By Lawdragon News | January 26, 2023 | Legal Consultant Limelights
After more than 20 years as a litigator, some of them as partner at AmLaw 25 firms, Marc Cavan joined litigation finance firm Longford Capital as a Director in July 2020. He credits the collaborative and supportive culture of Longford for helping him integrate into the firm – and the litigation finance industry – quickly and effectively.
Before becoming a litigator and patent lawyer, Cavan studied biology and history at Duke University. After college, he taught on a fellowship at Eton College, a storied boarding school in England, and it was during this time that he decided to pivot from an acceptance to medical school to pursue a career in law with a focus on technology and life sciences.
Cavan studied law at Harvard Law School, where he taught first-year law students as a member of the Board of Student Advisers.
More recently, he built a strong parallel interest in finance and now genuinely enjoys the intersection of law and business that litigation finance addresses.
Lawdragon: What attracted you to litigation finance? And why did you choose to join Longford Capital?
Marc Cavan: Unlike many lawyers, I have always loved math, and I thought I would enjoy the finance overlay on the legal analysis that undergirds the evaluation of matters in the legal sector. I was fortunate to begin my career in the corporate and securities group of a great law firm and received strong training in corporate fundamentals. In a way, working in litigation finance utilizes a transactional skill set that I possessed but had atrophied a bit, so I’m happy to be using those muscles again.
I first became familiar with litigation finance about five years ago when I was helping an inventor explore options to monetize a patent portfolio. I reached out to Longford Capital based on the strength of its reputation, and while Longford declined to fund the opportunity (as occurs in about 95 percent of the matters presented to Longford), I was really impressed with the caliber of Longford’s personnel.
Longford then became a client, and after interacting more deeply with the team, we both thought there could be a great mutual fit. I chose to join Longford because of the firm’s deep expertise and breadth of experience funding meritorious legal claims across a range of disciplines.
It is difficult to overstate the importance of developing the merits of an opportunity before presenting to a funder and ensuring that the merits of a case are strong.
LD: What do you enjoy most about litigation finance and working at Longford Capital in particular?
MC: Litigation finance focuses on a subset of the practice of law that I have always found most enjoyable – strategic analysis and evaluation. I also genuinely enjoy interacting with top tier lawyers and claim owners who are exploring options for how to best harness the value of their assets.
The best part of working at Longford Capital is our team. Our lawyers all possess extensive experience, and we work well together – and have fun together – as a group. We also work cohesively with our finance team, who are superb and exceptionally talented. The level of professionalism and enthusiasm of my colleagues for the work Longford does is energizing.
LD: Do you have any tips for lawyers or companies interested in exploring funding for a potential matter?
MC: In terms of a tip, it is difficult to overstate the importance of developing the merits of an opportunity before presenting to a funder and ensuring that the merits of a case are strong.
Occasionally, inventors or companies attempt to gloss over the merits of a potential matter to highlight the market capitalization or annual revenues of the target defendant, or defendants. But emphasizing the financial size of a litigation target can have the counter-productive effect of dampening a litigation funder’s enthusiasm (at least ours). Litigation funders are interested in claims that are likely to prevail – leading with and highlighting the deep pockets of a defendant can signal that the merits may be underdeveloped or uncompelling. If a claim owner or counsel presents inflated or untethered damages theories, that can also telegraph they may have unrealistic expectations for recovery, which can pose a challenge as a starting point in a funding relationship.
LD: Why, in your view, has litigation finance become more common and widespread?
MC: I think interest in litigation finance has grown exponentially for at least a couple of reasons. Longford is structured as a private equity firm; we raise funds from family offices, high-net worth individuals, pension funds and university endowments. For our investors, the uncorrelated nature (relative to the equities market) of litigation finance investment in the outcomes of meritorious legal claims is attractive, particularly for funds with investment parameters allocating or directing a portion of investments into alternative assets.
On the funding side, litigation finance firms are not necessarily seeking to hit only grand slams or the potential for nine- or ten-figure jury awards, and that ties into my previous answer about funders not necessarily attracted by stratospheric damages figures. Litigation funders like Longford are looking to work with commercially minded, pragmatic claim owners who know the value of their assets but are likely to be reasonable in the face of challenges or unknowns which invariably arise during litigation.
LD: Are there any particular types of law firms you work with regularly?
MC: One of my favorite aspects of my role at Longford is interacting with outstanding counsel at law firms across the U.S. and around the world. We work with AmLaw 100 firms, as well as regional firms and highly capable litigation boutiques. Exceptional lawyering is not limited to only a certain perceived echelon of law firm. Ultimately, we prefer to partner with lawyers who demonstrate the talent, drive, experience and confidence to win on behalf of a client – while successfully managing the tight corners of any case.
We have also experienced an uptick in companies – including multinational operating companies – approaching us with an interest in funding. Even though such companies have existing relationships with law firms, they frequently ask for our recommendations on counsel they should consider.
LD: Could you provide a sense of what’s on your plate in a typical week at Longford?
MC: We are a lean operation at Longford, and everyone is expected to contribute on multiple fronts and wear a variety of hats. In addition to developing opportunities within my network and fielding in-bound inquiries, I interface daily with litigation counsel and analyze the technical merits of opportunities in underwriting.
In any given week, I am also monitoring existing investments, which entails speaking with trial counsel and acting as a strategic sounding board. In addition to those responsibilities, I collaborate closely with our finance team and work on various transaction documents, including letters of intent and funding agreements, and devise economic waterfalls that align parties’ interests successfully. I am also regularly involved in investment committee meetings and presentations to current and prospective investors. Throughout any week, I communicate frequently with my lawyer colleagues, as I find their collective experience from lengthy careers in private practice and/or industry – in addition to expertise in litigation finance – invaluable.
Litigation finance by its nature helps claim owners and law firms de-risk certain opportunities, and the funder takes on that risk for the prospect of advantageous economic returns.
LD: What differentiates your company from competitors?
MC: I appreciate that I work with exceptionally talented and creative colleagues, who have strong backgrounds in multiple areas, including business-to-business contract claims, antitrust and trade regulation, intellectual property (including patent, trademark, copyright and trade secrets), bankruptcy, and domestic and international arbitrations.
Because we have a substantial fund open for investment, with the funds already committed by our Limited Partners, we can evaluate a range of opportunities and, depending on the merits of the opportunity, can offer certain options (like monetizations, portfolio deals and umbrella agreements), which not all funders can support. We also have the capability to be creative and flexible to accommodate claim owners with varying commercial objectives.
LD: Are there trends you’re seeing in evaluating patent litigation opportunities for litigation funding?
MC: While they’re continually evolving, key issues over the past year include venue, Patent Trial and Appeal Board proceedings, and damages. All these issues have been top of mind for funders, and we have had to take stock of developments in case law from the Federal Circuit and certain district courts which are re-contouring certain issues.
LD: Can you describe a new product or service that’s impacting the market?
MC: Over the last 18 months, claim owners have been asking about – and we have been exploring – insurance. Litigation finance by its nature helps claim owners and law firms de-risk certain opportunities, and the funder takes on that risk for the prospect of advantageous economic returns for its investors. Insurers can help funders lock in strong returns for investors, for instance, by insuring the results of a positive judgment if that judgment is challenged on appeal.
Sophisticated insurance firms have entered the market with enthusiasm and present a welcome complement to litigation finance. Over the next several years, we expect that litigation funders and insurance companies will increasingly find ways to work together synergistically to benefit claim owners and investors.
LD: What advice would you have for law students or less experienced lawyers who may be interested in litigation finance and exploring options within the law?
MC: The legal profession has changed significantly over the past quarter century, and if past is prologue, the next quarter century will entail further rapid change. The ability to adapt and adjust as the landscape shifts will be critical for newer and more experienced lawyers alike. I would encourage law students and newly minted lawyers to be cognizant of at least a couple aspects of development. First, there is no substitute for a strong foundation in legal fundamentals (i.e., reasoning, writing, analysis, communication), and I was fortunate to receive outstanding training early in my professional years from several excellent mentors. Seeking mentorship and professional feedback remains a constant now as it was when I started practicing in the late '90s. However, the acceleration of changes in the current legal marketplace necessitates, arguably more than ever before, that law students and lawyers stay attuned to market developments to take full advantage as new opportunities inevitably emerge and evolve. The legal field – and litigation finance – is anything but static.