How US corporate claimants can maximize recoveries by opting out of class actions


For a corporate litigant, pursuing a claim as an individual plaintiff could mean getting back three to ten times more than it would by remaining a regular class member. Legal finance providers like Burford help CFOs and GCs understand and value their opt-outs so they can make thoughtful decisions about their litigation and uphold their fiduciary duty.


In the US, the existence of a putative class action presents harmed class members with two options: Remain a member of the class or opt out and bring action as an individual plaintiff. “Opting out” refers to the decision not to participate in a class action and thus secures the right to bring the action as an individual plaintiff. When the legal action being considered has merit and a company has been harmed, the company has a right and possibly an obligation to shareholders to be made whole. For a corporate litigant, pursuing the claim as an individual plaintiff could mean getting back substantially more than the company would otherwise be entitled to as a class member.

As with any litigation decision, companies must analyze the costs and benefits of opting out. Among the inherent risks to consider when opting out are the loss of collective bargaining power, the distraction litigation can pose to the core business and the financial burden of retaining counsel and engaging in individual discovery. Many companies also wish to avoid being seen as litigious, especially against business partners.

These factors notwithstanding, companies are increasingly choosing to opt out of classes and file direct actions. In recent years, we have witnessed a wave of major companies with no historical practice of opting out deciding it was in the company’s best interest to proceed directly. Recent examples of corporate plaintiffs opting out include cases in the pharmaceutical and food industries relating to price fixing by suppliers and claims held by large volume investors in securities class actions.

The reasons that companies are opting out and pursuing individual claims vary. For many corporations, the prevalence of egregious conduct—spotlighted by high-profile criminal investigations and indictments—has grown alarming enough to override hesitation to litigate against business partners. Outside counsel are increasingly making their clients aware of the significant value of individual opt-out claims. And more and more companies and law firms understand that legal finance offers a risk-sharing solution that fundamentally changes the cost-benefit analysis to tip the scale toward opting out. Together, these factors persuade many in-house counsel and CFOs that their litigation claims are valuable assets that merit individual action.

GCs and CFOs increasingly favor opting out

Risks and concerns that have traditionally deterred companies from opting out are becoming less persuasive as GCs and CFOs better understand the value of their affirmative legal claims, their limited options as class members and the legal finance solutions available to them. A driving force behind the historical reluctance of corporations to pursue affirmative litigation has been that companies dislike being on the receiving end of litigation as defendants and therefore want to avoid appearing litigious by pursuing their own claims. But the table stakes of today’s affirmative litigation have changed: The Department of Justice, Federal Trade Commission, and other state and federal regulatory agencies are often actively prosecuting the same conduct that forms the basis for a company’s civil claims. Whistleblowers and participants in various criminal leniency programs often admit to improper conduct. In these circumstances, concerns about pursuing claims against business partners are mitigated by the egregiousness of the conduct at issue. 

For a company weighing these factors, the increasing prevalence of opt-outs among peer companies can make opting out a competitive and fiduciary imperative. Unlike class participation, individual opt-out claims can more directly advance business interests by allowing the corporate plaintiff to pursue a tailored litigation strategy and resolve claims in a manner that best suits the business. In many instances, this means recovering significantly greater value for the company and its shareholders than the company would have obtained as a class member. It may also mean negotiating business concessions, discounts and injunctive relief that are generally not part of a class settlement. Increasingly, savvy corporate legal departments—as fiduciaries of the corporation and its shareholders—recognize that opting out gives them the flexibility to maximize both the monetary and strategic value of the company’s legal assets.

The role of legal finance in maximizing claim value and de-risking individual claims

In the past, the costs and risks of pursuing claims that might lose presented perhaps the greatest deterrent to opting out of a class action. Additionally, as a member of a class, companies benefit from the collective bargaining power of a group. For some, this passive role is attractive because it requires no investment or input on litigation strategy. That group safety net is removed for the individual plaintiff.

However, corporations are now increasingly aware that legal finance can eliminate the litigation expense and mitigate the risks of opting out, eliminating this financial deterrent to pursuing individual claims and providing them with significantly more certainty around their recoveries.

Companies that decide to use legal finance in an opt-out claim have two main legal finance products available to them: Fees and expenses financing and monetization. Using legal finance capital to cover the ongoing legal fees and expenses associated with the pursuit of the claim removes the costs of the litigation, helps legal departments manage their budgets and allows companies to pursue valuable claims without downside financial risk. For group actions like antitrust matters, which are complex and require numerous expensive experts, removing the costs of pursuing the claim adds up to a significant benefit to legal department budgets.

Alternately, a legal finance provider can advance capital tied to a pending opt-out matter, thereby helping a company “monetize” the value of the claim now. Monetization accelerates payment, generates working capital and locks in a minimum recovery amount for an opt-out claim, thus reducing risk. Additionally, monetizing an opt-out can bring immediate benefit to shareholders by putting a portion of the anticipated proceeds to work in the business, often years ahead of the matter’s resolution.

Legal finance capital is not a loan but rather is provided on a non-recourse basis, which means the company only repays the legal finance provider once the claim has succeeded and been paid. In addition to providing companies more control over the timing and certainty of cash flows from opt-outs, legal finance capital removes or reduces downside risk: Should the opt-out fail, or an award take longer to recover or the recovery itself be far less than expected, the company keeps the capital advanced and owes nothing.

The added value of legal finance expertise

Beyond the injection of non-recourse capital into a company’s litigation budget, Burford adds value to companies and law firms considering the risk-benefit analysis of opting out through many dozens of experienced commercial litigation experts, many with in-house legal experience, who have reviewed billions of dollars’ worth of commercial litigation in their careers. As an example of this value-add, a legal finance provider can inform companies that are not in the habit of being plaintiffs and that may be unaware that they are even part of a class of an opportunity to pursue greater recoveries through an opt-out.

Burford routinely helps companies identify valuable meritorious claims to which a company is a party and helps GCs to prioritize and overcome hurdles to pursue these claims as opt-outs. This constitutes a win for both the legal department and the business side of a company, as companies increasingly recognize their pending affirmative claims have substantial latent value. Indeed, according to the 2021 Legal Asset Report, 59% of senior financial officers believe legal claims are assets because they represent future cash flow. In this regard, an opt-out claim is a valuable corporate asset.

Case study: Opting out of an antitrust group litigation

The recent example below provides an overview of how a large and sophisticated corporate worked with Burford to enhance company liquidity by monetizing an opt-out claim.

A household name Fortune 100 company had a large meritorious opt-out antitrust claim against producers for anticompetitive collusion. Simultaneously, the company was looking to cut costs due to revenue generation pressures following a brief decline in profits. 

Without ceding control of the matter, the client was able to monetize a meaningful portion of the expected proceeds from its opt-out claim. Burford provided $75 million in capital upfront for a portion of the opt-out claim, allowing the client to pursue the meritorious litigation without incurring additional downside risk.

As a result, the company was able to realize the value locked away in the contingent legal assets significantly in advance of a litigation resolution and was able to use the immediate cash injection for other strategic business purposes, as needed.

Unlock the full value of legal claims 

When considering opting out of a class, GCs and CFOs must weigh both risk and reward. Legal finance has upended that analysis by shifting the liability from the company to the legal finance provider. In turn, legal finance providers can help companies understand and value opt-outs so they can make thoughtful decisions about pursuing individual claims while upholding their fiduciary duty to stakeholders.


Kelly Daley is a Managing Director and the head of Burford's Chicago office where she leads the US commercial underwriting group in assessing and structuring investments in high-value commercial litigation. 

Alyx Pattison is a Senior Vice President with responsibility for originating new business with law firms and companies in the US. She has an extensive background in both law and politics, including more than a decade as a litigator at AmLaw 100 law firms.