A Big Law partner has left his firm to launch an investment shop focused on valuing and monetizing assets related to bankruptcies, distressed debts, litigation and what are sometimes called “special situations.”

In early January, Darius Goldman left his position as head of distressed debt and claims trading at Katten Muchin Rosenman to launch Haybeach Partners LLC with two other founders. The New York-based outfit plans to operate in a subset of the broader litigation funding market. Haybeach will focus on providing pricing and liquidity for assets that are hard to value, often due to their uncertain legal status.

Those can include account receivables, bankruptcy claims, judgments, private notes or other unconventional financial instruments resulting from insolvencies, class actions, frauds or insurance liquidations, according to Haybeach.

One example of an asset that Goldman said his new firm is interested in are claims related to subsidies originally promised to insurers by the Affordable Care Act that Republicans have phased out. That has led to litigation across the country.

“We're interested in monetizing whatever it is that is alternative, bespoke [or] unique,” Goldman said. “Whatever is keeping (companies or investment firms) up at night, we want to help them come up with a solution.”

Goldman said he launched Haybeach because he saw a market underserved by traditional litigation funders and investment banks that already operate in the space.

While large litigation funders such as Burford Capital Ltd. market their ability to monetize judgments and awards, Goldman said most litigation funding firms are focused on the larger market of funding suits. Investment banks, meanwhile, face intra-firm sales conflicts when marketing niche investment opportunities to their large number of clients, Goldman said.

“We're obviously not going to be the biggest litigation funder out there,” Goldman said. “But there is an area we're focusing on right now. We've done our homework on it. We think it's attractive, and we're reaching out to potential claim holders to work out an arrangement.”

Goldman also said changing client demands have been putting increased pressure on the Big Law business model. In Goldman's practice, clients would often ask for discounts on deals that weren't profitable, despite their being no fault over the legal work he provided. Viewing his relationships with a long-term perspective, Goldman said he would often give those clients discounts.

“But they never once come to you after a grand slam or home run and say we want to pay you more because we did so well,” Goldman said. “That's one of the leading indicators that the billable model doesn't work. Clients accept it, tacitly, when they're successful. They factor it in as a price of doing business. But when they're not successful, it would make for awkward conversations.”

Goldman said Haybeach would also use a long-term client model. Rather than trying to sell individual deals, Goldman said his new shop hopes to build relationships with large companies and investment firms as their go-to source for monetizing illiquid assets.

Those kinds of relationships are increasingly fleeting in Big Law, said Goldman, who joined Katten's New York office in 2013 from Kramer Levin Naftalis & Frankel.

“Over the years, the paradigm that I've seen is that law firms and legal relationships have become commoditized,” Goldman said. “[There's] less reverence for the legal professional over time. Not overnight, but over time.”

The other founders of Haybeach are two investment professionals: Neil Desai, who was formerly director of the special situations group at alternative investment firm Cowen Inc., and Bradly Schwab, a former managing director at Cowen who also dealt with special situations.

Haybeach takes its name, Goldman said, from a place on Shelter Island, New York, where one of its founders has “fond memories” of spending time as a child.

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