Financing litigation defense: How it works

When learning about legal finance, in-house lawyers always ask one question: “Can we finance our defense matters?” And that line of inquiry makes sense—after all, while many companies rarely (if ever) bring lawsuits, it’s the rare company that’s never a defendant in litigation (often more regularly than it would like). The good news is that—while the majority of legal financing is for the pursuit of claims—yes, legal finance also works for the defense of weak matters.

Below, we describe three typical defense financing models and how they benefit in-house legal departments.

 

1

Portfolio
of mixed cases

How it works

A portion of client fees and expenses for multiple plaintiff and defense matters is financed by a single set of deal terms. Burford provides the capital on a non-recourse basis, meaning it assumes all downside risk and earns its return only in the event of the plaintiff matters prevailing.

Benefits

Turns legal department into a profit center by generating revenue through recoveries and offloading cost and risk of defense.

Matters

Pool of plaintiff and defense matters

Client cost

$0

Burford pays

Significant portion of legal fees and expenses, and assumes all downside risk

Client gains

All recoveries from successful claims net of Burford return

 

2

Single defense matter—
With counterclaim

How it works

Burford pays a portion of client fees and expenses for defending against a weak claim and for pursuing a counterclaim. Burford covers costs on a non-recourse basis, meaning that if the counterclaim fails, Burford is not entitled to any repayment of its investment.

Benefits

Neutralizes risk of cost exposure, with potential to generate revenue through recovery.

Matters

Weak defense matter balanced by counterclaim

Client cost

$0

Burford pays

Significant portion of legal fees and expenses, and assumes all downside risk

Client gains

All recoveries from successful claims net of Burford return

 

3

Single defense matter—
No counterclaim

How it works

Burford advances a portion of costs to defend against a weak claim, earning its investment back and a return based on a predetermined success measure, such as client savings or prevailing on a dispositive motion. Capital deployed on a non-recourse basis, meaning that the client is not obligated to repay any of Burford’s investment should the “success event” fail to materialize.

Benefits

Creates predictability of cost and minimizes downside risk of loss to the company.

Matters

Weak defense matter

Client cost

$0

Burford pays

Significant portion of legal fees and expenses, and assumes all downside risk

Client gains

Risk mitigation, budget savings, and tool to protect the company’s wealth

 


Additional reading

Disclaimer

This section of Burford’s website is intended for the use of Burford’s public investors and is required to be provided under AIM Rule 26. Burford also maintains a separate private funds business. Information presented here is not intended for the use of private fund investors, nor is it presented in the appropriate form for such investors. Moreover, Burford does not present this information as a solicitation of private fund investment, which occurs only through appropriate offering documents.