Nicholas F. Kajon is a shareholder of Stevens &
Lee P.C. and co-chair of the Bankruptcy and
Corporate Restructuring Group and the Litigation
Finance and Alternative Funding Group. He
practices in the firm’s New York office and has
more than 30 years of experience advising clients
on financial restructuring, corporate governance,
and commercial litigation matters. He can be
reached at email@example.com or 212-537-0403.
Eric M. Robinson is a shareholder of Stevens & Lee
P.C. He heads the firm’s litigation group in its New
York office and is co-chair of its Litigation Finance
and Alternative Funding Group. For more than 20
years he has tried cases and represented clients before
courts and in arbitral fora. Matters ordinarily involve
claims arising from securities and other financial
products, business governance, and relationships
with material parties and executives. Robinson can be
reached at firstname.lastname@example.org and 212-537-0408.
Before it agrees to commit capital,
a funder will undertake substantial
due diligence. Getting to the table
is a multistep process that requires
time and patience, and is influenced
by the complexity involved and the
amount of funding sought. Other
prudent preliminary steps include
conflicts clearance, descriptive
narratives, specific nondisclosure
agreements, and in-person meetings.
If progress continues, the time and
work involved in the process can
compare with what ordinarily is
involved with the preparation of
a justiciable complaint or defense
plan, plus what might compare with
assembling initial disclosures under
the Federal Rules of Civil Procedure.
If mutual interest develops among
the principal, attorneys involved,
and funder, a prudent principal
might seek additional counsel
concerning the terms offered,
monetary and otherwise. Once
the litigation funder has agreed
to fund, the parties will need to
negotiate the funding documents.
Businesses in distress never have
many viable options to relieve
or resolve the distress. Litigation
finance and related alternatives merit
thoughtful consideration by business
principals and their advisors. While
not appropriate for all or probably most
business clients in disputes, it has
established itself as a consideration
in many circumstances. J
1 Magnesium Corporation of America,
Case No. 01-14312-mkv, order signed on
August 24, 2016, approving sale of Renco
litigation interest, Docket No. 745.
2 In re: Magnesium Corporation,
Case No. 15-2691 (2d Cir.).
3 11 U. S.C. §§ 544, 547, 548, 550.
4 See, e.g., NY Debtor & Creditor Law
§ 271 et seq.; North American Catholic
Education Programming Foundation,
Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007)
(creditors of an insolvent Delaware
corporation have standing to assert claims
derivatively for breach of fiduciary duty).
5 To the authors’ knowledge (and
as reported in various media), no
transaction like this had ever been
done in a pending bankruptcy case.
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