Often in Big Law, getting admitted to equity partnership is seen as the Holy Grail. Now, all your hard work has paid off and you can enjoy the fruits.
But for Christopher DeLise, getting to that point was only the beginning.
In his early 40s, he left a lucrative and comfortable position as an equity partner at an Am Law 50 firm to be part of the then-nascent industry of litigation finance. After earning his MBA from Boston University, DeLise was a financial analyst for a handful of years before going to law school, and litigation finance offered a chance to merge his talents and help develop an industry that is revolutionizing the worlds of law and finance.
He founded Delta Capital in 2011, which has since grown into a leading international funder with 15 professionals, most of whom joined the firm following outstanding careers in law, finance, investments and/or asset management. They fund large-scale commercial cases, including breach of contract, financing and investment transactions, M&As, securities, construction and mining cases, intellectual property, antitrust, real estate transactions and disputes of contentious trust. They also fund international arbitration cases, enforcement actions and asset recoveries, provide capital facilities to law firms and offer equity and credit lit fin products, for both defendants and plaintiffs.
Headquartered in Chicago, the firm now operates globally, investing throughout the United States, the United Kingdom, Europe, South America, Africa, the Middle East and Asia. Delta funds cases where the amount in controversy is at least $100M, and its investment is at least $5M.
A big proponent of collaboration in the legal finance industry, DeLise is the Treasurer and one of six Executive Committee members of IFLA (International Legal Finance Association), the industry’s year-old trade association. His background in finance, law and private equity has spurred innovative financial products and structures offered by Delta, including a game-changing product for defense-side litigants and industry-leading capital facilities for law firms.
For the past couple of years, DeLise has been a member of the Lawdragon Global 100 Leaders in Litigation Finance.
Lawdragon: You were an equity partner at an Am Law 50 law firm, at the pinnacle of your legal career as a private equity and financial services lawyer. Why did you decide to move into litigation funding?
Christopher DeLise: I had four large European institutional investor clients that appeared to have been defrauded by an investment fund manager in the United States and in Cayman Islands. They were concerned that we would be chasing after money that ultimately would not be there and therefore, asked if I would do the work on a contingency fee basis, which was not possible. Most big firms did not do that type of work on contingency back in 2011. I had heard from a colleague about litigation finance in London, which was still relatively new so I started to make calls.
I spoke with several funders and secured funding for these four cases and in parallel decided that I wanted to work full-time in the industry because it would allow me to use both my legal and finance background. This was the first thing I saw that was equal parts investment finance, business, and law and therefore I opted to leave private practice and start Delta.
LD: Was it just you at Delta at first?
CD: Yes, those initial four cases were funded by my money and some third-party capital. Not a lot of funders do it that way, but having represented private equity firms, I knew it would be easier to put my own money at risk rather than to go out and ask other people for money. That ethos still shapes how we operate. We are lean, we do not make a big splash or focus on capturing headlines. We focus on hiring the best people and delivering outstanding results for our clients and our investors.
As the economy gets tighter, general counsels will be under a lot of pressure to deliver and justify their budgets. Litigation funding will help them multiply their efforts without taking on more people.
In the beginning, I collaborated with outside counsel and then I started to hire people when we started to have some success. It was the beginning of an industry that I thought would really take off. There are few chances in life to be part of something like that and so I took the risk and it has paid off.
LD: So, you saw the opportunity and took it. What gave you the confidence or faith that it was going to work?
CD: To be fair, I did not know if it was going to work or not. It was a calculated risk but I recognized that the practice of law, especially in the private equity and transactional world, was becoming more commoditized. In a place like Chicago, even within the top law firms and lawyers, it is a crowded field, people were competing increasingly on price. Yet these big firms were and still are charging hourly for their services, which never made any sense to me. I like the law intellectually, it is fascinating, but the excitement wears off in a big firm as you climb the ranks. You start practicing less and managing other lawyers and clients more. I had achieved a lot in my legal career and I was always interested in finance, so it was a chance to bring all those skillsets together in a new fast-paced, nascent industry that I thought had tremendous potential.
I still get the best of the legal world now. I see innovative issues every week. Dozens of new cases come to us from all over the world. I can be looking at a case that is in a South American country one minute and review a case in Kazakhstan the next minute, I can be looking at the most complicated mass torts cases in the United States and new group actions in the United Kingdom an hour later. It is never boring.
Some of my law partners thought I was crazy. That is what differentiates an entrepreneurial mind from the rest – you look at the risk and see opportunity rather than anxiety. I would sit with my private equity clients who were making investments, seeing the risk and the rewards and how exciting that was, and I felt like I was on the sidelines. I thought, I want to take that risk. I want to make the business decisions and investment decisions. I wanted in on the action and was willing to work extremely hard, put my own money to work, and take the risk of failing.
LD: Clearly the risk paid off! How have you seen the industry evolve since then?
CD: When I started, we were the first funder in Chicago; the first funder west of New York. There was really no roadmap or model to follow, which was exciting but also a bit scary. I left a comfortable job in law for something that was still very uncertain. I spent most of my time meeting with law firms in the U.S. and overseas and telling them about something they had never heard of, trying to convince them it was a great idea. Gradually, litigation finance became more accepted, the asset classes more well-known.
LD: How do you decide which cases to invest in? And do you get involved in the strategy of the cases?
CD: It is a multidisciplinary approach. A career litigator might look at a case and focus exclusively on the legal merits. They read the claimant’s memo, do some digging, some due diligence, and look at the cause of actions, the claims, the evidence, etc. At Delta, we weigh all those things heavily but we also focus on other things like the collectability of the case, the strategy of the case, whether we can hedge our investment, durational risk, etc. Winning a case and not collecting is a hollow victory that will come to haunt you.
For us, it is a chess game. Very strategic. We oftentimes will play a role in helping claimants figure out what the best overall strategy is, which means a combination of the legal strategy, the enforcement or collection strategy, the media and PR strategy, government relations if that is involved, and the settlement strategy. However, we are not deeply involved in legal strategy. I am not reviewing deposition transcripts and suggesting what the line of questioning should be. We may very well, however, meet with the lawyers and claimants before trial and offer suggestions on what we think would work and what we think would not work. We are trusted advisors on the overall approach, not armchair litigators. We bet on teams that are comprised of the top attorneys in the world, so we trust them to run the case as they see fit.
LD: Can you tell us about some of the cases you have successfully funded? Any good war stories?
Coming from the private equity world, I thought, why are we not doing any club deals? If we are ever going to reach critical mass like venture capital or buyout funds then we need to be working together.
CD: We try to fly under the radar so we can remain neutral and not be seen as a party in these cases, for or against certain entities. But we fund all sorts of commercial cases, including in industries conducive to funding, like transportation, automotive, mining and construction, and investments, etc. We do not fund personal injury, mass torts or class actions.
There have been cases where we have funded the late stages of a case being managed by an Am Law 10 firm, where they took it on contingency and it took longer than expected. So, we were able to provide the capital for the “final blow,” if you will, with that last amount of money necessary for them to prevail at trial in a short period, with a high return for us. In those cases, the attorneys and claimants are grateful because litigation is unpredictable, and while they may have given up some of the upside, they were able to achieve their objective and secure a victory.
Going into China was interesting. I met with regulators to discuss what we do, and it was so foreign to them. We had to work with regulators and prosecutors to put pressure on the defendants because they participated in global schemes of wrongdoing and we advised the claimant – a Swiss hedge fund – that the fastest way to resolve the apparent fraud was to go to the perpetrators' regulator in China and show them why they should want this company to resolve this matter quickly.
We do a lot of work with investigative and business intelligence firms, which is really fascinating because you see all sorts of fraud being perpetrated, sometimes in tricky jurisdictions. We had to arrange to have someone served and the lawyers could not figure out how to do it because the defendants lived behind a guarded compound. And I said, “Why don’t you send over two dozen roses and make it seem like you are delivering it to his wife? And tuck the serving papers inside?”
LD: Oh wow. Did that work?
CD: My lawyers said, “this is crazy.” We had the investigators film it so we could prove that they were served. Her face was elated at first, looking at the roses. She is opening up the note thinking it is going to be something like happy anniversary, or I love you, and it is a service. She took that vase and smashed it in the courtyard. That is good service.
LD: Ok so this may be slightly more interesting than your old legal career.
CD: We just had a case in Poland with this individual who is one of the wealthiest people in the country, who keeps trying to deny his wealth to avoid paying us if we win the pending lawsuit. He said he does not own his 50-room chateau and instead claims he rents only a few rooms. So our investigators obtained pictures showing the defendant going from room to room, during the day and at night, and all these different lights flicked on, far beyond the rooms he said he rented. He also claimed he did not own all the expensive cars on the property but we were able to prove that he was switching license plates. And we obtained pictures of him washing and riding his polo horses that he claimed he did not own.
Chasing assets can be really interesting. We had to identify a big yacht that was stolen from a Saudi businessman and made its way to Florida. They repainted it and reflagged it twice during the trip, changing the profile so it looked different in photos. But this investigation firm we worked with was able to get a subpoena when the boat docked and saw that the engine numbers matched our boat, as they forgot to remove them when they tried to disguise the vessel.
One time, it took us 18 months to find a defendant who had two families and three passports. Eventually we found one of his mistresses and tracked him down that way. This job has a lot of intrigue and excitement, but we are always doing this work through investigators and intelligence professionals that have the authority and the right to do these things.
LD: Do you have a book deal yet? Are you going to make a TV show?
CD: No plans yet.
LD: Do you have any innovative products or services at Delta that you are excited about?
CD: Yes, we believe that we are the first funder to develop a comprehensive solution for defendants. In about 99 percent of all litigation finance cases, the claimant or the plaintiff is funded. Defendants have much less access to litigation finance. The few cases that have happened look more like over-under betting where the funder is taking a bet on what the outcome is going to be. If the outcome is better than expected, they benefit and if the outcome is worse than expressed, they suffer. We worked with structured finance professionals and insurance professionals to produce a comprehensive solution, called Delta Defense Solution. It enables us to both fund the cost of defense and also offer an insurance or structured financial product in the transaction to limit exposure for the claimant.
Chasing assets can be really interesting. We had to identify a big yacht that was stolen from a Saudi businessman and made its way to Florida. They repainted it and reflagged it twice during the trip, changing the profile so it looked different in photos.
It is really a tripartite arrangement between the funder, the claimant, and the insurance or structured finance company. We have just started to roll this out and there has been overwhelming interest. Most large law firms represent defendants rather than claimants so they are keen to learn about this new set of offerings.
We also have developed some innovative credit products, which we started providing to the marketplace about 12 months ago, including most notably to large law firms. It typically involves providing a line of credit or facility that is non-recourse. Once that is in place, the firm is then able to go out and do contingency fee or success fee-based work without bearing the financial burden. These arrangements shift the financial risk to us. This is an area that is growing significantly.
We also recently started doing a lot of innovative work funding intellectual property claims in the United States, including working with universities and research institutions to help them better leverage the value of their portfolios.
Finally, we just started rolling out our F1000 initiative to market our litigation finance offerings directly to Fortune 1000 companies. Law firms are obviously critically important to our industry, but we also think there is a need to go directly to major companies and make a pitch to their C-suite.
LD: It sounds like you are foreseeing a lot of growth in the industry still.
CD: Absolutely. The industry is also expanding geographically. Outside of the U.S., London and Australia, litigation finance is still fairly unknown. The Middle East, Asia, Africa and South America are all areas to expand into and we are developing new markets all the time.
Also, with the global economy headed towards recession, we think the need for litigation finance will increase even more as companies look to save money and offload expenses and costs. This might be the tipping point for the Fortune 1000, which historically has looked at litigation funding the way they used to think about sale and leaseback arrangements – like it was a crazy idea. They all thought they had to own their own real estate. Now the property they use is oftentimes owned by REITs or other third-party investors. As the economy gets tighter, general counsels will be under a lot of pressure to deliver and justify their budgets. Litigation funding will help them multiply their efforts without taking on more people. They can manage or pursue more cases on behalf of the company, but the company does not have to pay for it, the funder will. The company is just giving the funder a percentage of their victory.
LD: What would you say differentiates Delta from other funders?
CD: Our people. We hire the best people who have distinguished themselves with stellar careers in law, finance, investments and/or asset management prior to joining us. Our President, Peter Cornell, is the former Chairman of a UK Magic Circle Firm. One of our Senior Managing Directors, Martin Lueck, was the former Chairman of an Am Law 100 law firms. Jon Sablone, who heads originations for Delta, was formerly global co-head of litigation at an Am Law 100 law firm and a practice group head at an Am Law 10 firm. Mike Callahan, Delta’s COO, was formerly the COO of a very large asset management firm.
All this talent means we can sit down and usually understand almost any claim that someone gives us, without needing much outside help initially. We have very efficient and effective internal due diligence capabilities so we can move faster and be more creative than most of our competitors. We have as many transactional attorneys as we do litigators so we also can structure transactions and develop new products in ways other funders cannot. We utilize and embrace technology, and we are particularly good at quantitative analysis, not just qualitative and legal analysis.
All that being said, I have a lot of respect for some of the other funders in our industry and view them more as peers and colleagues than competitors. Chris Bogart and Aviva Will at Burford have done great things for the industry. Adam Gerchen and Ashley Keller, who formed Gerchen Keller, are incredibly innovative guys, who were ahead of their time in this industry, and still to this day have an impact. And Andrew Saker at Omni Bridgeway has done a remarkable job with the industry's first mega merger by bringing together Omni and IMF Betham.
LD: Interesting – lawyers are not always known to speak highly of their competitors.
CD: This industry was like that at first too, and I never understood it. Maybe litigators are more adversarial. Coming from the private equity world, I thought, why are we not doing any club deals? So, I sat down with some of the other major players about a year ago and we all said, “Why don’t we trade claims or share risk or get better pricing for insurance or collaborate on deals?" Since then, such collaboration has accelerated significantly and I am very excited because if we are ever going to reach critical mass like venture capital or buyout funds then we need to be working together.