At Burford, we routinely hear from Global 100 law firms that wish to expand or establish contingency fee practices. Philip Iovieno, a high-profile commercial litigator with experience on both sides of the “v” who is currently Co-Chair of Cadwalader’s antitrust litigation group, spoke with Burford Chief Marketing Officer Liz Bigham about best practices in building contingency fee practices. Hear their conversation in the four videos to the right or read the edited transcript below.
Liz Bigham: Conventional wisdom holds that many law firms, even those that have been historically committed to billing by the hour, are increasingly looking at ways to share risk with their clients. And indeed, recent research commissioned by Burford showed that 62% of in-house lawyers want their firms to offer more risk sharing solutions. Can you speak to the various factors motivating firms to move in the direction of more risk sharing and more contingency work?
Philip Iovieno: I see a lot of movement towards this area. In my opinion, there's basically two reasons driving firms to either do this more or at least seriously consider doing this more. One is client driven, and the other is from a perspective of basic law firm economics.
The client-driven piece is really significant. …I would say 75-80% of the litigation I do is in the antitrust realm. The first opt-out case that I worked on was in 2007 involving LCD and if you looked at the companies that opted out of the class in 2007, it was a small group. Over the last 15 years and especially over the last 10 years, you've seen an acceleration of this trend, not just in opting out, but more generally companies being much more comfortable being on the plaintiff's side of the “v” if they feel like their company has been harmed by some sort of conduct, whether it be antitrust conduct or other conduct.
Right now, one of the most active cases in the antitrust realm [is] a group of three separate price fixing cases [relating to] chicken, pork and beef. When law firms look at their client base, they're seeing more and more large companies, that may be their clients on the defense side, opting out. For instance, in the proteins cases, my clients include McDonald's, Costco, Target, Kraft Heinz, Wendy's, BJ's, Aramark, Papa John's and many others. Even some more regional companies like Gordon's and Restaurant Depot, who are maybe not as large as the first group and then smaller companies too. You are really seeing up and down the chain, companies filing these cases typically on a purely contingent basis, but sometimes there's different alternative fee arrangements.
So, one reason law firms are taking on more contingent work is responding to their clients' desires, like my firm Cadwalader. The other is just basic law firm economics. We all know that on the defense side, the purely billable cases, particularly the really large cases, the bet-the-company cases—cases that I would refer to as, in many respects, cost insensitive because they're so important—those cases are really competitive and getting those assignments has become much more competitive as the years have gone on. You also see companies using more budget discipline in their retention of counsel in those cases. So having a litigation department practice that's focused solely on just billable cases and particularly trying to identify and get a lot of those bet-the-company type cases, while everyone would like to and should try to do that, it's very competitive. So, a way to make your litigation department more balanced is to be flexible and able to represent your clients on both sides of the “v”.
The last thing I'll say from a lawyer perspective, is that the best litigation departments have deep experience on both sides of the “v”. If you're on the defense side representing a company, but you previously worked on the plaintiff side, you have an advantage and vice versa. So, with all those reasons together, it’s a very logical thing for companies to consider.
LB: Phil, you've had a very successful career as a litigator at firms with different types of risk sharing models, as well as representing clients on both sides of the “v”. What advice do you have for lawyers at firms that are making the transition to more contingent fee work?
PI: The two key points is if you're a lawyer and you're looking to diversify your practice and incorporate more plaintiff side, alternative fee or contingent fee work, you should do it very intentionally, not in a one-off capacity, and also recognize that it's a different set of skills and approach that will lead to success.
When I got out of law school, from 1992 through 2007, 90% of my practice was on the defense side, on the billable hour side. I was working at Boies Schiller as a partner at the time. I was there from 2000 to 2020 and I made a very intentional decision in 2007 to incorporate plaintiff side work into my practice. The first case I worked on was an opt-out case involving price fixing of LCDs and since then that part of my practice has grown and plaintiff's antitrust work is really the largest part of my practice now.
I would tell lawyers who are looking to do this to think about it in that way and to do it very intentionally. It's more of a medium to long-term strategy because you have to really shift your focus and your skills if you've been on the defense side for a long time... While it might seem super obvious, some of the skills I would highlight for folks to consider is if you're litigating a case, you're going to have a huge advantage if you can actually try cases. If you have deep experience trying cases, it's going to be an enormous advantage on either side of the “v”. On the plaintiff side, it might be a little bit more important because the whole goal of an alternative fee practice or contingent fee practice is to generate premiums. And the only way you're going to do that is through successful trials or positioning the case so well for trial and being such a legitimate trial threat that you're going to get an excellent settlement. So, I would say, really focus on your trial skills.
The second thing for lawyers looking to do this, is to really recognize that on the plaintiff side of the “v”, there’s a big premium to being entrepreneurial. You need a mix of skills, both lawyer and entrepreneurial, when you're looking at cases. The whole goal here is to generate premiums, and there's particular types of things in cases that would make them more susceptible to generating a premium versus not. Lawyers tend to be very good at analyzing cases based on the law. You need to develop that entrepreneurial side and realize that the whole goal here is to generate premiums.
Then the third thing, which is probably the most important and the most difficult in the switch from the defense side to being on a plaintiff's side, is you have to be super-efficient. On the defense side, particularly these big bet-the-company cases, the skill of value is analyzing every issue in the most thorough, detailed way from every angle. A lot of times it's a spare-no-expense approach because the case is so important. On the plaintiff's side, you could certainly do that, and that's what lawyers are trained to do. The problem is if you do that on the plaintiff's side, you're going to run up your lodestar, your investment in the case, to such a high level that your ability to generate premiums is going to be significantly diminished. So, efficiency is a huge deal.
The way you have to look at it is again, marry it with the trial skills and if you do your thinking on the front-end of the case, and look at it from the perspective of trial, you're taking this case on an alternative fee basis and you really think carefully about what are the three to five things that if I can prove these things, I should win at trial? And what are the three to five things the defendants are going try to prove? If they prove those things, I'm going to have a really difficult time winning a trial. If you try to keep all your time focused on those things and try to avoid being pulled into fights over tangential issues, which of course the defendants are going to try to get you to do, you'll have a much better chance of keeping your investment down.
The reason it's so hard is it's uncomfortable to not oppose a motion, because at the end of the day, it's a motion that you feel is frivolous or wrong, but it's not going to really affect the ultimate result of the case. It can be uncomfortable. It's a skill that once developed, you have a much better chance of being successful, because you're going to be able to manage your investment in the cases.
LB: Shifting now to the firms themselves, what do you see as best practices for law firms that are setting up contingency fee committees and practices?
PI: At the end of the day, the formula is pretty simple. If you're going to put together this practice, you need two things: You need good case selection and you need efficient execution… The tricky part comes in executing both of those things.
Good case selection is critical. It's more art than science. When you're on this side of the “v”, you're looking at cases as a lawyer, but also as an entrepreneur. It could be a case that's really excellent on liability. From all the legal angles, the lawyer loves the case. However, there could be a whole variety of things that will make that case not as attractive, not as likely to lead to a premium.
I would say the LCD case is probably the best case I've ever seen as far as being on the plaintiff's side of the “v”. It really didn't take any creativity for a lawyer to raise their hand and say, “I want in on that case”. We could spend a whole interview talking about what it was about the LCD case that led to such good results for the folks who are on the plaintiff's side. LCD was probably a once in a generation case, although I hope not. So, what I would say is on case selection, if you're analyzing these cases waiting for another LCD, you're going to be waiting a really long time.
Most of the cases that you are going to see are going to have a mix of elements. They're going to have some things that are pro-plaintiff, they'll have some things that are pro-defendant, and you have to be able to use your judgment and your experience to look at these cases and say, which of these is a good case to put as part of a portfolio of alternative fee cases. And a lot of times, cases that are really solid on liability and elements that if you're analyzing the case in law school, everybody would love, are not the best cases for a contingency portfolio. Case selection is incredibly important.
Efficient execution is equally important. You could have the most perfectly put together portfolio with carefully selected cases that are all excellent, and that all lead to good, positive results. However, if you don't litigate them in an efficient way, your results are going to be subpar if your investment in the case is too much. Thus, you have to marry those two things in order to have success with a portfolio over time….
If you're a firm and you're going to put together a committee to analyze these cases, you have to try to identify folks that have those skills. A lot of times the best defense lawyers, because of the skills they have in picking apart cases and analyzing and litigating every issue, might not be the best folks to put on a contingency fee committee. Because again, a lot of these cases I look at, you could pick them apart and find some things that, from the defendant's side, are pro-defendant. However, if you just walked away from every one of those cases, you're going to have a pretty small portfolio. So, it's really about using balance and judgment. Again, if you start from the end, which is the whole goal of this practice is to produce premiums and look at everything through that lens, your committee will have a good chance of doing well over time.
LB: Finally, there's an art to managing the additional risk that comes with doing more contingency work and even the most successful contingency fee firms have an upper limit on their risk tolerance. Can you give some advice for managing the additional risk that working on contingency presents to a law firm?
PI: The first thing I would say to any firm doing this, is that you have to start out with a really clear, intentional strategy. What are you trying to do in this space? When we came to Cadwalader, this is one of the things we focused the most on, what is our strategy for this practice? How are we going to de-risk? One of the things you really have to think long and hard about is how much from a litigation department's resources, how much of your resources do you want to devote to this practice? Is it 5%, 10% or 15% of your overall resources?
Once you have a clear strategy, then you can look at cases and decide how they fit into that strategy, as opposed to doing what I think is very suboptimal, which would be, and what I think a lot of folks end up doing, look at cases on a more of a one-off basis. They get this case, that one looks good, they get that case. Of course, you want to look at these cases as they come in, but you have to look at them from the perspective of your overall strategy. So, if you have that strategy really set from the start, you'll have a much better chance of creating a portfolio that matches your goals and does well over time. So that would be number one, I'd be really intentional.
Number two is super important; you have to have a real thoughtful process around how you're going to de-risk. Any responsible firm should try to de-risk if they're going to put together a portfolio like this. My preferred approach to de-risking is through case selection and through the use of funders. That's how we de-risk.
Now case selection, the way I look at it from our perspective is, of course we want to put together a portfolio, but we want to put together a carefully selected portfolio. I turn away most of the cases I look at….The wrong “yes” is more damaging than the wrong “no”. I'm very careful in the cases I select. …You could de-risk through volume and certainly folks do that where you're just filing a lot of cases, you're not being as disciplined on the front end… and the strategy there would be, hopefully the winners will outpace the losers…. My preferred strategy is to be more rigorous on the case selection and then also to de-risk with good litigation funding partners. If you put those two things together, I think you can craft a portfolio that manages the overall risk in a reasonable way.
There's two other things I would say. If you really want to contain your risk, you have got to manage this whole portfolio on a month-to-month basis, or else the lodestar is going to get out of hand. It's not easy and frankly not fun, but it needs to be done or you could have good legal results on cases at the end of the day but not have good returns. Having a single person or a small group of people who really understand how to manage these cases is probably the best way to do it.
Then the last thing I'll say is, and this might be the most important thing, if you're going to do this, you have to understand that this is a medium- to long-term strategy. If you want to develop this practice as a firm and you think it's just going to sort of magically lead to premiums in a year or two or even three years, you're going to be sorely disappointed... If the goal is to generate big premiums, the only way those can really be generated is through patience and getting cases prepared for trial. So much of what happens in litigation is outside your control. As the plaintiff, I'm pushing hard on speed. I want to get to trial as fast as possible. The defendants are pulling hard in the other direction. You have a judge who has a busy schedule. Lots of things happen unexpectedly that can delay a judge's schedule. All these things can lead to delays in litigation process and if that happens, you could have a choice where you could just try to settle the cases soon to try to get to results on a shorter time frame, but that's not going to lead to good results.
You have to look at putting together a good portfolio, having a medium to long-term strategy, which I would say is three to five years, and being patient. And I'm not saying I wouldn't analyze the portfolio on a year-to-year basis, but I would really be focused on analyzing its performance over a three- to five-year period. If your portfolio is not performing well over that period, then you should really take a look at the portfolio. But again, if you come at it looking sort of for quick hits and returns, unless you catch magic in a bottle, it's just very hard to do. So again, I would be very intentional around sort of the longer term strategy of a practice like this.
Philip Iovieno is the co-chair of Cadwalader’s antitrust litigation group, with a practice focused on representing plaintiffs and defendants in antitrust and other complex commercial litigation. He has extensive experience on both sides of the “v” in federal and state courts throughout the country, including having led or co-led multiple jury trials through verdict.
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Liz Bigham is Chief Marketing Officer with responsibility for Burford’s brand, marketing and communications globally. In addition to building the commercial legal finance industry’s most recognized brand, she leads a global team of marketing and communications professionals who collaborate to support Burford’s continued growth.