David vs. Goliath

Above the Law on how Legalist levels the litigation playing field.

Joe Bornstein
12/21/2016
Articles
Original Article

Today’s alt.legal adventure features legal entrepreneur Eva Shang. She’s on a quest to help the Davids of the legal world vanquish Goliaths — with the help of technology.

Eva is not a lawyer, but access to justice has become her raison d’être. A Harvard dropout,* Eva worked hard, the old-fashioned way  — mobilizing protests, writing articles, and volunteering her time — to protect the rights of the underprivileged. Today, she’s an alt.legal CEO and her company, Legalist, uses big data and proprietary algorithms to help the little guys fund their battles against the legal heavies.

Eva first witnessed the access-to-justice problem at the public defender’s office in D.C. She learned that justice isn’t cheap and that the proverbial deck is stacked against those without deep pockets. We civil litigators already know this: torture a small company with motion practice and discovery, and it will often settle for far less than the value of its claim (or even drop the case all together). Data and money to the rescue.

Eva and co-founder Christian Haigh are self-proclaimed “legal data nerds,” and have “accumulated a database of 15 million court cases from all over the United States,” as the Boston Globe reported. To make that massive mess of data actionable, Eva and Christian built proprietary algorithms that quickly compare key attributes of historical cases with cases seeking funding. Just as all non-legal businesses do, their algorithms learn from the past and give them actionable insight into the future, such as the likely duration of the matter and the range of likely dollar outcomes. If the computer says the case has legs, Legalist can fund it . . . quickly.

Now let’s be clear, helping small companies prosecute civil tort claims doesn’t immediately tug at your heartstrings (the same way an asylum claim might), but to the actual small-business owners, these are often bet-the-life-savings situations.

Skeptical that litigation funding can solve an access to justice problem? Hear Eva out below, she’s the real deal.

* You might be thinking: why should I pay attention to this non-lawyer, college dropout?  Well, for one, you should know by now to pay attention to Harvard dropouts. For two (and I finished college!), the VCs supporting Legalist are some of the Goliaths of the tech world, including the Y Combinator and the Thiel Foundation, which thought enough of Eva and Legalist to nurture and fund the idea.

Joe Borstein: You’ve been involved with access-to-justice issues for a long time. What sparked that interest?

Eva Shang: I worked as an investigator at the Public Defender Service in D.C., which offers free legal services to indigent defendants — both civil and criminal. I started to realize pretty quickly that the justice system is stacked against people who don’t have money for lawyers. I realize that this is by no means a revolutionary insight, but it made me want to do something about it. Litigation finance is a natural extension.

JB: You and your founder are both “non-lawyers,” why legal tech?

ES: We are not lawyers, but we are huge legal-data nerds. One of the most exciting parts for us is how to best mobilize legal data to solve this big access-to-justice problem. Being able to mobilize legal data to help people get access to resources in the justice system is, to us, the epitome of the good that alt.legal or legal tech can bring.

JB: How does lit finance alleviate access to justice issue?

ES: Litigation finance is based around the idea of funding the little guy against a defendant with deep pockets. It’s non-recourse, so it’s a lot like contingency-based fees–but for commercial cases, where contingency fees aren’t usually an option.

I see its impact in every case we fund, especially because we focus on smaller-sized cases. Our applications come from local ice cream manufacturers, bakeries, family-owned vineyards, small toymakers who simply don’t have the resources to see cases through. The cases are often against deep-pocketed clients and vendors who have damaged their business and believe they’ll get away with it. Without us, plaintiffs will file the lawsuit and then find themselves dropping the claims or settling for pennies on the dollar, because they simply can’t afford to pay more legal bills. Litigation finance allows them to see that claim to a more satisfying resolution.

JB: Legalist’s underwriting is based upon human and machine input. Can you explain to our readers what makes your underwriting different?

ES: Yep! One reason Legalist, unlike other litigation-financing companies, is able to fund small commercial cases, is because we have a fast underwriting process that uses a computer algorithm to assess a case’s likelihood of winning. Algorithms sound scary – but in reality, it just means using past data to inform future decisions. Insurance companies use sophisticated algorithms all the time to calculate your car insurance prices, your health insurance rates, and so on.

Our algorithm uses public records to better make underwriting decisions, by calculating likely time to resolution and anticipated outcomes. We look at many of the variables that an attorney would look at to get to the same answers. How fast does the docket move? How many cases in this court settle? But while expert lawyers hired by litigation finance firms might make underwriting decisions based on the 40 or so cases they’ve been involved in, the computer reads across 15 million court records for broader patterns that can be replicated instantly and accurately.

Now, we’re not using data just to be fancy. More automated underwriting makes the application process simpler for the client and faster for us. Believe it or not, all we need is a short questionnaire from both the client and the attorney. We can make our investment decision from that.

In addition to quality applications, we do get applications from folks who say, “I won’t litigate unless I’m funded.” Those are often the people claiming the Kardashians stole their trademark, or some other outlandish, unsubstantiated claim. To us, that’s a pretty good indicator the case was never going anywhere to begin with.

JB: Can Legalist also be used to help small law firms?

ES: One frustrating and entirely preventable phenomenon I’ve noticed: if a client is a few months behind on paying invoices, their litigation counsel will inevitably stop putting in the hours to move the case forward — no matter how meritorious the case is. I understand why – especially for smaller practices, every hour spent is crucial to their paycheck. At that point, the options are to dig up the cash or to drop the case.

But nowadays, litigation financing is so accessible that it presents a third option. Lawyers need to advise their clients of that option. Not telling your client about litigation financing is an omission that could drastically change the litigation outcome. It’s a costly omission – and frankly, in my opinion, an unethical one.