Our evaluation process for potential investments is straightforward, efficient, and above all, transparent.
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1.
SCREENING
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2.
DUE DILIGENCE
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3.
FUNDING & MONITORING
SCREENING
At the screening stage, we’re looking to identify the risk points and understand the financial parameters of the litigation.
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WHAT WE NEED
We’ll ask for the following information at this stage:
the basic documents (complaints and answers, any major decisions, memo from counsel summarizing the facts, key contracts or similar foundational documents);
some justification for the damages estimate;
the identity of counsel and the parties; and
a phased budget for the case distinguishing between legal fees and hard costs.
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WHAT WE’LL DO
Our approach relies on total transparency at this stage and throughout the process. First we’ll talk to the claimant and counsel to understand the case and the financial needs in a funding arrangement. We use a proprietary risk matrix that helps us ensure the pricing is appropriate to your case and gives us flexibility where a case presents less common risks for its case type.
We’ll then prepare a term sheet that reflects a fair division of risk and reward, considering both low return and high return scenarios. We’ll tell you our concerns, our level of confidence that the case will survive deeper diligence, and why we’re structuring the pricing the way we are. We will take the time to walk claimants or counsel through any scenario or model that helps them understand the proposed arrangement.
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WHAT WE LOOK FOR
What kinds of opportunities make it through this stage? We’re looking at the following factors.
Merits. The client deserves to win the litigation.
Discovery Risk. The level of evidence is appropriately strong for the stage of the case.
Legal Risk. The legal framework around the claim is relatively clear.
Collectability Risk. The defendant has sufficient assets to be able to settle the case or pay a judgment and no history of ducking judgments.
Damages. The reasonable damages are ~5x the funding request for a law firm side investment, or ~10x for a client side investment
DUE DILIGENCE
Investment opportunities that make it through the screening phase are then moved to due diligence.
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WHAT WE NEED
At the due diligence phase, we’re diving deeper. We’ll need:
to see hot documents and key story documents while respecting any protective orders in the case;
to know your client information; and
access to both counsel and client to ask questions and explore the case more deeply.
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WHAT WE’LL DO
Either in-house or with outside counsel, we will prepare a thorough legal and factual analysis at this stage. As necessary, we’ll hire experts, run prior history searches, and do research to understand any lingering damages or collectability concerns. Throughout, we’ll continue to practice total transparency – we’ll tell you how the case is tracking and where we stand at every stage, and you’ll always be in contact with an Arcadia Founder who is running the diligence process.
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WHAT WE LOOK FOR
At this stage, we’re looking to confirm that the risks identified to us in screening are of the kind and magnitude that was explained to us and that there aren’t other risks. The opportunities that make it through due diligence are ones without surprises – if we are just confirming what we believed in screening, this step should be smooth. At the conclusion of due diligence, you’ll receive a form funding agreement that tracks the term sheet and is easy to understand.
FUNDING & MONITORING
When we choose to fund an investment, we are looking to add value and be a good partner.
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WHAT WE NEED
The needs at this stage are vital but simple: open lines of communication. Keep us informed as the case progresses, and importantly, let us know how we can help. We’ll read briefs, offer settlement strategy advice, and help make connections with experts whenever that’s helpful. We’re here for you and can be as involved as you’d like us to be.
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WHAT WE’LL DO
Perhaps what’s most important is what we won’t do at this stage. We will take absolutely no control. Counsel and client remain the decision makers in the litigation at all times. It’s your case, and whether you choose to tap into our non-financial resources or not, it’s always your decision how to proceed.