Of the 55 lawyers on Burford’s global team as of publication, 18 are former in-house lawyers, including Burford’s CEO, Christopher Bogart, who co-founded Burford in 2009 inspired in no small part by his experience as the former General Counsel of Time Warner Inc.
In June of 2019, Burford Senior Managing Director and former in-house lawyer Aviva Will gathered members of the team who recently joined Burford from in-house legal teams for a roundtable discussion of lessons learned on both sides of the in-house/legal finance divide.
Craig Batchelor, Former Vice President, Barclays
Christopher Catalano, Former Assistant General Counsel, JPMorgan Chase
Michael Sternhell, Former Senior Vice President and Managing Counsel, OppenheimerFunds
Moderator: Aviva Will, Former Assistant General Counsel, Time Warner
I have theorized that one of the reasons so many in-house lawyers are still learning about legal finance is that their natural instinct is to think about their roles as defenders of the company, rather than as proactive litigants. At the same time, I have encountered an increasing number of in-house lawyers who are working with recovery targets and who therefore think quite differently about affirmative litigation and financing that litigation. What has your experience been in this regard?
Michael Sternhell: “Defend the company” is something you hear and say often as an in-house lawyer. But defending the company can often mean defending and enforcing the company’s rights, which may require the company to sue in certain cases. I don’t think it’s unreasonable for GCs to regard litigation as something that should generally be avoided because of the distraction it can cause for the organization. But when affirmative litigation is necessary, GCs should approach it as they would any other legal initiative by, among other things, financing the litigation in a way that best serves the strategic goals of the company. That can often mean working with a legal finance provider to better manage the risk and expense of litigation.
Craig Batchelor: Most in-house litigators think of themselves as defenders of the company. Many are reluctant to bring affirmative claims, because litigation is expensive, and they do not want to incur significant costs that might not be recovered. This is particularly true because many of their preferred law firms will not take these types of matters on contingency. Legal finance obviously changes that calculus because it is non-recourse financing. The company can retain upside in a litigation while reducing its downside exposure, all while using counsel that it knows and trusts.
Burford’s 2018 research identified in-house lawyers’ top two challenges as “managing legal risk and uncertainty” and “increased pressure on legal budgets, staffing and spending.” Is that consistent with your experience?
Craig Batchelor: In-house lawyers feel comfortable managing legal risk because they have been trained to do it. But many do not have the same level of experience or familiarity with managing legal budgets and staffs. Legal finance is an invaluable tool because it helps them manage the financial component of their jobs and frees them up to focus on legal issues.
Christopher Catalano: This is entirely consistent with my experience. The problem is that there’s a tension between managing risk and uncertainty and keeping budgets down. A bargain-basement firm may do a terrible job and cost you more money in the end than paying a higher-end firm—of course high-end firms try to take full advantage of this concern to justify their fees. Corporate clients, though, are becoming savvier consumers of legal services, and law firms have realized that they need to meet the needs of their clients within the constraints even of reduced legal budgets.
With the ongoing trend towards globalization, there has been a rise in the number of multi-jurisdictional cases being brought. What challenges do in-house lawyers face in this context?
Craig Batchelor: Multi-jurisdictional cases bring many challenges, but one trend that I have noticed in the last few years is the rise of class action type litigations outside of the US. Although US-based in-house lawyers traditionally have faced these kinds of litigations only in the US, that is quickly changing. I expect that we will see more and more class action type litigation being brought in multiple non-US jurisdictions.
Michael Sternhell: In the investment management industry, global asset managers overseeing funds that invest in foreign markets often find themselves in possession of legal claims they can only pursue in unfamiliar jurisdictions where law firm contingency fees may be unavailable or even prohibited. The organization may have established relationships with high quality US litigation counsel and the internal expertise necessary to evaluate claims and manage cases once they are filed—but that’s often not the case with claims that must be pursued internationally. That creates a natural role for legal finance. A litigation finance provider overseeing a global portfolio of claims can provide the capital necessary to finance a multi-national claim, leverage a global network of legal counsel capable of litigating the claim successfully and offer strategic advice as the case proceeds.
In-house lawyers are often eager to innovate and to be as commercially-minded as their peers in other corporate functions—and yet the law is of course notoriously bound by tradition, precedent and other barriers to change. From your perspective, what are the most important ways in which legal departments must innovate? How can their law firm and other partners support this innovation?
Christopher Catalano: The global financial crisis frightened the tradition right out of the profession. Firms laid off huge numbers of lawyers and were falling over themselves to appear to be cost conscious to their clients by agreeing to AFAs. For their part, corporate law departments started putting matters out to bid, automated and offshored document review, and generally increased financial discipline. Legal departments with some affirmative claims can, of course, use litigation finance to turn themselves into profit rather than cost centers, but that depends on their willingness to see affirmative claims as assets whose value they should try to maximize. In a way this shouldn’t be a big leap, since they see defensive claims as liabilities.
Craig Batchelor: It is true that in-house legal departments are focused on innovation, and most of that focus is on finding ways to reduce outside counsel costs, as many law firms can attest. This is why legal finance is a win-win for in-house legal departments and law firms. In-house counsel can reduce their costs and pursue affirmative claims that they might otherwise neglect. And law firms that are familiar with litigation finance can offer it as an innovative solution to their clients’ problems and benefit from the additional work. Given this dynamic, I expect that we will see more and more in-house legal departments using legal finance in creative ways
Michael Sternhell: There has certainly been enormous innovation in recent years by in-house lawyers. But perhaps not surprisingly, we tend to mostly hear about innovation by the largest corporate legal departments situated in the largest corporations. It may seem that the bargaining power that comes from a sizable outside counsel budget can create the luxury to be innovative in ways that smaller corporate legal departments cannot be. One of the more appealing features of legal finance from the perspective of an in-house lawyer is that it can be used just as effectively by smaller organizations as by larger ones.
Read more of “Former in-house lawyers weigh in on legal finance”:
Part I • Part II
To read the article in full, download the Summer 2019 Burford Quarterly.