How Litigation Finance Went From An ‘Undiscovered, Untapped’ Legal Concept To A Booming Industry

Over the course of the past decade or so, litigation finance has undergone a transformation of sorts, starting off in the industry as a little-known, novel legal concept before becoming a widely accepted and often heralded part of the profession that’s helped to level the playing field in the civil justice system. Litigation funding is now so mainstream that it’s ranked by Chambers and Partners. 

This made us wonder: What has it been like to navigate the world of litigation funding as it’s expanded to a flourishing, billion-dollar industry? We recently had the pleasure of speaking to Lee Drucker and Boaz Weinstein, the founders of Lake Whillans Capital Partners (Lake Whillans and Boaz are ranked by Chambers), about their journey in the litigation finance field. Here is a (lightly edited and condensed) write-up of our lively conversation about third-party litigation funding and what it’s been like to start and build a career from the ground up in this constantly developing industry.

Staci Zaretsky (SZ): Describe the path that you took from law school to litigation finance. What led you here?

Lee Drucker (LD): My path to litigation finance was basically a direct shot. I was a JD/MBA student at NYU.  In my first summer, I took a position with a retired partner from Latham & Watkins. He hired me that summer to help put together business plans and look at assorted opportunities at the intersection of law and business for a company called Burford Advisors. The opportunity I worked on most extensively involved litigation finance. I helped him do research and put together a business plan around it. This was the summer of 2008. My second summer, I interned at a law firm, my third summer, I interned at an investment bank. 

Upon graduation in 2011, I was still very keen to move back into litigation finance. The partner I had worked for had significantly advanced the ball in the field; litigation finance had grown a bit, but it still wasn’t very large or built out.  A slightly different iteration of the company I had worked for went public about a year and a half later. That company, Burford, is now the largest litigation funder in the world. The Latham partner that I worked for left Burford and started his own shop, and he helped me get my footing in litigation finance right out of the gate when I graduated.

Boaz Weinstein (BW): So, unlike Lee, I had a longer path as a lawyer before moving into litigation finance. I graduated from Harvard University and Columbia Law School. I did two clerkships following law school. First for the Chief Justice of the New Mexico Supreme Court, and then later for a federal district court judge in the Southern District of New York. I started my career in a traditional way, working for Cleary Gottlieb as a litigator, and spent six years there before deciding I wanted something more entrepreneurial. That led me to move over to the plaintiff-side firm Bernstein Litowitz, which is the premier plaintiff-side securities litigation firm, where I represented investors in large class actions. I was there for three years before I ever heard of litigation finance, which was still very nascent. 

In 2011, I found my way into the field when one of the partners at Bernstein Litowitz, who I had worked with closely and who had recruited me into the firm, decided to open a litigation finance firm, one of the first firms to plant its flag in the U.S. I thought it was a unique opportunity to get in on the ground floor of an industry that served an important need. The legal industry is likely the only industry in America where capital can’t flow in as equity in the normal course because nonlawyers can’t own pieces of law firms and so firms can’t raise equity in the normal way. I decided that I would give it a go. And that’s where Lee and I met — we both  worked at this firm for a year and a half before we decided to strike out on our own and start Lake Whillans in 2013.

SZ: Let’s talk about the progress that this industry has made in recent years. Tell me about what it was like when litigation finance really started to catch on, and what’s happening now.

BW: When we first started in the business, around 2011 to 2013, litigation finance was not well known in legal circles. A lot of the questions we got when we were trying to educate people on the space were along the lines of, “Can you do that? Is that legal?” It took a number of years for the market to accept the practice and to go from “Can you do that?” to “How do we do this?” 

From about 2015 to 2018, we had a major shift in the market where it felt like litigation finance had really become embraced by the largest law firms in the land. In its initial phases, litigation finance was mostly utilized by small to medium-sized companies, which needed funding, and often, smaller firms that represented those companies. It took some time for the largest firms to agree to use litigation finance and become well versed in it. And now we’re at a point where it really is common for large law firms and lawyers across the U.S to be utilizing litigation finance in one form or another. 

The frontier of the industry — and I don’t call it the frontier to imply it’s necessarily wild, rather it’s the place where most of the action is happening right now —  is at the larger corporate level. I would say we are in the midst of an adoption similar to the adoption by large law firms, where large corporations are increasingly becoming users of litigation finance, not necessarily because they don’t have the funds to bring a claim, but because it’s a helpful tool. Every year, we do more deals with more large-name corporations, and you can see that it is becoming increasingly accepted. I would not yet say it at the same place where the law firm market is, but it’s following a similar trajectory. 

SZ: What steps are you taking to help grow the market even more?

BW: We have always sought to promote education in the space. Early on, we decided — really in conjunction with Above the Law — to take an active role in writing thought leadership pieces about the industry to educate the market about litigation finance. Even when people felt like litigation finance wasn’t a dirty word anymore, there were still all sorts of practical questions that lawyers wanted to understand before they would feel comfortable enough to recommend it to their clients. To that end, we partnered with Above the Law to write pieces about the essential aspects of litigation finance. We covered issues like: What can you expect in terms of process when you call a litigation funder? How do you protect privilege when you’re dealing with a litigation funder? What are the ethical issues for attorneys to consider when dealing with litigation finance? What are the deal structures that litigation finance might have? What  about champerty? Are there any regulatory issues? 

These are the nuts and bolts of how the industry works and we really were trying to demystify the industry in a very approachable way so that lawyers would feel comfortable with introducing their clients to the product. We were setting the tone for the kind of open approach and professionalism with which we approach the industry. It’s given people an opportunity to feel comfortable in asking questions and starting dialogues. It’s led to several relationships that have continued to grow and bloom over the course of a number of years.

SZ: Is there anything else you’ve been doing to educate lawyers about the benefits of litigation finance?

BW: Absolutely. We give CLE presentations on litigation finance and the ethics of litigation at law firms. We’ve spoken at conferences in the United States and abroad. 

The other thing that we’re known for in the industry is flexibility and sensibility about how to get deals done. What we ultimately do is offer a financial product. And for that financial product to be useful, it’s got to really be geared toward the needs and wants of whatever company we happen to deal with. And so, we don’t approach situations formulaically. We come at them with an eye toward finding  a way that we can make a deal work, even if it’s unconventional.

SZ: I recently saw an article in Wired about the actual Lake Whillans, which is a subglacial lake of profound scientific importance. When it came time to name the business, why did you decide to name it after Lake Whillans? What’s the connection between litigation finance and this subglacial lake?

LD: Boaz and I think of ourselves to be investors first and foremost. And as investors, we are looking for inefficient markets to allocate capital. In 2013, when we started this company, litigation finance was undiscovered, untapped, and unused in litigation in the United States, as Boaz laid out earlier. It was this really interesting, inefficient asset class that people hadn’t yet thought about or discovered, and it was something we looked at and thought could be really large — maybe not the size of the U.S. equity markets or the U.S. bond markets — but it could be a sizable asset class that people just weren’t paying attention to or didn’t know existed. At the time we were launching the business, there was an expedition in Antarctica that had just proved successful in excavating a subglacial lake. It was the first expedition to ever do so, and that subglacial lake was Lake Whillans. Not only were they able to successfully excavate the lake, but what they found there, which they were not expecting because of the lack of sunlight and oxygen, was a thriving ecosystem with untapped potential that scientists continue to explore. We thought that was a perfect metaphor for what we were looking to do, which was to excavate and explore previously uncharted territories in the hopes of finding new financial ecosystems So that’s why we named our company after the lake and the expedition.

SZ: On a more personal note, what is your greatest satisfaction about working in litigation finance?

LD: For me, it’s related back to the Lake Whillans definition — even though it’s becoming more developed, there’s no playbook for how to proceed or how to build this business or how to contribute to the legal ecosystem. I find it exciting to be constantly navigating that world and being part of how we expand it and looking at innovative ideas and finding things out. Some things fail, some things succeed; you build on those successes.  Without a playbook, this is truly about having a vision of what is possible and setting out to create it. It’s a different type of task, but that’s what I like about it.

BW: Litigation finance allows me to pair the best of what I liked about being a lawyer – understanding the strengths and weaknesses of claims, evaluating how claims will play out – with the dynamism of business. We are constantly working with sophisticated claimholders and lawyers on new opportunities, working to craft solutions that provide win-win outcomes for all.

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Since 2017, Lake Whillans and Above the Law have collaborated on an annual research report for which we ask in-house counsel and law firm attorneys to share their perspectives on third-party litigation funding. Year over year, our survey findings have tracked the explosive growth of this field. Our findings show that an increasing number of law firms and their clients view litigation funding as a valuable resource. To cite merely one example, an overwhelming majority (88%) of our respondents with prior experience with litigation finance would recommend the practice to others, and nearly all (94%) told us they would turn to litigation funding again themselves.

On behalf of everyone here at Above the Law, we’d like to congratulate Lake Whillans on its progress in educating members of the legal profession on the use of litigation finance and its success as one of the top-tier litigation funders in the industry. 

(Disclosure: Lake Whillans is an Above the Law advertiser.)

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Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.