Mark Shapiro is a judgment broker based in California and is the host of the Judgment Buy Radio Show, also based in California. He interviewed Joe Genovesi, Senior Vice President of RD Legal Funding for the December 16th, 2012 edition of the Judgment Buy Radio Show. Below is the transcript.
Mark Shapiro: Today, I’ll be talking with Joe Genovesi about legal funding. So thanks for calling Joe.
Joe Genovesi: Sure, thanks for having me.
Mark: Alright, so let’s see, I guess the first question might be what is legal funding?
Joe: Sure, so with legal funding there are a few different parts to the industry. The part that we are focused on is post-settlement funding. So what we do is we will purchase an attorney’s legal fee on a settled case that is going to have a delayed payment for one reason or another. We also can fund the underlying client their settlement award when there is a delay of payment or distribution in settlement. Now legal funding itself, the large heart of the industry is pre-settlement funding. We don’t do any of the pre-settlement stuff or the case-cost type loans to attorneys.
Mark: So basically you work on post judgment situations only?
Joe: Yes.
Mark: When I say post judgment it could be settled out of court or just something that’s done with litigation. It’s not lawsuit funding, it’s like final judgment or final settlement funding or something like that. That’s why it’s called legal funding and not lawsuit funding. This is really post-settlement funding.
Joe: That’s exactly what it is, post-settlement funding.
Mark: What kind of judgment settlement cases qualify? I imagine only cases where debtors’ assets have assets that qualify.
Joe: It’s any case where there is going to be a delay in payment. So some examples might be a personal injury case where Medicare and Medicaid are involved, which slows down the process because of their backlogs. Speaking to some attorneys, the delay for Medicare and Medicaid was 9-12 months. Or it could be a class-action or MDL where a settlement is reached but it could be months or even years before funds are actually distributed to all the plaintiffs and the attorneys.
Mark: The defendant or debtor has to have deep pockets for this to work.
Joe: We obviously look at the credit rating of the underlying obligor and as a firm we have limits in place to how much we would allow to each different credit rater. Meaning if you are an unrated company, there’s a limit to how much we would be able to accelerate against that.
Mark: Does it work when the debtor is an individual if they have assets?
Joe: It can work, but that would obviously be our smallest limit where we can have the least amount of exposure to that and we would absolutely have to look into it and be comfortable with the collection.
Mark: So basically, it’s just like anything else in judgment recovery, a judgment that could sell for cash upfront for a large amount could also be legally funded for a large amount because in both cases you have a strong debtor with deep pockets.
Joe: Sure, your question is actually focusing a little bit more on the plaintiff settlement funding which is something that we do. Our primary business is the attorney legal funding on federal cases. So it’s a little bit different than just funding the whole judgment, we generally fund the attorney fee on it.
Mark: So basically, your bread and butter so to speak is funding the attorney’s portion of the attorney’s expenses.
Joe: Yes.
Mark: So even if the plaintiff owes them, its money due to the attorney that’s still fair game.
Joe: That’s exactly what we are looking for.
Mark: If someone sues a big debtor on a contingency basis, that’s where you can help keep the lawyer working when he was about to give up because he was spending too much money on it.
Joe: Yeah, so it would have to be a settled case. An attorney spends a year or two fighting a case then it’s settled and he doesn’t have to wait six more months or nine more months to actually get his fee because he needs that money to keep his practice going and litigate other cases.
Mark: So this is really a cash flow solution for attorneys.
Joe: Exactly.
Mark: Is there a minimum amount or does it depend on the situation?
Joe: The minimum we would ever do is somewhere around a $20,000-$25,000 advance. We don’t want to do anything smaller than that. We generally like things that are obviously larger than that. We are also looking for things that are not going to pay tomorrow. So ideally we want things that are three months out from being collected. Obviously we will make exceptions on that because a lot of the times it’s kind of an unknown how long it takes to collect. So we will do things shorter but we want it to be at least $20,000-$25,000.
Mark: So it sounds like basically you are purchasing the attorney’s fees or you are paying the attorneys upfront for fees they will earn in the future.
Joe: We are purchasing their fee, so we expect to get it paid in a lump sum whenever it does collect. So if an attorney has a $1 million fee coming, in most cases they don’t get paid every month or every year for a certain amount of years. They get paid their full fee at some point in the future and we are purchasing that fee.
Mark: So basically anybody can use your services but it has to be centered on a settled case or money owed an attorney.
Joe: Yes
Mark: What kind of cases do not qualify?
Joe: The majority of cases pay quickly or quickly enough. So we are only focused on the ones where there is a delay of collection fees, otherwise the attorney doesn’t really need us.
Mark: Right, so obviously cases where somebody is going to get paid next week don’t qualify and cases where it’s too small don’t qualify. If it’s a state that owes money does that qualify?
Joe: We would definitely do that.
Mark: Historically, they wait until a creditor is dead before they pay.
Joe: One thing you mentioned before: a lot of times we won’t do for example divorce matters because we don’t want to have to get involved in divorce court and chase after an individual, and we don’t want a house as collateral. We are just looking for a legal settlement.
Mark: If it was somebody divorcing a millionaire, then maybe, but otherwise no.
Joe: Yeah, if they had liquid assets in a bank someplace that we knew of.
Mark: It’s funny; I find that most people that call me with divorce judgments would rather talk about their judgment than have a solution.
Joe: Yeah.
Mark: So basically we talked about how legal funding benefits the attorney and plaintiffs. How long does it take to get approved?
Joe: It’s a pretty quick process. Usually the largest waiting time is us waiting on documentation we need from the attorney, but once we get all our documentation, we can wire the attorney their money in a matter of days.
Mark: The wait depends on the outside world, not on you. My favorite slogan is “I’m fast, the world is slow. “
Joe: Yeah, I should use that.
Mark: What are circumstances where someone might have to return the money you sent them? I could think of an example: you fund and the debtor files for bankruptcy. The bankruptcy trustee says that’s a preferential payment because it happened one month before they filed for bankruptcy or they paid you and didn’t pay their other creditors.
Joe: We do take risk of non-payment. So our loans are non-recourse advances in that sense so that if the obligor went belly up we would be left trying to collect. It wouldn’t fall back on them.
Mark: So basically that’s not a worry for the people that use your service. That is something you factor in before you get involved in it. That is the cost of doing business if that should happen.
Joe: Exactly.
Mark: So nobody ever has to return the money unless they defraud you or some other thing. So I guess your company is an alternative to conventional judgment recovery in certain situations because with all judgments the creditors want to be paid instantly and the reality is most of them will never get paid and if they do get paid it will be after a long period of time.
Joe: We don’t fund any verdicts because we can’t fund things that can be appealed.
Mark: So your company is not really an alternative to conventional judgment recovery. If the little guy has a judgment against a big successful company then it’s possible your company could be a solution.
Joe: We are not a collection agency. So we don’t go after them to collect. We just simply purchase your settlement and wait for collection.
Mark: But obviously the bigger and more successful the debtor is, the more it goes into that territory. That’s not your bread and butter so we won’t spend any more time there. How was your company started?
Joe: Our CEO, Roni Dersovitz, was a plaintiff’s attorney in Brooklyn, NY and he realized that there are cash flow issues for plaintiff/consumer attorneys. He had to go to some funding sources, and in doing so realized that it’s a pretty good business model on its own. He started a little of that on the side until finally it blossomed into his full-time business. In 2007, the firm was formed.
Mark: Obviously one thing I learned is if you do a good job, you will get plenty of competitors.
Joe: Yes.
Mark: So my way of dealing with competitors is to have excellent customer service, tell people the truth, and stuff like that. I imagine you are the same.
Joe: Ours is very similar. One thing I will mention about the competitors: if you were to Google “legal funding,” there’s probably a hundred companies that might pop up. But one thing that differentiates us is that we focus solely on post-settlement funding like I mentioned. A lot of the “competitors” are more focused on pre-settlement. Whether it’s doing case-cost type loans or doing pre-settlement funding or doing lines of credit-most of those things generally imply pre-settlement risk, which we don’t take. I’m not saying there aren’t people who do what we do-there definitely are, but we focus solely on that. A lot of the other guys who dabble in our space also do pre-settlement stuff.
Mark: Obviously, that’s your bread and butter.
Joe: Yes.
Mark: Obviously, your growth is limited by the economy and how well you can get the message out.
Joe: Sure, that’s really it. Truth be told, I’m not sure how much the economy affects things. I don’t know if the up or down economy affects how often people get sued. So there is always going to be lawsuits and there is always going to be contingency fee attorneys. So there is always going to be a need for the business. But like you said it’s a matter of capturing the market share, and that’s just getting your name out there.
Mark: Fantastic. And there is always a chance government regulations will be an issue, but I don’t see how that would affect you. But you never know. What’s your website?
Joe: Sure, LegalFunding.com.
Mark: LegalFunding.com, that’s straightforward. LegalFunding.com. Fantastic. Alright Joe, thank you so much for calling the judgment show. It’s really a pleasure.
Joe: Thanks for having me. I really appreciate it.
Mark: Take care.
Joe: Take care, Mark.
