A managing partner’s advice on securing capital from litigation funders
As a former managing partner of a Silicon Valley litigation boutique, Bentham IMF’s Stephanie Southwick has seen both sides of the litigation funding process. If there is one piece of advice she can provide to law firms interested in pursuing litigation financing, it’s to know their case and be prepared.
“When you’re approaching a funder that has a thoughtful due diligence process, you’re not just spit-balling an idea. There’s not much a funder can do with that,” said Southwick. “My advice is that your case should be fully analyzed. You need to analyze the damages at the outset. We understand that you may not have completed discovery, but tell us what you think you will discover and how that will impact the damages analysis. The funder needs to have that upfront to assess the investment opportunity.”
Southwick joined Bentham in September as an investment manager and legal counsel in San Francisco. A litigation veteran with more than 15 years of experience counseling clients on a wide range of business and intellectual property cases, Southwick has spent the last several years of her practice focusing on Silicon Valley-centric clients and their litigation issues.
She joined Bentham from Greenfield Southwick, a boutique business and IP firm where she was the managing partner. “As managing partner of a small firm, I was risk-averse,” Southwick said. “We only took on a few contingent cases at a time. I see litigation funding as a real game-changer—giving firms a chance to take on cases they probably couldn’t pursue without mitigating the risk.”
Bentham provides non-recourse financing to claimants and their counsel to fund all types of highly meritorious commercial claims where the defendants have a clear ability to pay and the anticipated recovery exceeds $10 million (exclusive of punitive damages).
The litigation also must have strong prospects of success. Bentham determines the strength of a case by subjecting it to a deep vetting process conducted by litigation experts like Southwick, who are able to determine the value of claims and evaluate cases on the merits.
The benefits of diligence
The underwriting process, Southwick said, provides benefits to the firm and claimants beyond financing. Firms can use Bentham’s due diligence to work through foreseeable issues with a case and to get a stronger handle on its potential value. “You’ve got to think through these issues,” Southwick said. “It can be difficult, but it is highly useful for the claimant and the attorneys.”
Southwick herself had experience seeking and working with funders during her litigation practice. “I was considering funding in a trade secrets case,” Southwick said. “I pitched the case to Bentham, but it wasn’t a good fit for the company. I’ve been there. I have helped clients seek funding, and I’ve worked with different funders. That’s a good perspective to have. I know what it’s like from the other side.”
As Southwick sees it, it helps to work with a funder like Bentham, which is staffed with individuals who understand the ups and downs of the litigation process. “When you have a funder that is staffed, say, entirely by people with finance backgrounds, they can be very rigid in matching costs to a particular budget line.” When a budget variance occurs in that scenario—because, say, an additional expert is needed—“it can be very frustrating for the lawyers and the client,” she said.
"With Bentham, “that relationship is easier because we’ve been through it ourselves,” Southwick said.
To learn more about litigation financing and how your company or law firm can benefit from our scale and experience to unlock the value of litigation assets, contact us for a consultation. And visit our Company Insights to learn about the CLE seminars we offer to companies interested in working with funders. There, you also will find our recent client podcasts, blog posts and videos.