Atticus Financial Corporation, Inc. (AFC) is a Delaware Corporation. Our goal is to provide investors with an attractive level of cash flow and/or capital appreciation through factoring agreements and/or investments in litigation-related opportunities.
By investing in lawsuits, AFC will be engaging in “alternative litigation financing” or “ALF” which can be defined as the financing of litigation by individuals and entities other than the parties to a legal action or their respective lawyers or insurers. Alternative litigation financing is a fairly new, but growing, industry in the United States, and information on the financial performance of alternative litigation funding companies is sparse as all but a few ALF providers are private companies. Nonetheless, a couple of industry participants have reported strong results. In 2016, the New Yorker pegged the litigation funding market as a $3 billion dollar asset class.
We believe that increasing costs of litigation as well as an expected increase in the number of litigations have the potential to create strong demand for alternative litigation financing in the coming years.
Our goal is to build cash flow and increase revenues to its investors through factoring agreements and/or investments in litigation-related opportunities. AFC believes such opportunities may be relatively uncorrelated with general economic trends so that AFC’s investments may still perform even if other assets are performing poorly.
AFC intends to leverage the experience of its team of veteran trial attorneys to enter into investments in litigation-related opportunities in contingency cases we believe will result in cash payouts either through verdicts or settlements. AFC expects that its opportunities will initially be predominantly in California, which is one of the most litigious states and is where AFC’s investment team collectively has over seventy-five years of legal experience. In addition, AFC may consider investments outside of California where such investments are lawful and permitted under local law and rules on professional ethics.
We intend to invest in opportunities which it believes will in aggregate generate cash returns over two-to-four years. To supplement that guideline, AFC may adopt additional criteria that must be satisfied before an investment in an opportunity can be made. These criteria will be regularly reviewed to ensure that appropriate risk-evaluation methods are in place. The investment review process will include an evaluation of traditional litigation risk elements, such as liability, collection risks, the experience and track record of the lawyers prosecuting the claim, the financial strength of the lawyers prosecuting the claim, the likelihood of target defendants to settle the claim and the timing of a potential settlement, the likelihood of recovery of a judgment or settlement, and whether the claim is wholly or partially insured. AFC will also consider the costs involved in monitoring an opportunity prior to investing in such opportunity.
Factoring may be negotiated as a purchase of a stream of income from either the attorney representing a Claimant or from the Claimant themselves with the Claimant’s lawsuit serving as collateral for the stream of income. For example, AFC has entered into a factoring agreement wherein AFC paid a law firm $100,000 for a stream of the law firm’s income of $140,000 recovered in Song-Beverly Act cases. As another example, AFC successfully entered into a factoring agreement with an oil company wherein AFC paid $103,000 for a stream of income of $135,000 secured by a lawsuit in Federal District Court in Texas brought by the oil company. As a further example, AFC has invested in, and continues to invest in, eminent domain matters.
Investment in a lawsuit may be structured as purchase of a percentage in the recovery obtained by the Claimant in such lawsuit, whether through settlement or verdict, with AFC assigning a percentage of its recovery, if any, to ourselves. AFC will advance a certain amount of funds directly to the Claimant that the Claimant will agree to use to pay his, her or its attorney’s fees and expenses. Although AFC intends to monitor the progress of each lawsuit in which it invests, AFC does not intend to act in any manner which would adversely affect the Claimant attorney’s independence of judgment.
AFC may also invest in law firm revenue (including, but not limited to, percentage interest in a portfolio of lawsuits) through providing funding for marketing for the law firm. For instance, AFC may pay for monthly marketing expense to third-party vendors in exchange for a percentage of return of all case revenue generated from the third-party vendor marketing on behalf of the law firm.
Types of Alternative Litigation Financing
Generally speaking, alternative litigation financing can be grouped into broad areas:
- Non-recourse Loans to Plaintiffs – This segment of ALF involves direct loans to plaintiffs, who usually have personal injury claims. The loan is secured by the underlying claim itself. Since the loan is non-recourse, the borrower/plaintiff will be obligated to pay his or her ALF company no more than what he or she receives as proceeds from the underlying lawsuit, and any amount specified in the loan in excess of such proceeds is forgiven. Therefore, if the plaintiff loses at trial, none of the loan will be repaid.
- Loans to Law Firms – Certain ALF companies provide direct loans and lines of credit to plaintiffs’ law firms. Generally, law firms’ debts to ALF suppliers are secured by all of the assets of the borrowing firms, including future fees from their cases and real property, such as land, buildings, and equipment.
- Direct Investments in Claims –A third type of ALF is the providing of capital to plaintiffs in exchange for a share of the eventual recovery.
- Factoring – Factoring may be negotiated as a purchase of a stream of income from either the attorney representing a Claimant or from the Claimant themselves with the Claimant’s lawsuit serving as collateral for the stream of income.
AFC will primarily engage in the third and fourth type of ALF by entering into factoring agreements and/or investing in litigation-related opportunities. AFC may, however, invest in all four types of ALF set forth above.
Atticus Financial Corporation
5200 W. Century Boulevard, East Tower, Suite 345
Los Angeles, CA 90045
Atticus Financial Corporation
Lake Highlands Tower, 9330 LBJ Freeway, Suite 900
Dallas, TX 75243