As litigation funding picks up speed – and respectability with even the most traditional white shoe law firms – the industry is attracting some of the best legal talent to its ranks.
Stuart Grant, known internationally for his plaintiff advocacy work on behalf of stockholders, co-founded Bench Walk Advisors in 2017. The company has since invested nearly half a billion dollars into over 150 commercial cases and portfolios. They have offices in New York, Delaware and London.
Grant comes to the work after over 30 years as an effective and sought-after securities litigator. A graduate of NYU Law School, his credentials include a degree in economics from Brandeis University, clerking in the SDNY and working as an associate for Skadden for several years. He then became a partner at Blank Rome before co-founding Grant & Eisenhofer, which would go on to become a renowned leader in plaintiff advocacy work.
The sharp and tenacious attorney is known for his groundbreaking work in corporate governance reform and securities litigation, shoring up the rights of investors particularly in Delaware courts. One of his recent big wins before moving full time into litigation funding was the blockbuster case for Facebook investors over the stock reclassification that Mark Zuckerberg was seeking.
“Mark wanted to restructure the company so that there was a third class of stock, almost like a golden share,” says Grant. “He wanted to be able to sell down almost all his economic interest and still maintain absolute control over Facebook.”
Given the enormous political and economic power of the social media giant, from election interference to Covid misinformation, allowing Zuckerberg that much power and limiting his economic risk was worrying to the investor community, and other parties. “It would have been a disaster,” says Grant, “and would have set a dangerous precedent.” Grant, on behalf of investors, was able to get the proposal withdrawn.
Grant was inducted into the Lawdragon Hall of Fame in 2019 as a litigator, and again in 2022 as a legal consultant.
Making the transition from law to finance was perhaps bolstered by his wife of 36 years, Suzanne Grant, who has an MBA from Wharton, worked for several major brokerage houses and is now the Chair of the Delaware Public Employees Retirement System. Grant considers himself to be the “second smartest finance person in the house.”
Lawdragon: You were one of the top securities litigation lawyers, particularly in Delaware. Why did you make the move into litigation funding?
Stuart Grant: It was really an accident. One of our big institutional clients came to me and my partner Jay in 2016 and said, "We're getting more and more involved in the litigation finance space. You guys are great case-pickers, and we think you'd be really good at this. If we gave you some capital, would you be willing to invest in third party cases?"
We thought about it and liked the idea. It sounded like an interesting endeavor. It took us about a year to set up the infrastructure. About the same time, the Chancery court started to sour on appraisal cases, which seemed to have been taking more and more of my time. So I thought of litigation finance as a “next chapter.”
We made our first investment in the fourth quarter of '17, then I left the firm at the end of '18 and started full time on this. I really liked it. I was using the same skillset as in my legal practice, yet reducing the demands on the emotional energy of being in trial frequently. Although, I did try my last case just before I left and got a jury verdict for the full amount requested, so that was a nice way to get on my horse and ride off into the sunset.
LD: So just a couple years in, the pandemic hit. How did that impact things?
SG: In the end, it did not have a material effect on the business at all, which is extraordinarily surprising. I had thought that case resolution would slow dramatically, and hence stretch out the investment time. It did not.
We are getting in pre-complaint, working with counsel and agreeing to the financing before the complaint is ever filed.
I also thought it could dramatically increase the demand as companies and potential counterparties were looking for assets to monetize to use for collateral to help their business. It did a little bit, but not in a material way. Demand increased during that time, quite dramatically, but only because more and more law firms started to understand how legal findings could be used and how it could help them.
LD: What types of cases or portfolios does your firm generally focus on?
SG: Our firm is different in a few ways. Most litigation finance firms are running after law firm loans and portfolio investments. Although we love law firm loans and portfolio investments, the bulk of what we do, two thirds to three quarters, is single case risk. So, we are getting in pre-complaint, working with counsel, and agreeing to the financing before the complaint is ever filed.
Then we take several of those cases and put them together as a portfolio for our investors. They’re investing in our ability to select cases. Not a lot of entities out there that do what we do, or at the scale that we do it.
The types of cases really are any commercial cases – breach of contract, fraud, misrepresentation, antitrust, mass tort. Anything except intellectual property, which is a creature of its own. You really need to have a special skillset for that. We had that for about a year, but that guy is now in charge of all the Navy's intellectual property, and the Navy doesn't like to share. But that's okay, they shouldn't.
LD: You're getting involved pre-complaint. How much are you involved in building the litigation strategy?
SG: I’m not practicing law, but we will often get a draft complaint, or at least a litigation finance memo which explains what the case is, what they’re trying to achieve. My diligence team, and ultimately I, read those complaints and have discussions with the lawyers.
I can't help myself, those discussions wind up probing their legal theory, testing them, pushing, asking about the evidence they have to support their case, ferreting out the weaknesses. Does that cause the complaint to be better, particularly if we invest in it? I think so. Am I telling them what to do? No. I have no authority to tell anyone what to do, how to try a case, what theories to use, etc.
LD: How picky are you about the cases you take on, compared to how many come across your desk?
SG: We take less than five percent of the opportunities we see.
LD: Even the ones that you don’t take on, it sounds like they might walk away with new strategies for making their case stronger.
SG: I think that happens. If we go through our whole diligence process with them, we’ve pressed our concerns, and so they should understand pretty clearly why we decide not to fund the case. Or the really smart ones ask us, “Why won’t you fund this?” And we’ll walk them through exactly why. Some may very well go and try to fix those weakness and bring the cases to other funders, which is fine. We were unhappy taking the risk at a price that both sides would consider reasonable. Perhaps the next case they have, they’ll remember our service and come back to us with stronger evidence and arguments.
LD: You mentioned that a lot of law firms and lawyers are really catching on to the utility of litigation funding. Can you point to a turning point there, or has it been a slow shift?
SG: The Great Recession was a big turning point. Before then, a company might have counsel with whom they have had a long-term relationship. But if they had a plaintiff’s case, they would go to the firm and say, “We think this case is worth a couple hundred million dollars. We’d like you to do it.” And the law firm would say, “Sure, that’ll be about $20M.” The company wouldn’t have that in their budget. And anyway, these big white shoe law firms were thumbing their nose at that kind of work, they didn’t really want to be on the plaintiff side, they thought it was beneath them. So the company would either have to go to another firm that they’re not as comfortable with, that they don't know, or many times they just didn't bring the case.
Then, the Great Recession hit law firms unlike any other recession. All of a sudden, the corporate clients were much more cost conscious, and the lawyers were saying, "We need business." They had to keep feeding the beast. Plaintiff’s work started to look like a good opportunity.
This is where funding comes in. Effectively, what we do are synthetic contingent fees.
This is where funding comes in. Effectively, what we do are synthetic contingent fees. The client wants a contingent fee but the law firm says, "We don't do that. We need to be paid hourly." So, there's no deal there. Now we step in. I talk to the firm and say, "I'll pay your hourly rates. They're outrageous. I want a discount. But I'll still pay your hourly rates."
Then I say to the client, "I got you covered on the legal fees. So you pay me a percentage of what you recover if you win.” If we can pick those cases right and we can work with the Big Law firms of the world and keep their budgets under control, there's enough money left for us to make a nice living. That's effectively what we do now.
Most of our cases are with large traditionally corporate defense firms in the U.S. or in the UK. As these Am Law 250 firms started to understand that this is just another sophisticated way of financing things, they became more comfortable, and realized that financing allows business relationships to happen that might not otherwise happen.
That's what we do. There are still many lawyers in the Am Law 250 who are either not comfortable or unaware of litigation finance, which is how our business is growing.
LD: As more players are entering the litigation funding space, what differentiates your firm?
SG: People think price is always the top of the criteria. This is not a commodity product, and so price is generally not on the top of people's list. Speed and certainty are the two most important things to counterparties.
If getting financing takes a year, that's a problem for these firms. They don’t want to work with a little storefront that they don’t know will be around when they need their fees paid in year two and year three. And they want to know that a yes is a real yes, not a “yes but first I just need to check with my committee, my parent company, and my funding sources.”
Speed, certainty, stability, and the ability to work with a law firm and be part of the team, understanding what their needs and constraints are. Then price. All those things are really important. Where we really have a competitive advantage is on the first three things in particular. When you come to us, we analyze quickly, and you’re dealing directly with the investment team. When we say “yes,” that’s it, we’re in.
Finally, we bring a wealth of plaintiff-side litigation experience, which can be an asset to the team as they're looking at what kind of case they're going to put forward.
In terms of pricing, my partner Adrian [Chopin], who runs the London office, comes out of a structured finance derivatives background. He is extraordinary at being able to structure deals in a way that has economics that are satisfactory to us and also considers the needs of the counterparty and what their issues are so that the deal works for them.
LD: Do you ever miss being in court?
SG: I thought I would, I really did. And it is shocking to me, I do not. The only thing I miss from my former legal practice is the camaraderie, going into an office that has a lot of really smart, fun people who I worked and built with. I miss that. As it turns out, probably everyone misses it for the last two years.
I do not miss the trials, or the deadlines, or having to be at the beck and call of judges and clients. I don't miss the stress of adversaries just jerking around for the sake of jerking around.
LD: It sounds like you get the best parts of a legal practice now – looking from a high level about all different sorts of cases, judging the strategy and the viability of them, and then collecting all these really good, interesting cases.
SG: That's exactly it. It's using the same skillset. It's taking the best intellectual parts and getting rid of all the day to day grind that a litigation practice entails. I also have 12 employees instead of 175 employees. There is less hassle and distractions.
LD: How did you first decide to become a lawyer?
SG: I mentor a lot of really smart, talented young people who are not sure what they want to do. When they ask me that question I try to avoid it, because when I was six or seven years old and all my friends wanted to be policemen and firemen, I wanted to be a corporate litigator.
LD: No way, when you were six?
SG: I'm assuming there is some genetic defect in me that has always caused me to want to do this.
LD: Were your parents lawyers?
SG: My dad was, but I never wanted to do what he did. He was sort of a jack of all trades, he would do your will and your divorce, help set up your business, all that stuff. I wanted to litigate financial matters. Growing up, I watched “Perry Mason,” and that's what I wanted to do, be in a courtroom.
LD: That would do it.
When you come to us, we analyze quickly, and you’re dealing directly with the investment team. When we say “yes,” that’s it, we’re in.
SG: Interestingly enough, I took my son at three years old to see “Top Gun” and he became enamored with that. Now he's a Marine fighter pilot. Sometimes little things in our lives like a TV show or movie just trigger something.
LD: Tell me about the I Could Do Great Things Foundation.
SG: It's a foundation that my wife and I started in 2010. Neither of us grew up with money and we realized we’d been very fortunate. We've always tried to give back, and this was an opportunity to do that in a larger way.
The foundation does major project grants, seven figures to institutions, multiple universities and all sorts of other projects. We're doing some really cool stuff with an outfit here in Delaware called The Teen Warehouse, which is part of a larger group that has tried to take on the circle of poverty and realized that low-income housing alone doesn't solve the problem.
We love working with teens. We’re getting more personally involved, and realizing not every kid has to go to college. We are working on a program for young people to identify success as they determine it. What's my personal roadmap and plan? What are my benchmarks? We tell them we are investors and we love investing in success. We will invest in human success, but first they need to put together a plan, with a counselor, that’s measurable.
We’re helping teens learn valuable trades to become plumbers, welders and electricians. We pay to get them trained, and the next benchmark is an internship or apprenticeship, and we can often be helpful with those, as well. You need contacts for that work. I like to say we have a lot of high friends in low places, and they love to help out with this stuff.
We try to do things particularly with young people that will change lives. Not necessarily the world, but just lives.
LD: Is your wife a lawyer, too?
SG: She is not. We like to say she's a "real person.” She runs the Delaware Public Employees Retirement System, a $15B fund. She is a finance wizard. She has an MBA out of Wharton. So, I am the second smartest finance person in the household.
LD: Was she pleased when you moved over into her realm?
SG: It's funny, because from very early on when I started at Skadden, and my wife was at Morgan Stanley, they would call us in and say, "You're basically concentric circles now. We want to make sure that compliance is appropriate.” This was before cellphones, so you might not even be able to disclose where you’re traveling to because if you’re headed to a meeting in Bartlesville, Okla., your spouse might be able to quickly put together that that’s where Phillips 66 is headquartered, so they must be involved in a deal.
So, it had its challenges. But then we would go to conferences where some spouses are terribly bored, but with us, we would have these overlapping social circles. So we had fun. It's actually been a huge advantage in my career, and I hope she would say the same thing, that we move in circles that don't duplicate but compliment. She understands what I talk about, and I understand what she talks about. It's been very nice having a partner like that for what is approaching four decades.
LD: Do you have other children, besides the one in the Marines?
SG: Yes, I have three kids. My eldest is in sales with a company called TriNet, doing very well. She’s married to a great guy and they had our first grandchild a few months ago.
My middle guy lives in Miami, and is engaged. He's in private wealth management with JP Morgan, he's doing really well. Soon I'll be the third best investor in the family.