May 25, 2017

Andrew Stolper Explores the World of Litigation Funding

In recent years, notes Andrew Stolper, the benefits of litigation finance have been a major topic of discussion within the legal industry. As a popular financing option in unresolved claims, litigation finance uses innovative methods that appeal to both companies and their managers. Below, Andrew Stolper describes the transformation of litigation finance into a powerful tool for many modern businesses.

Interviewing Experts: Good morning, Andrew. We’re looking forward to hearing about your work in litigation funding today.

Andrew Stolper: Thank you for having me.  Litigation finance covers a lot of territory so I’ll do my best here this morning.
Interviewing Experts: Why should businesses and corporations look for in a litigation financier?

Andrew Stolper: Selecting the right litigation financier is just like selecting the financial partner for any other part of your business.  You want a litigation financier who understands your litigation – or who will with minimal effort.  You want a litigation financier who will get you a term sheet as fast as possible so you can evaluate whether the funding makes sense.  And you want a litigation financier who will add value beyond the checks they write in the form of advice, fee deals, or wisdom in how cases play out.

Interviewing Experts: Where does your team fit into the picture?

Andrew Stolper: We are a southern-California-based litigation financier focused on commercial litigation disputed in the $5-50 million dollar range.  We have one of the most accomplished teams in terms of diligence and litigation experience in the business.

Interviewing Experts: What is the basis of litigation finance?

Andrew Stolper: In litigation finance, one entity agrees to cover some of the legal expenses of bringing a case in exchange for a portion of the recovery, if any.  In most transactions, the financing is non-recourse meaning that the money needs to be repaid only if there there is a recovery.

Interviewing Experts: Why has litigation finance seen a spike in popularity over the last decade?

Andrew Stolper: The cost of bringing a lawsuit has skyrocketed over the past decade.  Law firm rates continue to climb which has priced out many meritorious cases because the would-be plaintiffs lack the financial capacity or risk appetite to bring cases that make legal and economic sense.  This shift in the legal expense structure took place at about the same time the demand for uncorrelated alternatives spiked which made it possible for litigation financiers to assemble the capital needed to make these funds work.
Interviewing Experts: What types of cases can generally benefit from litigation finance?

Andrew Stolper: Litigation finance can be utilized to help fund a portfolio of cases, as well as individual suits.  We focus on an individual approach because we think that maximizes our diligence expertise.
Interviewing Experts: How does portfolio financing work?

Andrew Stolper: Portfolio financing gives financiers the opportunity to provide better pricing by distributing a project’s risk across several different actions.  This cuts down on diligence expense.

Interviewing Experts: Does litigation finance apply to consumer lawsuits as well?

Andrew Stolper: We don’t finance consumer lawsuits.  But there there are a number of financiers who do.  That type of funding is really based in large part on the funders relationship with the plaintiff’s attorney.

Interviewing Experts: What is typically the deciding factor for litigation finance firms when choosing which cases to fund?

Andrew Stolper: We are looking for meritorious matters that make economic sense for our investors.  Our decisions usually come down to merits and people: how strong are the claims and how strong is the litigation team at executing the litigation plan.

Interviewing Experts: How does litigation finance help the long-term goals of businesses and corporations?

Andrew Stolper: Initiating litigation can seem almost impossible especially to non-litigators who are noniterative participants in the courts . Litigation funding allows corporate legal departments to pursue cases they may otherwise would have avoided because they will have a partner to share the risks with them.

Interviewing Experts: That sounds like a positive development…

Andrew Stolper: Absolutely. The legal departments of today’s corporations are under an enormous amount of pressure to curb expenditures for outside attorneys.

Interviewing Experts: Thank you so much for your time!

Andrew Stolper: It has been my pleasure.

Andrew Stolper is the co-founder of Crux Capital, a private equity fund based in Orange County, California.

 

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About

Andrew Stolper founded Crux Capital after transitioning from his role as one of America’s most respected federal prosecutors of white-collar criminals. As an Assistant United States Attorney, Andrew Stolper worked at the United States Department of Justice office located in Santa Ana, California from 2002 to 2013 before founding Crux Capital.

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