plaintiff party pick it up or does the funder have to pick up that shortfall?


Jo Burgess:
The beauty of these ATE policies, and certainly the ones that I've seen and worked on, is it's not like a standard insurance policy where it has an upper and lower limit. It will assess the estimated con term and will look at rough costs but at the moment, I think it's probably because it's quite a juvenile market in the policies that we're seeing at the moment, that we haven't had anything like that come up. And actually because the defined limits don't specify a value, it's not written in the policy.


Stuart Grant:
Jay, it look like you wanted to add something?


Jay Greenberg:
Yeah, I'm just surprised we actually don't see more fully insured litigation finance products in the United States. You sort of take a look and I guess I'll paint in broad strokes, the overarching economics of a full portfolio wrapper for insurance in the U.S. So let's say you have a litigation funder who's pricing their deals to generate 100 percent annualized return. Let's say that that's a really good litigation funder and they have an 80 percent win rate. So let's say that their book is generating 80 percent IRR. Even if the insurance premiums are extremely expensive, let's say they're half of that, let's say they're 40 percent of the initial investment amount, you're talking about 40 percent annualized returns that are fully insured; I don't know what individual investor or institutional investor wouldn't want to get their hands on that type of product. And I think insurance companies would love to underwrite that type of risk, right? They're getting a 40 percent premium for a 20 percent loss rate? So I'm really curious to see in the U.S. if there's more of an influx of fully insured litigation finance products.


Stuart Grant:
So it's funny, we're actually seeing and using some of those but they're not necessarily coming from insurance companies. They're coming from other investors who are actually willing to say, look, I will take on that risk and the way I'm taking it on, because you don't want to worry that I'm going to go out of business, is I will actually get a letter of credit standing behind me from a substantial bank. So now you've got the bank's involved, you've got a wrap entity who's generally not an insurance carrier, and you have the investor who is now looking at a more secure return with less, obviously a lower return, but with less risk to it.


James Batson:
I'll pick up on that; Jay raises a really important point. I've seen other insurance products now that we've started to utilize in the U.S., so tends to be with the more commoditized products, if you will, like appellate insurance. We've had a couple investments now where we've provided litigation finance on an appeal and then gotten an insurance policy to cover a large chunk of the underlying investment. So that's just the beginning, now those policies come out of insurance policies in the U.K., not surprisingly, although some of them have offices here in the U.S. But I think that's sort of a logical first step for some carriers at least, okay, we can take a quantifiable risk, we've gotten appeal, it may not be exactly binary but the probably outcomes are easier to peg, and then secure the amount of the investment up to a certain percentage.


Stuart Grant:
And we're seeing that and we're seeing that what they want is the funder to take first risk, what they'll take, last three-quarters, last 80 percent. And it's interesting because often I'm asked, "will you use leverage to try to boost rates" by some of our investors. And I smile and I say, "we don't do that." But sometimes we actually use insurance to, in effect, lever, because if they're willing to insure your last 80 percent. And then the excess return you're getting on your risk capital, in a way, actually winds up giving you leverage. And so we're seeing more and more folks be creative, the insurance companies who are doing this same experience, they're all coming from the U.K. because they're a lot more sophisticated in that. But we're also seeing non-insurance companies getting in and using these kind of wrap programs.


Jo Burgess:
And I think just on that, the insurance companies in the U.K., it's kind of that chicken and the egg things. They are seeing this industry booming, and they're seeing it in the news, and they have that appetite and they want to start stepping into this but it's them getting more statistics and understanding the trends and getting more experience and the costs at the moment are really, really high; if more people start to use them and they start to understand the litigation world and they're able to do more of their own underwriting and get their own security, the costs will come down. So it's that kind of, as soon as you start to use it, yes it's expensive but it will balance. And I think that's something that I am definitely thinking we're going to see in the next couple of years.


Stuart Grant:
So you go home, one of your takeaways is this is the new cutting edge, seeing wrap programs, seeing insurance being used more and more, and I think you're hearing from people who are on the front lines that this is sort of what we might expect over the next couple years. So let's segue from there and talk a little bit about the market for law firm lending, portfolio lending, versus single case risk. And Patrick, why don't you start us off on that.


Patrick Dempsey:
Sure. I think single case is still probably the bulk of our portfolio and what we see but, increasingly, more and more, what people are coming to us for are these portfolio products, whether it's a portfolio of a fixed number of cases that a law firm is looking to de-risk on partially, whether it's a more flexible line of credit to a law firm to expand or to grow, operating capital to a law firm or to a company. I think, if I look at the transactions that we've closed recently, I think the bulk of them have been of this type. And if you look at what's reported among other funders, I think that trend, generally speaking, would hold out where there is this shift towards more complex, robust products, other than just single case funding.


Stuart Grant:
Steve, as a litigator, how do you feel about the idea about single risk versus, do I have to put up a whole portfolio in order to get credit here?


Stephen Tountas:
I love it. Frankly, there's a place for both, is the way I see it. I think Patrick absolutely hit it on the head, there is a shift more towards portfolio products but I think it's really more a shift towards being strategic and being smart to find the right product for the deal that you're assessing. So I think back in the day, say five years ago, the classic portfolio product was just used for a credit line. Take all contingency cases at the firm, put it in a basket, we'll use it like a credit line. And I think now what you're starting to see is people take a step back and say, "can we be smarter about the basket, can we be more strategic about the basket?" Maybe it's just a certain type of contingency case at a firm. Maybe it's all generic price fixing cases, maybe it's all opioid cases, maybe it's all securities opt-out cases.


Whatever it might be, you get an opportunity I think now, with the way the market is headed, to really work side by side with your funder and be joint venture partners and think strategically and say, "What is the right way to structure this one? What is the right way to take this and hopefully mutually get a really nice profit on it?" Because, at the end of the day, if you're not working side by side with your funder as a lawyer, you're really not doing it the right way. And the earlier those discussions start, the better, especially for portfolio products. Single cases will always have their place, but I think the drive towards being more creative, strategic, and really having those discussions at the onset, are really what's starting to drive that change in the market.


James Batson:
If I pick up on what Stephen was just saying, people had this conception, as you were saying, there's one product and then maybe there's two products. There's single case funding and then there's portfolio funding, oh, I wonder what else is out there. I think the way the market's evolved is people are realizing, this is just finance, just financing a product. And you no longer have to convince people that a litigation is an asset. So now it's about, okay, how do we finance that? Am I trying to win business of a client who can't afford to pay anything? Maybe a single case funding with some risk sharing works for that. Am I a law firm that's trying to develop a new practice area that might traditionally always be on a risk basis, maybe in the patent space or class-action or something. Maybe there's a way to finance that. Am I a corporation that's looking to modify the way assets and expenses are treated on their balance sheet? Well now there are new products for that. So I think it enables not just the litigation finance companies to say, "hey, let's do this and let's do that," but as people become more familiar it's getting the lawyers and the clients to say, "hey, can you use it this way? Can I use it that way?" And as Stephen said, much more of a collaborative process that way.


Stuart Grant:
So Jay let me throw you a little spin on this, how does it affect you as someone who has to do the due diligence on all these things when all of a sudden, now it's not just a single case, it's a portfolio, and some cases are at different stages, what do you do?


Jay Greenberg:
I think this sort of gets to another point, in regard to specialization of different litigation funders. We're not funding portfolio deals or single case deals in a vacuum, right? These deals are all part of a larger portfolio of cases that we currently have on and so while it might make sense for one funder to take on additional single case risk because that makes sense in the broader construct of their overall portfolio, that may not make sense for another funder to do so. And so I think that's really, we sort of get into specialization and what different funders are good at and sort of portfolio construction for those funders.


Stuart Grant:
And let's, and I'll open this up to anyone, but let's talk about, you know, a portfolio is sort of nice to have cross-collateralized, less risk, but generally price much cheaper. And also limited, because generally those are going to law firms and you're lending against their prospective fees, because there are not a lot of litigants, albeit there are a few, who say, "well gee, I have ten or twelve litigations going on and I'm the plaintiff in all of those." So Jay, you made the statement that you'd rather have a diversified pool of single cases. Let's talk about how you construct that, and you use a platform to offer these out to your investors. How do you put that together so that your investors have the kind of diversification that they need to feel comfortable?


Jay Greenberg:
That's a great question. When we started LexShares we were essentially offering investment in single cases. And that was the exact feedback that we got from our investor base, you know, hey, LexShares, this is all well and good and love the asset class, really interesting space, grade A symmetric return profile… but we don't want to just be in one binary outcome matter, we want to be diversified across a number of these binary outcome matters. And so what we ended up doing to solve for that is creating a diversified pool vehicle that we call LexShares Marketplace Fund. And essentially, an investment in that vehicle diversifies an investor across all of the cases on our platform, to solve for that exact issue.


Stuart Grant:
Patrick, let me ask you the same question as the U.S. Chief Investment Officer at Therium, again, nice if all of the law firms in the country would come to you and say, "we want to give you all our cases," but, limited market, what do you do to sort of get the same benefit of portfolio when the market may not be as big as what you have to invest?


Patrick Dempsey:
I think it's looking at the single cases that you put into your portfolio, as Jay was saying, and look at how they fit together, whether that's different time horizons, different capital commitments that are required, and you plug them in together so that you try to, as best you can in the asset class, even out the lumpiness of the returns in the single cases so that you have sort of a smoother level of returns across the time horizon of the portfolio. So you're never looking at one case in a vacuum, but how it fits in with the rest of what you have in your book.


Stuart Grant:
So Jo, let me ask you, at Affinity Finance, my understanding- and please correct me if I'm wrong- is that you're dealing with smaller cases, but many more of them. How do you put it all together so that you have the benefit of being able to provide your investors with the benefits of portfolio but without having these portfolios pre-created for you?


Jo Burgess:
So in Affinity we have two business divisions. We have our consumer division and our commercial. And on our consumer division we've kind of created like a portfolio, but what we do is set a pre-defined criteria, which we give to our panel of approved law firms, which they can apply themselves onto their cases. If they fit within this set of criteria, which we've worked with industry experts with precedent cases on, we've actually created a custom built system; it's the first of its kind in the U.K., and we integrate direct into the law firm's case management system. So a law firm applied criteria to the case and at the touch of a button, if it fits within that, it comes into our system and the plaintiff goes through an electronic applications process.


The benefits of this, number one, to us, is it reduces our opex, so we don't need to have lots of people doing lots of manual processing; the documents are done electronically. Benefits to the plaintiff is, being a litigation funder with just a small blip on the journey of their claim, they don't want to have a huge interaction with us; they've already sat down with their law firm and have gone through all the details. That data is transferred to us, later to the application form to us. So there's a reduce of any duplication and they can kind of get our part out of the way and actually we've had some plaintiffs be approved and funded within three hours, if they're on the ball. It can be up to a week if they're slow at reading their emails.


The benefit to the law firm is they have a login to the system and have a real time view of their cases, so they know exactly where they are, what's going on, and it means that we can do… the biggest thing that I love is being able to get the data analytics, to be able to see by law firm, by case, by client type, by age range, the amount of time it take for these products to go through, how long we're looking at, the resolution times. If we have any cases that fail we can then track the ATE claims. So the data that we have created just by having it on a platform rather than paper is huge for us and it's something that we're looking at actually moving, not in the same way because our commercial cases are obviously done and underwritten very differently, but still, having those put onto our platform so we can get that data analysis out of the system.


Stuart Grant:
And in fact, I want to expand a little bit of that, because you come from a somewhat different background than the rest of us. And I'm not just talking about your lovely accent versus my accent from Brooklyn, but I'm talking about operations versus law. You're actually more of an operations person, and tell us more about how you use operations, date analytics, and sort of all the advancements in technology to sort of push your fund through, and then we'll sort of counter, and if no one else wants to take the role of the dinosaur I'm certainly available, of sort of doing the due diligence the same way we would diligence a case when it would come into our law firm.


Jo Burgess:
Absolutely, so I'm at Affinity, I was working, I've spent ten years working in insurance. I was working at the U.K's largest insurance broker and I was given a project to create a product for a litigation funder, whatever that was; I had absolutely no idea but set up a specialized MGA to create a ATE product, and then almost came over to help Affinity create and design their case management system and the way that it would integrate with the law firms, because the premise of it is the same as insurance; it's still underwriting, it's still looking at risk, it's still looking after plaintiffs, or claimants for the insured side. Somehow my CEO managed to convince me to leave my life of insurance after quite a long time of bugging. Coming over it's actually almost, for me in the side that I do, it's the same thing. I leave it to our lawyers to do the other underwriting. But in terms of the management and the analysis and improving the performance and making sure, my main thing is keeping our law firms happy. They are effectively our clients, only the plaintiffs are the end clients. So I kind of use everything that I've used in the insurance and management world and apply I to the law firms.


Stuart Grant:
Jay, do you want to just talk a little bit about using platforms to sell to the investors themselves?


Jay Greenberg:
Absolutely. I'll sort of touch on the technology aspect because I think Eric, in his keynote, made an extremely proper characterization of how we use technology. We do not use technology, or I should say I have not seen a commercially viable solution yet, where technology is able to predict the outcome of litigation. I think that's something that everybody always talks about in these buzzwords of artificial intelligence and machine learning. They're great buzzwords, but I think we are decades away from a commercial solution that predicts the outcome of cases. Where I think technology does have an impact, I think it has a major impact of the origination of these deals. So as it sort of impacts our platform so we use technology to source our deals, so source initial qualification and given origination's really the life blood of any commercial litigation funder, I think that's the largest place where technology will impact our industry in the near term.


I think the other place, Stuart, is what you hit on is with regards to transparency. And that's transparency in reporting to our investors, so selling these deals through a platform to our investors, the investors ability to understand what's going on with these particular investments. I think it's also transparency in regards to when we are providing funding to a recipient, where we currently are in the underwriting process. Enabling that plaintiff and attorney to understand what we're doing in the underwriting process and that hopefully creates a more efficient funding process.


Stuart Grant:
Steve, can you talk briefly about seeing a defense side litigation financing and whether that's actually something that's...


Stephen Tountas:
Absolutely. So we are hearing a lot of chatter about it, I'm sure there are a lot people, I know for certain there are a lot of people in the room who are trying to crack that code. It's really just getting started. I think, next year, when we look to 2020, it's going to be a major piece of the panel discussion. It will probably be a panel all alone on defense side funding.


I think one of the problems that you're going to see and that people are starting to bump into is trying to find the right situations where it can be used and deployed effectively. Because, unless you've got a defendant who's a serial litigant and is being sued over and over again, oftentimes there isn't enough deal flow to be able to create a product that makes sense.


I think the other problem is, quite frankly my firm is an exception, most firms are usually plaintiff side or defense side. So if a funder is working with a law firm to try and create a structure that makes sense, it's difficult to package a hybrid deal where there's both plaintiff side and defense side cases for the same client, because a lot of firms aren't equipped to be on either side of the aisle. Even worse, law firms are always running into conflicts which create their own issues. So trying to thread that needle, trying to do it strategically in a way that makes sense for everyone, is a really tough nut to crack. But I know people are hard at work trying to find a product that, at the very least in the near term might make sense. The one thing we are seeing immediately is the funding of cases where there are counter claims, where a firm is on both the plaintiff side and the defense side. I think that's the easiest way to start easing into valuing how that might work if people are on both sides.


Stuart Grant:
Jim, how about cracking the corporations? Are you finding that you can have direct relationships with them and tap into that?


James Batson:
Absolutely. In that scenario that's growing considerably and actually just picking up on Stephen's comment, so defense side funding being one way to work it in. Again, looking at litigation finance as a financing tool, larger corporations can say, "okay, wait a minute. We have a number of defense side litigations, again and again-depending on the size and the corporation, the industry they're in- and we have some affirmative litigations. Can you, litigation finance company Bentham come up with a way that we can use one to help cross-collateralize the other and put together a product?"


And actually I almost shouldn't use the word product, it's more of a solution. There's something that works for our company, it's not-single case funding, law firm portfolios, I think it's fair to describe them as products. But when you start talking about defense side funding and larger corporations with multiple litigations then it's like, okay, how can we find a creative financing solution for you? But picking up more in the point of your question about relationships with corporations, so, when I started in this space about six plus years ago, the idea of going out directly to corporations and soliciting business as a litigation finance company was unheard of and would've likely been a great waste of time. Today, GCs and CFOs are much more knowledgeable about and interested in, at least, alternative ways to finance what can be a very expensive undertaking.

And if you think about some of these larger corporations, when they are faced with a very big case, they're going to put that out to bid to a bunch of different law firms, and they're going to receive quotes and, rarely, although maybe more increasingly, are those RFPs going to come back with proposals where the law firm says, "we'll do it on a full contingency." Or, "We'll do it on anything less than sort of an 80 percent contingency." But what they will get a lot of are caps. And then they can bring in a litigation funding company and say, "look, we're not going to base who we hire on solely what you tell us, but if we wanted to finance that ourselves- if we want to finance that ourselves then which of these law firms can you work well with? And what is your experience with them as partners and so forth?" Well we can provide invaluable insight there.


And then the next step on that is of course law firms recognizing that funders are increasingly playing that role with companies that are more familiar with litigation, saying, "hey, recommend us, we're comfortable with litigation finance, we can work with that, in addition to being the great litigators that we are." I'm not saying anything that any of the funders in here wouldn't say as well, which is that it's a real growth area and the amount of inbound calls from in house lawyers, or to a lesser but increasingly degree, financial persons like CFOs, has grown considerably.


Stuart Grant:
Or interesting, when those bids are coming in, to already have financing set up so that you can say things like, "I will do it on an 80 percent contingency or 100 percent contingency or whatever, because I already have the financing lined up,” so that to you it just looks like a contingent fee.


James Batson:
That's a great point, sorry to just jump in. I've had a couple law firms say, "we lost a deal in one of these beauty contests because someone else went in with a better proposal and they had a funder ready to go, and we'd like to be ready to do that in the right case next time."


Stuart Grant:
Exactly. Okay, in the last six and a half minutes that we have we're going to open it up to questions for the panelists. I understand there's a microphone coming around so if you have any questions, if you will pop your hand up and the mic should find you, you can fire away. Okay, obviously, Jo, next time you've got to bring even larger cups so we can keep everyone awake with their coffee. Well, if there are no questions, then I will ask the lightning round question and we will just start on the end and come all the way down and is predictions for the next three to five years. You get 45 seconds to tell me the one thing that nobody else here is thinking about, three to five years out from now.


Patrick Dempsey:
Well I think, as funders' balance sheets become increasingly more robust, you'll have more creative solutions to these problems. And I think, because of the balance sheet and the capital coming into the space, I think you'll also see some acquisitions or consolidation within the market of the funders to sort of lessen the number of players in the space. I think you'll start to see that four or five years from now.


Stuart Grant:
Jay?


Jay Greenberg:
I'd say maybe less of a prediction and more of a hope, and I certainly hope it take shorter than three years, but I'd love to see more standardization and transparency in our space.


Stuart Grant:
Steve?


Stephen Tountas:
I'm going to go the opposite side of Patrick. I actually think you're going to see more new players step into the field. I think next year we might even need a bigger room, with private equity funds, mutual funds stepping forward and trying to dip their toe in the water and set aside funds for funding of their own, more and more these days I think you're seeing people other than the and the Burfurds and the Benthams getting involved. So more players, more growth, which I think is great for the room as a whole because it creates more opportunity.


Stuart Grant:
Jim?


James Batson:
I would say, on the disclosure front, without taking a position on this, I think you're going to see in the next three to five years some type of mandatory disclosure rule, but it will be limited to the existence of funding and who the funder is, and some presumption against any discovery of the underlying communications with the funder.


Stuart Grant:
Jo?


Jo Burgess:
I think we may well see more people bringing their claims to the U.K. courts. We're already seeing more of a trend of people in appeals process having U.K. law to apply, we've all got one large Brazilian claim that's been brought to the U.K., we're seeing more Russians bring their appeals to us, so I think that's something that the international jurisdictions might use to bring in appeals or the claims into the U.K. courts.


Stuart Grant:
Fair enough. And my thought for the next three to five years is although we've heard how much money is coming into the space, I think because of folks like those of you in the audience and those on the panel here, educating people more and more, I think you will see the demand for litigation finance continue to outpace the influx of money, despite how much money is coming in, for the next three to five years. And we will still be in a balance where there may be excess alpha to be made. So with that I want to thank all the panelists, and I want to thank you for being so patient, and I guess we'll bring on the next panel. Thank you.