Validity Fuels Top Boutique Using Portfolio Funding – A Case Study

Portfolios are an effective way for law firms to boost profitability. This case study looks at how Weisbrod, Matteis & Copley uses litigation finance for growth.

The Firm

Weisbrod, Matteis & Copley is a nationally acclaimed litigation and insurance recovery boutique.

Founded in 2011, the firm’s clients range from financial institutions to states, municipalities, individual consumers and victims of fraud. In 2014, WMC made The National Law Journal’s Litigation Boutique Hot List, just three years after opening its doors. From the beginning, the firm has balanced hourly work with contingency work – both to best serve their clients and to take measured risk for enhanced profits.

The Problem

WMC’s dedication to clients on contingency poses a problem: cases take years to resolve and the firm’s growth may be stunted just as client demand is rising. Hiring the best lawyers in new markets and continuing to develop a high-quality reputation requires a significant up-front investment.

You can’t pay rent on new offices with projected revenue.

Why Legal Finance?

Law firms need capital at the right time to fuel growth. A typical bank loan is problematic. Banks are ill-equipped to properly value contingency matters, which means that loans are often unavailable, priced too high, or require onerous personal guarantees.

Alternatively, firms like WMC could turn to their partners for equity contributions to grow but this represents another unappealing option. Litigation finance offered WMC a compelling opportunity.

A Market Solution

Litigation finance is non-recourse capital; the repayment obligation is based entirely on the outcome of the case or cases financed. Additionally, the capital is flexible-use. It can pay the costs to open offices, hire lawyers, or attract clients. Finally, funding transactions often offer financial terms that are accurately priced because litigation finance firms specialize in valuing cases.

A Portfolio for Growth

As WMC Chairman August Matteis noted, “When we started this firm, we had a lot more work than we expected out of the gate, so it seemed like the right thing to consider funding.”

Matteis and Validity CEO Ralph Sutton worked together on two portfolio deals starting in 2012 including a large portfolio of FEMA flood insurance claims arising out of Hurricane Sandy. Their truly innovative large portfolio structure combined with WMC’s outstanding work helped the firm’s devastated clients recover over four times as much (on average) as any other party from FEMA.

When the opportunity arose to collaborate, Matteis reflected as follows:

“I’ve worked with a number of funders and I have to say that overall Validity has been the easiest to work with. The process [is] very simple, transparent, and streamlined.”

The Funding

Validity committed an eight-figure amount of capital for firm expansion focusing on commercial disputes against insurance carriers. As with all Validity portfolios, the capital is disbursed in tranches and each tranche is reasonably priced, permitting the firm to plan its growth, and even defer or advance a tranche, as needed.

WMC understands that clients need to rebuild their lives after shattering business losses. To do so, they need to resolve claims quickly. They want to be made whole on failed business transactions now. They want compensation for stolen trade secrets now. And to help these clients, WMC needs capital.

Validity Delivered: the Firm Prospered

Validity’s portfolio financing has helped the firm hire the best litigators, develop the most efficient systems for case management, and open new offices where clients need them most. WMC now has a fully staffed offices in Washington, DC, as well as in Philadelphia, Pennsylvania; Jackson, Mississippi; Fort Lauderdale, Florida; and San Juan, Puerto Rico. The firm has grown from 12 to 50 lawyers and continues to expand.

Connecting with a Trusted Partner

If you’re a law firm or business considering litigation finance, you will have many funders to choose from. So how do you make the choice?

As Matteis described it: “When I work with Validity on a funding deal, I really feel like we’re collaborating. We’ve developed trust in them as funders and they have developed trust in us as litigators.”

For August Matteis and WMC, the choice is easy: it’s all about trust.