June 20, 2011 6:20 PM
Sean Coffey Launches New Litigation Finance Firm with Juridica Cofounder
Posted by Nate Raymond
Sean Coffey, the former securities class action heavyweight, has found a new calling in the wake of his unsuccessful campaign to become New York's attorney general: He wants to fund other people's litigation.
Coffey, who left Bernstein Litowitz Berger & Grossmann in October 2009 to run for office, has cofounded BlackRobe Capital, a New York-based investment management firm that invests in litigation. He is partnering with Timothy Scrantom, cofounder of the first publicly traded litigation funder in the United States, Juridica Investments Ltd.
BlackRobe joins the growing field of companies--including Juridica, Burford Capital Limited, and Juris Capital--that advance legal fees to litigants in exchange for a share of any recovery. But Coffey said BlackRobe plans to shake up the existing third-party litigation finance model by taking a more "proactive" role in lawsuits that the firm funds. "It will certainly be amenable to classic litigation funding 1.0," Coffey said. "But I think we'll be creating a niche where we provide more value than simply writing a check."
BlackRobe, which incorporated in Delaware in April and launched a Web site recently, will launch in earnest in the fall, Coffey said. While exactly how much it will seek from institutional investors and hedge funds remains under discussion, Coffey said BlackRobe may look to raise around $100 million. The firm, which has no plans to go public, will seek to invest $2 million to $8 million in cases with more than $50 million in damages at stake, Coffey said.
In addition to providing funding, BlackRobe's Web site says the firm will evaluate underlying claims, work to mitigate risk, match the "correct" law firm to cases, and use its "network of strategic partnerships to assist with fact finding efforts and other related matters."
Coffey said he wanted to move beyond the "conservative approach" of other third-party funders. "The industry is ready to take another step in the direction of adding value to a claimant's litigation claims," Coffey said.
Maya Steinitz, an associate-in-law at Columbia Law School who studies litigation finance, said that there's been "talk about pushing the envelope a little bit" in terms of increasing funders' roles in the cases they finance. But there are still limits. "The question of the level of control is one that a court would look at to see if funding is champertous or unethical," Steinitz said.
Fulbrook Management LLC, founded earlier this year by former Burford Group chairman Selvyn Seidel, is also taking a more hands-on approach to investing in cases. Seidel said his firm will not tell a law firm or claimant what decisions to make, but will consult and offer guidance. "We're doing less than control [the case], but doing more than was done before," Seidel said.
Coffey said BlackRobe wouldn't run afoul of ethics rules, adding that the "most important thing is informed consent by the client." Ethical guidelines issued by the New York City Bar Association on Wednesday stated that lawyers may take cues from third-party funders as long as they've obtained their clients' consent.
The issue of client consent is probably one reason third-party funders so far have steered clear of class action litigation. Despite his own background as a class action plaintiffs lawyer, Coffey said he didn't see class actions "as the sweet spot in litigation finance." BlackRobe would instead focus on funding the claims of small companies, he said.