The Disruptors: Keller Lenkner Moves From Legal Finance to Practicing Law

Photo of Travis Lenkner, Ashley Keller and Adam Gerchen by Michelle Nolan.

Lawyers fear change.

It’s ingrained. Required. Incrementalism is the law of the realm – take what’s been done before, find a way to make a new situation resemble it and you’re golden.

Nowhere is that alchemy honed and burnished as in the chambers of U.S. Supreme Court Justices. Travis Lenkner and Ashley Keller clerked for Justice Anthony Kennedy there, finding ways to fit, fiddle and fuse hundred-year-old words with current dilemmas. Combine, contrast, churn and create, making what’s old new and what’s new forever.

Keller and Lenkner brought remarkable achievements to their time at 1 First St. NE, Washington, D.C. Lenkner had clerked for Judge Brett Kavanaugh of the D.C. Circuit, while Keller had clerked for the 7th Circuit’s Richard Posner. From there, the two would craft fast early success at, respectively, Gibson Dunn and Boeing; and Bartlit Beck and Alyeska.

In 2013, they joined with Adam Gerchen, whom Keller had met at Alyeska, where the two had invested in companies facing legal issues. They formed Gerchen Keller, a harder-edged, more clear-eyed upstart in the still uneven litigation funding world. The trio rocketed to success, raising more than $1B before selling in December 2016 to Burford, the London-listed standard bearer for the industry. The price tag? A cool $175 million.

After the requisite year at Burford the itch to build kicked in anew.

Strike that. Some lawyers fear change. And these guys, they don’t.

Gerchen was looking at the inflamed tweets of Elon Musk on August 7, when the CEO tweeted “Am considering taking Tesla private @ $420. Funding secured.”

Musk was in a battle with short sellers of his company’s stock, whom he tanked with those 52 characters. They lost hundreds of millions of dollars when Tesla rose by $45.57 to $379.57 in response.

Keller Lenkner filed suit. On August 10, Ashley Keller signed a complaint charging that Musk, the Company’s Chairman and Chief Executive Officer, and Tesla, violated the Securities Exchange Act of 1934 by issuing false and misleading statements about taking Tesla private. They claim Musk lied, and “Tweeted to decimate the Company’s short-sellers who were forced to cover their positions over the succeeding days at artificially inflated prices.”

The Tesla suit is one of a handful of inspired claims filed by Keller Lenkner in its first year in business. Others are the appeal of a claim that Uber misclassifies its drivers as independent contractors; and a lawsuit on behalf of classes of purchasers of health insurance, including businesses and individuals buying on the Affordable Care Act exchanges, against opioid manufacturers for flooding small towns throughout the Midwest with enough drugs to kill a hundred villages.

Add to that Travis Lenkner’s role helping Kavanaugh, his first law boss, win confirmation to the U.S. Supreme Court and you start to understand that this is their time. What they bring to the plaintiff bar is deep legal analysis, unparalleled understanding of the quality of various cases and lawyers – and cash. Their potential impact on the future of plaintiff litigation is profound, not only because of their close ties to a transforming judiciary, but also their vision of bringing the next generation to the fore. Not in ten years. Today.

From the beginning, Gerchen, Keller and Lenkner have built their brand by marketing it to the lawyers on the front line, one lawyer at a time, finding a foothold in a firm and securing the battle line. They used the strategy in litigation funding, targeting plaintiff matters at defense firms. The gambit was so successful they ended up funding entire portfolios of litigation matters for firms.

Key to the strategy was the decision to not spend their time trying to persuade those with the most to lose – the senior, established trial lawyers leading the firms – of the need to embrace a new day. They lasered on the lawyers waiting for their shot.

“There has always been a natural inclination, on the funding side and now here on the legal side to be partnering as much as possible with our peers,” says Gerchen, a Goldman Sachs alum who is CEO of the firm. “There’s an opportunism and nimbleness that we describe ourselves with that tends to be shared more with the new guard as opposed to the old guard.”

A look at their co-counsel in their biggest suits thus far is telling: Eric George of Los Angeles’ Browne George Ross in Tesla; Michael Geibelson of L.A.’s Robins Kaplan in Uber; and Will Consovoy and Michael Park of Consovoy McCarthy in opioids. These are not the usual suspects. Instead, they are the lawyers on the front line of the battle, and the new guard who are very likely about to change the plaintiff power structure.

Part natural affiliation through the social network of 30-somethings, and part strategy, Gerchen says the relationships reflect where they want to be in five years: Who are going to be the future leaders of those organizations, if they’re even still at those organizations?

“The first is just the natural world order and who’s on top of those organizations and whether they even want change. Do they even need to embrace change?” he asks. “Versus, the folks more on the front line who see the landscape shifting and realizing that this is a strategic benefit to be thinking about having a risk-based culture.”

As a result, Gerchen says, the focus of their relationship-building is not the “proverbial gray hair” partners but younger partners who can eventually effect change throughout an entire organization.

“We generally find that change can bubble up from beneath and there’s the power,” he says.

The opioid lawsuits - in which the firm represents businesses and individuals who paid higher rates for insurance – demonstrate Keller Lenkner’s impact right out of the gate. “We’re proud of the fact that this was our idea,” says Keller, who conceived of the claim like an antitrust damages analysis – that everybody who is buying private health insurance is paying a higher premium as a result of what the defendants have done.

The suits claim that the defendant pharmaceutical companies misrepresented the addictive properties associated with their products and funded front groups that were supposedly relying on medical science, but in reality were just pumping product. As a result, the number of opioid prescriptions skyrocketed.

“You had thousands of pills going into towns that have hundreds of people,” Keller says. “It’s a terrible health and humanitarian crisis. People who were covered by these private health insurance plans received medical treatment that they otherwise wouldn’t have, had the misconduct not occurred.”

The firm has joined with Consovoy McCarthy for suits in 16 states. They’ve also formed good relationships with firms like Lieff Cabraser and others that represent the municipalities and counties in the more traditional suits over the crisis.

“We all have the same objective, which is to get a recovery and to ensure that this crisis is quelled and that opioids are only prescribed for appropriate purposes as opposed to a widespread substitute for Advil that they have become,” says Keller. “We’re in a position where, with respect to our clients, we’re providing the costs, and we’re fronting our time in exchange for a portion of the hoped-for recovery.”

The lure of a plaintiff firm that can pay its own way is substantial. Keller describes the firms they work with as “co-venture partners” – well-capitalized firms that can also put their dollars to risk.

At the heart of their disruption is a reality anyone in the law business has known forever. The law is a thing of beauty, allowing mere mortals to give justice in matters profound and mundane for clients of grace as well as malice. But its practice in these times is that of a steel-trap leviathan ingesting whatever is large enough to get through its maw on the way to rewarding an ever-aging populace dependent on outsize salaries for a little thing we call law.

Insert irony. Because after pocketing their huge return from the sale of Gerchen Keller – and the lessons learned observing the current pack of plaintiff counsel as well as the inefficient structures of big law firms, Gerchen, Keller and Lenkner decided to create a law firm in which they are using the fruits of their successful bets on earlier plaintiff suits to fund their seats on the biggest claims around.

They say that running a high-end plaintiff-side contingency fee firm involves a similar skill set to being a high-end litigation funder.

“At the end of the day, you’re evaluating the risk-reward of an opportunity or case, and determining whether it’s going to produce a good outcome,” says Keller. “As a law firm, we are ethically bound to zealously represent our clients, so we’re taking a different role in approaching the same kind of monetary question, which is, ‘is this a good investment of firm resources’ as opposed to ‘is this a good investment of fund capital?’”

The switch brings the advantage of having much more of a strategic voice and open line of communication with the client. Keller says it’s also more exciting because as lawyers they gain access to more information – such as privileged materials they did not see as funders – enabling them to strike a better risk-reward calculation.

Their experience at Gerchen Keller was largely with plaintiff matters handled by big defense firms, giving them valuable insight on the needs of the defense bar. Which they are now taking on.

What they saw as litigation funders and now is that, despite the proliferation of litigation funding, law remains an undercapitalized sector compared with most other service sectors. Despite the opportunity, Keller says the excitement comes from picking great cases and partners as opposed to merely providing capital.

Gerchen adds that the new firm will be able to avoid making decisions because they are over-leveraged; instead, he says, they can go “toe-to-toe with the white-shoe firms.”

“If the merits are on our side, you’re going to get a meaningful recovery, because the other side can’t just bury us by throwing money at the problem,” he says. “We can match that. That is a significant advantage that I think we bring to the marketplace.”

The firm is also moving in on select appellate cases, as it’s done on Uber. Several years ago, Uber was sued over classifying its drivers as independent contractors. The company won a decision that Uber Black drivers are independent contractors. Keller Lenkner reached out to Sacks Weston Diamond, which handled the case at trial, and offered its services. The firm is now representing the drivers in partnership with the firm, arguing to the 3rd Circuit that the trial court made a mistake.

“Uber’s drivers should be classified as employees, or at a minimum, a reasonable jury could find that,” says Keller.

The national implications of the ruling are part of the appeal. Keller says the 3rd Circuit would be the first appellate court to address the classification issue, which has huge implications for Uber, Lyft and the gig economy generally. Joining the case for the appeal allows Keller Lenkner to bring its experience and expertise to bear when the stakes are highest.

Keller Lenkner’s focus on appellate matters stems not so much from economics – appeals aren’t costly - as the group’s deep reach into the evolving mindset of the federal appeals bench. It’s a situation where they think they can couch the arguments in the most compelling way possible and draw on their appellate experience. The firm believes that injecting that perspective earlier into the process than is normally considered in a trial-level, plaintiff-side case can have massive implications, monetary and otherwise.

The amplitude of bringing a deep, conservative mindset to plaintiff matters can be seen in the firm’s recent addition of Warren Postman, who clerked with Keller and Lenkner at the Supreme Court for Justice David Souter, worked at Jones Day, then ran the appellate division at the U.S. Chamber of Commerce. “You’re talking about a person who understands quite well how big corporations think about issues and appeals-type work. We now get to use his big brain for the forces of good,” says Keller.

Would it strike a plaintiff as a bit nuts to hire the former appellate head of the U.S. Chamber as counsel?

“To the contrary,” Keller says. “You’re making a very sane choice.”

He says it typically doesn’t matter whether a judge is a Republican or Democratic appointee – what matters is advocacy before thoughtful people who want to apply the law to the facts before them. For that reason, Keller says his team’s defense-side and corporate experience brings a huge benefit by resonating with different types of jurists.

“We have the ability to present and package our arguments in a fashion that are going to have appeal to the sorts of judges who wouldn’t normally be thought of as plaintiff-side judges,” he says.

One of the most mesmerizing components of Keller Lenkner’s practice is its entry into the plaintiff securities litigation arena. In part because of the financial chops Gerchen brings to the area, the firm is filing the occasional suit, like the one against Tesla.

Keller says the firm will not go after the simple and small stock-drop suits but instead pick their spots when they are “uniquely positioned” to pursue the claims.

Gerchen’s financial background will be key in identifying promising finance-oriented suits, and working their way through discovery. Another of the firm’s cases is a securities fraud suit against AbbVie for its Dutch tender, for which Keller Lenkner has been appointed lead counsel.

“We pride ourselves on the marriage of law and finance,” Gerchen says. “The qualitative side of identifying and managing talent, and the quantitative side of allocating our resources. That’s what we do.”

About the Author: Katrina Dewey (katrina@lawdragon.com) is the founder and CEO of Lawdragon, which she and her partners created as the new media company for the world’s lawyers. She has written about lawyers and legal affairs for 30 years, and is a noted legal editor, creator of numerous lawyer recognition guides and expert on lawyer branding. She is based in Venice, Calif., and New York. She is also the founder of Lawdragon Campus, which covers law students and law schools.