Burford submits response to US Senators

Further to my blog post on August 30, Burford has now responded to the inquiries from Senators Grassley and Cornyn. Burford’s response is available here (full text appears below). The attachments to Burford’s letter are here.


September 25, 2015

Chairman Charles E. Grassley
Senator John Cornyn

United States Senate
Committee on the Judiciary
Washington, DC 20510-6275

Dear Chairman Grassley and Senator Cornyn:

We write in response to your letter of August 27, 2015. We are pleased to have the opportunity to discuss litigation finance with you and to dispel the misconceptions that surround it.

Litigation finance as practiced by Burford is simply conventional commercial financing for participants in the legal system – both law firms and the business clients they represent. As with any other form of commercial finance, litigation finance only exists because there is demand for it from its users – in Burford’s case, typically small and medium-sized businesses, Fortune 500 companies, and AmLaw 100 law firms. That demand exists for various commercial reasons, but a common theme underlying all those reasons is that litigation is very expensive and can be financially burdensome even for our very largest companies.

Litigation finance is neither new nor novel. It has been practiced for decades and on a very large scale with the full knowledge and acceptance of lawmakers, judges and lawyers. A significant part of the civil litigation underway today in American courts—almost certainly a majority of it—involves someone who is not the named party bearing cost for or sharing risk with that party. Burford is quite a small part of a market that includes long-accepted providers of financial solutions to litigants – including law firms who work on contingency or alternative fee arrangements, insurers and a wide variety of institutional capital providers.

What may be new about Burford is its introduction of professionalism and institutional specialization to the field. Burford is made up of a significant collection of professionals who have deep experience in all facets of corporate litigation – three senior partners of Latham & Watkins (including two who have been the firm’s global head of litigation); the general counsel of Time Warner; one of the country’s leading litigation academics; senior bankers, including the Chairman and CEO of Barclays; yet more litigators from firms like Cravath and Debevoise. All of those people have come together in response to a deep-seated need in corporate America for more solutions to the challenge of addressing litigation and its economic consequences for businesses than the law firm hourly billing model can provide.

Perhaps the best way to introduce the concept of litigation finance today is to use others’ words:

Hundreds of companies, increasingly from the Fortune 500, have used litigation finance, convinced that it was in their interest, according to people in the field. Most use litigation finance to support lawsuits that they bring as plaintiffs, over commercial contracts, antitrust matters, intellectual-property disputes, and other business claims. A company can use financing to reduce its litigation costs, with the funder covering or sharing the expense of legal fees and the company splitting its recovery with the funder if the suit succeeds. A company can also use the financing for psychological relief. It could end its dealings with a vanquished adversary that remains infuriating to company executives by getting most of a settlement immediately from a litigation financer in exchange for giving the financer the right to collect the full amount later.

– The New Yorker, July 9, 2015

“I think you would find a notable percentage of the Fortune 100 have engaged in some kind of funded litigation,” says Kent Gardiner, chairman of Washington, D.C., law firm Crowell Moring LLP, which has represented more than a dozen large companies in such cases. “Overwhelmingly, the impetus has been very, very tight legal budgets.”

The Wall Street Journal, April 7, 2013

The practice is increasingly gaining backing from some of the country’s top law firms … Partners at Simpson Thacher & Bartlett, Latham & Watkins, Fulbright & Jaworski and Patton Boggs have all fought cases backed by litigation finance firms.

The New York Times, April 30, 2012

The best business is in unlocking good cases that otherwise might not be filed, rather than in funding a slew of uncertain ones in the hope that some are settled for their “nuisance value”, or that a few big wins pay for the rest.

The Economist, April 6, 2013

Put simply, litigation finance is an accepted and entirely appropriate practice that is already well established among American and global businesses and their law firms.

Burford’s Background

Burford was founded in 2009 and went public that same year, raising capital from institutional investors as part of an initial public offering on the London Stock Exchange’s market for smaller companies. Today, Burford’s market capitalization exceeds a half-billion dollars. Burford’s largest shareholders supported it at IPO and remain shareholders today: Invesco, Fidelity, and Woodford. Burford has subsequently raised more equity and issued bonds, also listed on the London Stock Exchange. Although Burford’s capital base is in the U.K., the majority of its senior management team is located in the United States.

Burford was founded by Christopher Bogart and Jonathan Molot, and its chairman since inception has been Sir Peter Middleton:

  • Christopher Bogart, Burford’s Chief Executive Officer, was the Executive Vice President & General Counsel of Time Warner Inc. and a litigator at New York’s Cravath, Swaine & Moore. Before founding Burford he held a variety of executive management roles, including as the Chief Executive Officer of Time Warner Cable Ventures.
  • Jonathan Molot, Burford’s Chief Investment Officer, is a Professor of Law at Georgetown University Law Center and an experienced litigator, an expert in the litigation finance field and a former senior U.S. government official. He clerked for Justice Breyer of the U.S. Supreme Court and practiced with Cleary Gottlieb and Kellogg Huber.
  • Sir Peter Middleton GCB, Burford’s Chairman, was U.K. Chairman of Marsh & McLennan Companies and Chairman of Mercer Ltd. He was previously Permanent Secretary at HM Treasury and Group Chairman and Chief Executive of Barclays Bank PLC.

Burford today is a global business, with a presence in the U.S., London and Hong Kong, and offering services around the world. It is also an American success story of the kind that deserves to be celebrated for its innovation. In a few short years, Burford started from nothing and has become a successful firm employing more than 25 people in the United States by providing products and services that its clients want and value. Burford’s U.S. team includes three former partners at Latham & Watkins and former senior litigators from Cravath and Debevoise, as well as former executives of a variety of Fortune 100 companies.

Indeed, Burford is today much more than a litigation finance business, and “litigation funding,” the business of financing case expenses, accounts for only around one-third of Burford’s business today (and a significant part of that occurring outside the U.S.). In addition to offering litigation finance globally, Burford also owns and operates a litigation insurance provider and has expanded into professional services offerings and capital provision to the legal industry unrelated to litigation finance.

Litigation Finance Is a Familiar Concept, Driven by Client Demand

The involvement of third parties in financing litigation by commercial plaintiffs and defendants is widespread and has been occurring in the United States for decades. Such financing is well known to the courts and to lawyers and has neither needed nor attracted any special regulation or scrutiny beyond the entirely adequate ethical and regulatory regime to which lawyers and litigants are already subject. Indeed, both the American Bar Association and the New York City Bar Association have studied litigation finance in depth and concluded that it is ethically permissible and requires no additional, special regulation by the bar.

Litigation finance is entirely in accordance with legal and ethical guidelines in the United States. Certainly, its increased popularity has led to dialogue about legal ethics as well as its impact on evidentiary protections given to confidential information of clients and their lawyers. However, the courts and legislatures have been clear about the legality of the business, and the tide is clearly running in favor of including litigation finance within the umbrella of protection from disclosure.[1]

The financing of commercial litigation takes many forms:

  • Commercial plaintiffs routinely use multiple sources of direct financing for their own litigation claims, including drawing on existing credit sources, establishing new credit sources explicitly to pursue claims, accessing third-party finance like venture capital, and seeking capital from investment banks, investment funds, and private investors. (Indeed, when Burford provides financing to a company, it very often finds that a traditional commercial bank already has a pre-existing security interest in the litigation asset with respect to which the company has asked Burford for additional financing.)
  • There is an active market in commercial claims; owners of claims can easily sell or assign them to economic actors interested in pursuing them.
  • The assets underlying claims (or related debt or derivative instruments) are frequently bought and sold for the principal purpose of extracting the value associated with the claim through litigation, in both insolvency and non-insolvency contexts.
  • Contingency fees for commercial claims are widely available, from both traditional contingency plaintiffs’ firms and from many hourly firms.
  • Insurance and reinsurance are also widely used in all stages of the litigation process.

Over the past decade or so, specialist providers of litigation finance like Burford have joined this well-established field. Although the emergence of such specialist firms has garnered public attention, their activities are consistent with and fit comfortably within accepted practices. Perhaps the only novel aspect of litigation finance is the increased attention paid to it of late – but that attention speaks more to seismic changes in the overall market for legal services and increased client unhappiness with the conventional billable hour business model traditionally used by many law firms.

As noted, litigation finance takes many forms, but generally refers to any transaction through which the asset value of a litigation claim is used to secure financing from an outside financier – and litigation claims are financeable assets at law (technically choses in action), falling under the purview of the Uniform Commercial Code.

In the simplest variation of the practice, commonly referred to as “litigation funding,” a provider of finance advances some or all the expenses of bringing a legal proceeding in exchange for a return tied to the outcome of the case (e.g., a portion of the damages or the settlement received). In essence, this is creating a synthetic contingent fee arrangement for use by law firms that do not offer such fees directly because they do not fit the firm’s business model – and doing so preserves the ability of the client to hire the law firm of its choice. Because the litigation funder’s return is tied to the success of the case, and because the litigation funding agreement does not constrain or interfere with a claimant’s ability to settle the underlying litigation claim at any time and for any amount, financial providers will by definition fund only the most meritorious actions; if they do not, they will quickly go out of business.

Finally, we should be clear about some of the things that Burford does not do. Burford is a commercial finance provider engaged in multi-million dollar transactions. There is an entirely separate market in the United States for providing small dollar advances to consumers in connection with pending litigation claims. The business associated with that market attracts controversy because of its high finance charges, although its existence is also a commentary on the dilemma facing lower-income Americans whose injury claims are unduly delayed by slow-moving courts and recalcitrant insurers; in any event, Burford does not engage in this type of activity. In addition, Burford also rarely finances patent litigation, even on a commercial scale.

In addition to our own words, we once again incorporate the words of others:

The concept of funding litigation costs is not new. Plaintiffs’ lawyers commonly represent lower and middle income clients on a contingent fee basis, and large corporations and law firms increasingly have adopted the contingency structure. Similarly, insurance companies traditionally have provided coverage for legal fees and, in some cases, liability for judgments. Investment in litigation by private sector firms, however, is a more recent phenomenon in the United States, though it has been available and widely employed in the United Kingdom (which has adopted legislation explicitly permitting litigation funding), Australia, Germany and Spain for many years. …

The principal criticisms of litigation funding have spanned a broad spectrum of the legal, ethical and philosophical. As to the latter, critics have complained that the availability of capital to parties that otherwise might not be in a position to commence litigation will result in an ever increasing wave of frivolous lawsuits. Funders respond, with considerable justification, that the opposite in fact is the case. They contend that because they profit only by carefully assessing the merits of claims and the likelihood of settlement or judgment, and will not fund weak cases, the industry in facts serves as a bulwark against frivolous lawsuits. …

Bar associations and courts largely have rejected arguments that litigation funding on its face violates rules of professional responsibility. … [A]lienation of control in litigation is not a concept foreign to U.S. litigation practice. Insurers often require control pursuant to subrogation rights and the relevant case law over time has recognized their right to do so. Similarly, the laws of subrogation, champerty and maintenance and assignment all have evolved to reflect the need for greater access to justice …

Litigation funding is becoming increasingly attractive to a broad array of parties. Given the increased costs of litigation, and the attendant rise in third-party funding in complex, commercial lawsuits by large institutional investors, lawyers now must familiarize themselves with the availability of this source of capital … Standing Canute-like on the shores seeking to resist this tide of capital is unlikely to yield any result. … [S]eemingly fundamental arguments over control, privilege and frivolous claims are likely to give way to a recognition that the availability of capital in the end levels the playing field in a way that the law recognizes as socially responsible.

New York Law Journal, June 1, 2015

Litigation Finance Is Praised in Industry and Academic Commentary

There is clear support for litigation finance in the legal and business communities as well as in the legislatures and courts.

The public comments of legal and business leaders provide ample testimony to the market need for litigation finance. Burford’s web site also includes a bibliography of legal scholarship on litigation finance. General counsel of Fortune 100 companies, leaders of AmLaw 100 law firms and elite boutiques, and eminent legal scholars are all on record regarding the utility and necessity of specialty litigation finance.

In the U.K., litigation finance is not merely widely accepted but a mainstay of the justice system. Indeed, no less than the President of the Supreme Court of the United Kingdom has remarked at length on the value of litigation finance. Lord Neuberger roundly criticized the outmoded legal doctrines commonly raised as bogeymen in opposition to litigation finance. Discussing the state of the law as described by Jeremy Bentham in the 1800s, Lord Neuberger said:

For him, as long as litigation, access to the courts, remains expensive, then anyone who has a right that stands in need of vindication should be able to obtain funding from anyone willing to offer it and on whatever terms it is offered. The public policy rationale is simple in his opinion: access to the courts is a right, and the State should not stand in the way of individuals availing themselves of that right.[2]

By the 1900s, Lord Neuberger points out, England had concluded that maintenance and champerty were “dead letters that were no more than useless ‘lumber’.”[3] And today:

The public policy rationale regarding maintenance and champerty has turned full circle. Originally their prohibition was justifiable as a means to help secure the development of an inclusive, pluralist society governed by the rule of law. Now … the exact reverse of the prohibition is justified for the same reason. The argument … appears positively to support the development of litigation funding.[4]

In addition to Lord Neuberger’s comments on litigation finance, Lord Justice Jackson, one of the most preeminent jurists on the Court of Appeal of England and Wales, was directed in 2009 to review the rules governing the costs of civil litigation in the U.K. Lord Justice Jackson surveyed the largest funders in the U.K. and concluded that “Litigation funding is beneficial, promotes access to justice, and should be supported.” Lord Justice Jackson’s report was the basis for a series of reforms to the costs system of the English courts; litigation funding remains an integral part of the English system.

Although there have certainly been critics of litigation funding, it is important to assess fairly the nature of the negative commentary and to identify its source and motivation. For example, of the 1,140 articles resulting in a Factiva search on litigation funding between 2009 and 2015, less than a quarter of the articles contained any negative comments. Drilling down into the negative commentary provides insight into the nature of the critique. Only half of the articles cited a source for the negative comments, but 9 out of 10 times, that source was the U.S. Chamber of Commerce, the Chamber’s Institute for Legal Reform, or lawyers who have testified for or consulted with the Chamber. It is well known that the Chamber of Commerce is not simply critical of litigation funding – it is critical of litigation in all forms. Of course the Chamber is entitled to that view, but its opposition to litigation funding must be understood as part of an overarching effort to limit use of the judicial process, regardless of merits or financing mechanism.

Moreover, the Chamber’s position on this issue stands in stark contrast to the fact that its members are the users of litigation finance. This is not the first time that the Chamber has taken a public policy position that calls into question the Chamber’s ability to speak for its members and the legitimacy of that position. For example, in a recent brief to the U.S. Supreme Court, numerous local Chambers of Commerce affiliates made it clear that the national Chamber “does not speak for these Affiliates and their members.”[5] The local Chambers describe at length how the national Chamber, in its rush to oppose all plaintiffs’-side litigation, is ignoring the interest of its own members, and especially smaller businesses. They go on to bemoan the fact that the national Chamber “did not seek input nor approval from its Affiliates and those Affiliates’ local members for the filing of an amicus brief.” The reason for this is clear to the local Chambers – only 1,500 entities out of the U.S. Chamber’s stated membership of three million businesses provided 94 percent of its contributions in 2012, and more than half of its contributions came from just 64 donors. In the opinion of the local Chambers, the national Chamber focuses on the interests of this small set of donors to the exclusion of the interests of its purported constituency. This pattern of behavior is evident as well in the Chamber’s vehement opposition to litigation funding, despite the fact that many of its members have benefited from its availability.

Litigation Finance Fulfills a Significant Business Need

Litigation finance as it has evolved in the United States in the last decade reflects a market-based solution to a clear business need – one faced by companies engaged in litigation domestically and around the world.

Put simply, litigation is a necessary and inevitable reality of doing business – and yet it’s never been more expensive. The costs of pursuing as well as defending claims can be extraordinary, functioning as a barrier to justice and an economic burden for companies of all sizes. As a result, business leaders have faced a difficult choice: diverting cash from business growth and hiring, or forgoing the legal counsel they need.

Litigation finance provides a solution to this dilemma. Outside financing enables a business with its major asset tied up in litigation—for instance, a pharmaceutical start-up with a breakthrough drug subject to a legal dispute—to pursue its claim. Outside financing helps a growing company preserve cash for investing in the business without ceasing its pursuit of a valuable but prolonged litigation matter. It also enables large businesses to make their own strategic and budgetary choices about where to spend their own cash, and when to seek outside finance – just as they do with any other kind of asset, from tractors to airplanes to office buildings.

In theory, the needs of such clients could be served by providers other than litigation financiers, most obviously law firms willing to operate on a contingency-fee basis. In practice, however, the firms that are often best situated to bring complex commercial claims and most desired by clients are often not comfortable—given their compensation models and institutional reluctance—to undertake substantial and lengthy litigation without a known return.

Banks, insurance companies and investment funds could also fill the market demand, though historically, most have been unwilling to provide funding for litigation on the same scale as specialty providers like Burford, because of the protracted timelines, and the significant legal knowledge required to underwrite the risks associated with any particular case. Many of the companies that come to Burford for financing already have taken financing from their regular regional or national bank, and have included their litigation assets in the security packages provided to the banks. Those companies come to Burford because it is able to give them more credit for a meritorious litigation claim than a bank would. By including Burford among their finance providers, companies can put together an overall financing package that better meets their business needs.

In a sense, litigation financing transactions are entirely unremarkable, sharing much in common with the financing that businesses obtain every day by collateralizing their real estate, equipment or inventory. In contrast to those assets, however, litigation claims have not routinely been viewed as a potential source of financing. Arguably, however, all litigation requires some form of financing. Although Burford and others are among the first to dedicate themselves solely to the business, they merely represent an alternative to other methods of financing litigation—borrowing from a bank, raising financing from investors or self-financing—that are not only well-accepted, but necessary. Litigation funding facilitates what is from the client’s perspective a synthetic contingency fee, a well-established practice in the U.S.

Although Burford is contractually and ethically required to maintain the confidentiality of its funding relationships, Burford is able to report that it has worked with or received funding inquiries from many of the most highly-regarded law firms in the U.S., including 75% of the AmLaw 100, as well as legal and business executives at companies representing a range of sectors and sizes, from family-run businesses and start-ups to the Fortune 500.

The growth of the litigation finance field and of financiers such as Burford demonstrates that there is a clear need in the market. Research conducted by Burford and others reinforces this: for example, in Burford’s most recent report on litigation finance, 72% of private practice lawyers, 69% of general counsel and 78% of financial executives affirmed that “litigation finance is a valuable tool.”[6]

Litigation Finance Has a Positive Impact on Businesses, Law Firms and the Judicial System

Litigation finance often serves to connect claimants with good cases to lawyers at great law firms in an arrangement that wouldn’t otherwise be economically feasible for either party. Simply put, litigation finance enables corporate legal departments to avoid having to choose between pursuing strong claims and other corporate priorities, such as hiring, purchasing equipment, or otherwise investing in the business. Litigation finance allows law firms much greater flexibility to serve the growing number of clients that require alternative fee arrangements.

It offers substantial additional benefits, too, not just to clients and their counsel, but to the justice system as a whole. Open access to the civil justice system—not just in theory, but in practice as well—is a fundamental characteristic of any meaningful legal system. While all would agree with this statement, they would likely also agree that the onerous costs associated with modern legal practice, particularly in complex commercial matters, places the courts out of reach for many.

An imbalance in litigation resources can have a significant effect on litigation outcomes, despite the fact that the economic position of the parties generally has no relation to the merits of the case. Rare is the litigator who has not observed, for instance, aggressive motion work from a resource-rich party designed to sap the budget of its adversary and pressure it into settlement. This negative phenomenon, once the subject of academic study by Burford Chief Investment Officer Jonathan Molot,[7] is corrected through litigation finance. It gives the party that uses litigation finance the necessary resources to conduct the litigation and allows the case to be decided, as it should be, on the merits alone.

By making it economically feasible to bring meritorious claims, litigation finance allows parties to overcome the prohibitive expense, prolonged duration, and other disincentives associated with modern litigation, with greater efficiency than any court reform.

Importantly, in easing the path to the courthouse, litigation finance also selects out meritless cases. While some wrongly suggest that the availability of financing indiscriminately promotes litigation, the truth, as noted above, is that business necessity requires litigation finance providers to be highly selective in their investments, and to back primarily winning cases. Litigation finance providers, therefore, provide a vetting function that is valuable to overburdened courts.

Burford Follows the Rules

Burford always complies with the rules applicable to its activities in each jurisdiction in which it operates.

In some jurisdictions, those rules relate to the financial side of Burford’s business. In the U.K., Burford is today regulated by the U.K.’s Financial Conduct Authority as well as being subject to the overall regulation that comes from being publicly traded on the London Stock Exchange. Burford has in the past also been regulated by the U.S. Securities and Exchange Commission and the Guernsey Financial Services Commission.

Other jurisdictions have also either promulgated specific rules or worked with litigation financiers to agree on self-regulation. In the U.K., for example, the Ministry of Justice’s Civil Justice Council oversees an industry body, the Association of Litigation Funders, which promulgates capital adequacy and other standards that meet with the approval of the U.K. government. And in international arbitration, the International Bar Association recently promulgated new disclosure guidelines for use in arbitration proceedings, which seek disclosure of anyone with a “direct economic interest” in the outcome of an arbitral claim – including litigation financiers, insurers, shareholders and others.

In the U.S., the regulatory issues are well settled and clearly defined. Commercial finance when practiced by non-bank entities is largely unregulated in the U.S. – whether the asset being financed is a truck, a receivable or a litigation claim. States are obviously free to regulate commercial finance within certain bounds, but have generally refrained from doing so, for sound policy reasons. And as to disclosure of interests in litigation claims, the courts have decided which financial interests are to be disclosed, and which need not be. Within the Federal system, the rules at every level of adjudication require the identification of a party’s parent corporations and any public shareholder owning more than 10% of the party’s stock.[8] Providers of financing to a party or case—whether those providers are banks, insurers or “litigation funders”—are not required to be disclosed. The comments to the Federal Rules of Civil Procedure perfectly encapsulate the balancing test that the Judicial Conference took when adopting the rule:

Although the disclosures required by Rule 7.1(a) may seem limited, they are calculated to reach a majority of the circumstances that are likely to call for disqualification on the basis of financial information that a judge may not know or recollect. Framing a rule that calls for more detailed disclosure will be difficult. Unnecessary disclosure requirements place a burden on the parties and on courts. Unnecessary disclosure of volumes of information may create a risk that a judge will overlook the one bit of information that might require disqualification, and also may create a risk that unnecessary disqualifications will be made rather than attempt to unravel a potentially difficult question. It has not been feasible to dictate more detailed disclosure requirements in Rule 7.1(a).

Fed. R. Civ. P. 7.1 (2002 Committee Notes)

Fundamentally, Burford believes in fair play and a level playing field. It’s not appropriate to single out litigation financiers like Burford for some sort of special regulation or rule-making. Rather, rules applicable to our civil justice system must apply even-handedly. For example, if our participation in a matter is to be disclosed, we believe that all economic interests should be disclosed (just as the IBA guidelines require), and that all of those interests should have the same protection from the kind of tactical mischief lawyers sometimes like to play. Today, for example, insurance companies often benefit from greater protections against intrusive discovery requests than do litigation financiers in similar circumstances. There is no basis for narrow discriminatory treatment against specialty litigation finance firms while leaving litigation finance as practiced by others untouched.

Detailed Responses to the Points Raised in the August 27 Letter

Your August 27 letter sought information about how Burford’s provision of litigation finance works in practice.

Burford is a publicly traded company. As a result, a substantial amount of information about our business is already publicly available, and we have attached our most recent annual report, including its comprehensive discussions of our business, which addresses many of the inquiries in your letter and provides detailed financial information about our investments. For example, our financial statements and accompanying commentary set out clearly information about our investment returns and performance. In addition to our extensive public disclosure, our web site also contains a substantial amount of information about litigation finance and Burford’s activities.

Litigation is inherently a sensitive matter for its participants. The privileges and confidentiality associated with litigation belongs to the client, not to Burford, and we are not free to disclose clients’ information or to waive any privileges. Moreover, some of your questions call for non-public information beyond that which we provide in our public disclosures. However, in addition to the information contained above and the substantial public disclosure we provide in connection with this letter, we can add the following in response to your specific questions.

Question 1: From 2009 through the end of 2014, we have entered into 83 investments, the majority of which relate to litigations or arbitrations in the United States. Our obligations to maintain confidentiality and to respect privileges prevent us from identifying the specific matters in which we have invested, and we similarly do not publicly disclose the geographic breakdown of our portfolio.

Question 2: In the U.S., which is our largest market and the home to the majority of our staff, Burford has been approached to provide litigation finance from a broad spectrum of companies and law firms, from the world’s largest to American entrepreneurs who are struggling to obtain access to justice for their businesses. However, given that Burford’s average investment is around $8 million, Burford’s business inevitably skews towards larger and more complex (and thus more expensive) litigation, and that work tends to be done by the larger law firms and comparable specialized boutiques. Our obligations to maintain confidentiality and to respect privileges prevent us from identifying the specific lawyers or law firms with whom we have entered into financing agreements.

Question 3: Burford’s business is focused on large dollar commercial litigation. Thus, the matters we finance are characteristic of the disputes commenced by businesses engaged in complex litigation. Most matters have a variety of claims, but certainly contract and business relationship claims are a meaningful part of our business. We discuss the question of payments below in response to question 5. Our obligations to maintain confidentiality and to respect privileges prevent us from disclosing the details of each dispute we have financed, and we have not provided such detailed information in our public disclosures.

Question 4: From 2009 through the end of 2014, Burford has committed a cumulative total of $510 million, the majority of which relates to U.S. litigation or arbitration. We have not provided in our public disclosures a stratification of funding for U.S. vs. non-U.S. matters.

Question 5: We publish annually a report on the investment performance of each concluded matter in which we have invested. The most recent such tabular report is contained on page 10 of our 2014 annual report (attached). As of December 31, 2014, the net return on invested capital for the 32 investments that concluded to date was 60%, which is a level of return considering the duration of the investments that falls well within the normal range of returns in the private equity/venture capital industry.

Question 6: Burford does not enter into referral agreements. We do not compensate lawyers for referring matters to us (although naturally we do finance their fees and expenses when we ultimately agree to finance a matter), nor do lawyers compensate us for referring matters to them. In those cases where clients approach us without having secured counsel, we are happy to provide recommendations based on our experience with the many top-notch law firms with whom we have worked. We are not, however, paid anything for those recommendations (which the client is free to disregard), and most matters come to us with counsel already engaged.

Question 7: Burford has not ever had an arbitration or litigation matter with a client in our history.

Question 8: Burford’s returns vary from investment to investment, depending on the needs of the counterparty and law firm litigating the case, and on the risk profile and likely duration of the dispute. In the typical form of agreement, upon a successful outcome in the underlying litigation, Burford receives its investment back plus a preferred return on the invested amount, plus a percentage of the net recovery. It is also important to bear in mind our previous description of our business, only a minority of which today now is comprised of single case financing. There are also wide variations in the structures and economic terms of our arrangements depending on the economic goals and desires of our clients, who typically negotiate our arrangements intensively. Our obligations to maintain confidentiality and to respect privileges prevent us from disclosing any of our funding agreements.

Question 9: Our financing agreements do typically include standard commercial arbitration clauses that are negotiated with our counterparties. Just as our clients insist on preserving the confidentiality and privilege associated with their litigation-related affairs, they generally prefer confidential arbitration to address the unlikely possibility of any dispute with us. Our U.S. financing agreements do not constrain or interfere with a claimant’s ability to settle the underlying litigation claim at any time and for any amount.

Question 10: Our business has not historically included the financing of plaintiffs in class action litigation. We have been asked to finance a complex derivative action in the Delaware Chancery Court, and in that instance we sought the court’s approval for our financing arrangement, although the case ultimately went in a different direction. Were we to be asked to finance plaintiffs in a class action, we would need to consider whether court approval of such an arrangement would need to be sought.

Question 11: As noted previously, we comply with all applicable rules in any jurisdiction in which we finance a matter and address them on a case-by-case basis.

Question 12: Burford’s mandate is broad – Burford is a leading global finance and professional services firm focused on law. Burford’s businesses include litigation finance, insurance and risk transfer, law firm lending, corporate intelligence and judgment enforcement, advisory and professional services and a wide range of investment activities. For example, Burford owns and operates a commercial litigation expenses insurance provider. The kind of single case litigation funding that is the focus of your letter represents a minority of Burford’s business.

We hope this overview of our business and the industry within which we operate has been helpful and responsive to your inquiries, and we would be delighted to discuss any of this further with you and your staff. We have also attached a variety of information that you may find helpful as further reading.

Very truly yours,

Peter Middleton GCB
Christopher Bogart
Chief Executive Officer
Jonathan Molot
Chief Investment Officer



  • Burford Annual Report 2014
  • Burford Interim Report 2015
  • Burford’s Third Annual Litigation Finance Survey
  • Jonathan T. Molot, A Market in Litigation Risk, 76 U. Chi. L. Rev. 367 (2009)
  • Jonathan T. Molot, Litigation Finance: A Market Solution to a Procedural Problem, 99 Geo. L. J. 65 (2010)
  • Jonathan T. Molot, The Feasibility of Litigation Markets, 89 Ind. L. J. 171 (2014)
  • The Burford Quarterly, Spring 2015
  • The Burford Quarterly, Autumn 2015
  • Burford, The New Economics of Litigation, Business Edition (2015)
  • Burford, The New Economics of Litigation, Law Firm Edition (2015)




[1] In its July 17, 2014 order in Abi Jaoudi and Azar Trading Corp. v. CIGNA Worldwide Ins. Co., (E.D. Pa.), the court found work product protection applies to internal communication regarding litigation funding (see Section I.B.). Vice Chancellor Parsons ruled in the February 24, 2015 opinion in Carlyle Investment Mgmt. v. Moonmouth Co., (Del. Ch.) that work product protection applies to documents and communications relating to third-party litigation funding (see esp. Section II.C.1.b, pp. 17-23). The Delaware Superior Court took up the matter again in its March 31, 2015 opinion in Charge Injection Technologies, Inc. v. E.I DuPont de Nemours & Co. (Del. Super. Ct.), finding that work product protection applies to payment terms in litigation funding agreements. Numerous other courts that have taken up the issue agree. See Walker Digital, LLC v. Google, Inc., No. 11-309-SLR (D. Del. Feb. 12, 2013)); Doe v. Soc’y of Missionaries of Sacred Heart, 2014 WL 1715376 (N.D. III. May 1, 2014); Devon IT, Inc. v. IBM Corp., 2012 WL 4748160 (E.D. Pa. Sept. 27, 2012); Mondis Tech., Ltd. V. LG Elecs., Inc., 2011 WL 1714304 (E.D. Tex. May 4, 2011).

The Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, in its October 2014 meeting, reviewed a rule proposed by the U.S. Chamber Institute for Legal Reform that would have required disclosure of litigation funding agreements in all litigation. From its report: “The Committee agreed that the questions raised by third-party financing are important. But they have not been fully identified, and may change as practices develop further. In addition, the Committee agreed that judges currently have the power to obtain information about third-party funding when it is relevant in a particular case. An attempt to craft rules now would be premature. These questions will not be pursued now.”

[2] Lord Neuberger, President of the Supreme Court of the United Kingdom, From Barretry, Maintenance and Champerty to Litigation Funding, Speech at Gray’s Inn (May 8, 2013), http://www.supremecourt.uk/docs/speech-130508.pdf.

[3] In feudal days, there was the risk that the powerful could abuse the litigation process to steal land from those less powerful by manufacturing lawsuits in which they otherwise had no interest. Today, in contrast, litigation finance is used by resource-constrained companies to level the playing field against more powerful opponents.

[4] Id.

[5] Brief for Mobile Area Chamber of Commerce et al. as Amici Curiae Supporting Respondents, BP Expl. & Prod. Inc. v. Lake Eugenie Land & Dev., Inc., 135 S. Ct. 754 (2014) (No. 14-123).

[6] Third Annual Litigation Finance Survey (2014).

[7] Jonathan T. Molot, Litigation Finance: A Market Solution to a Procedural Problem, 99 Geo. L. J. 65 (2010).

[8] See Sup. Ct. R. 29.6; Fed. R. App. P. 26.1; Fed. R. Civ. P. 7.1.

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