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Using litigation finance: 12 Leading lawyers weigh in (Part II)

October 17, 2019

In June and July 2017, Burford conducted individual phone and in-person interviews with leading lawyers in conjunction with our 2017 Litigation Finance Survey, and we share excerpts from those interviews in the pages that follow. We are grateful for their time and perspective.

Collin Cox, Partner, Yetter Coleman

Patricia Glaser, Partner and Chair, Litigation, Glaser Weil

Guy Harvey, Head of Commercial and International Disputes, Shepherd and Wedderburn

Howard Janis, Director of Strategic Pricing & Analytics, Dentons

Ben Knowles, Partner and Co-Chair of the Global Arbitration Group, Clyde & Co.

Craig Martin, Partner and Chair, Litigation, Jenner & Block

Michael Mills, Partner, Quinn Emanuel Urquhart & Sullivan

Paul Skiermont, Partner, Skiermont Derby

David Thompson, Managing Partner, Cooper & Kirk

Co-Chair, Intellectual Property, AmLaw 100 Firm

Partner, AmLaw 20 Firm

Managing Partner, Corporate and Business Litigation Firm

What are ways that firms and clients could be using litigation finance but aren’t?

Collin Cox: The concept of portfolio management is interesting and important. There are many firms that have run lines of credit for years and they are used to seeing the world in that way. In many ways financing based on portfolio management makes more sense. You’re making a bet on the firm.

Managing Partner, Corporate and Business Litigation Firm: Before I had a portfolio relationship with Burford I talked to a lot of funders, and they can spend 45 days kicking the tires on a potential case. If I meet with the client on Monday and they say, “Alright, a third is an acceptable contingency, this is an important initiative for us. It’s a $200 million claim for us, we’ve got approval from the general counsel, the board signed off. Are you going to do it?” I can't tell him, “I'll get back to you in 45 days.” …. [Portfolio financing] is a great thing for us, … because we [can] be responsive to the client in a timely fashion.

Guy Harvey: We see portfolio financing as a major opportunity for us to go out into the market with funding in place and develop clients. It gives us a particular selling point which is very useful to a firm of our size in competing with other firms. I see defense funding as very interesting indeed… Clearly a lot of clients have to defend themselves in litigation and would be eager to have their litigation funded away from their balance sheets.

Michael Mills: In Australia, companies are beginning to work out ways that they could use litigation finance in commercial contexts, to move costs off their balance sheets. Corporates are also beginning to understand the opportunities they have to use litigation finance proactively. They understanding is still developing about the scope to utilize litigation funding and tailor it to mee the company’s/client’s specific needs, rather than just being considered as a standard off-the-shelf product. Another change in Australia is that there are now many more litigation funders and with this competition comes more solutions and options. I am not sure if this is yet fully recognized and as a result, some past adverse impressions about litigation funding may understandably remain.

Ben Knowles: For the UK market, the addition of adverse costs isn’t necessarily a reason not to use finance, but it can cause major problems in the process because ATE insurance can be so expensive.

Craig Martin: In terms of types of matters, the places where I see the most need and the most potential impact are insurance, IP and antitrust—and I think there’s significant untapped need in antitrust and IP.

Among clients and law firms that still have not used litigation finance, what are the primary obstacles?

Craig Martin: For those who are still not using litigation finance, lack of need for external capital is the number one factor, and lack of understanding is the second most important factor.

David Thompson: For the most part, companies only raise it with me when they lack cash—they are not generally otherwise interested.

Paul Skiermont: I’ve never heard a client say, “I don’t want to do it because I don’t believe in it”.

Patricia Glaser: I don’t think it’s an objection that prevents people from using litigation finance. I think it’s mostly a lack of knowledge. Of course, there are people who say, “You’re just encouraging litigation, that’s what’s wrong with America today.” But that’s silly. And of course, there are clients who don’t use litigation finance because they don’t want to share. But that’s also silly—because if you don’t share, you often won’t be able to afford to bring the lawsuit.

Collin Cox: Lawyers are in one of the most tradition-based practices… We’re always looking to precedent, we’re always looking backward. And litigation finance is something that looks forward. What’s going to take the fear of the unknown away? I think it’s going to be lawyers talking to lawyers. The more that well-respected attorneys tell war stories about how litigation finance helped them, the more that will take away their fear.

Looking ahead to the next five years, do you have any predictions for how litigation finance will impact the business of law?

Michael Mills: The impact will continue to grow. Both on the plaintiff and potentially defense side, especially as corporations recognize that litigation finance gives them a means to move costs off balance sheets. There’s tremendous appeal in that and that is going to be another area of huge growth for litigation finance in Australia.

Co-Chair, Intellectual Property, AmLaw 100 Firm: In IP, there is more and more uncertainty and that is going to cause litigation finance firms to grow, because they’re equipped to handle that risk and because they’re better suited to assess and price it.

Partner, AmLaw 20 Firm: From my perspective, it will continue to allow me to compete for business that I couldn’t otherwise compete for.

Patricia Glaser: I think there will continue to be growth, and you’ll see more companies get into the space. With the good companies, there will be more of it, and the other companies you’ll see dying on the vine. So much of it is about the people and the ability to make the right calls…. So much of litigation finance is the people and the trick is getting the right people. The people I’ve worked with at Burford have been great.

Do you have questions or concerns about litigation finance?

Craig Martin: No, I don’t. For those without experience using litigation finance, sometimes there is an unspoken concern about what attitude courts have taken. It’s not an ethical concern about champerty. When I encounter this type of question about how the courts treat litigation finance, I point people to the most relevant ruling, by a magistrate judge in the Northern District of Illinois,[1] and that alleviates any concerns they may have.

Collin Cox: As litigation finance has become more prominent, there’s been more “controversy”. But in the main, if you look at the overall practice of litigation finance, it’s a positive development.

Guy Harvey: About the concept, no, I don’t have concerns. In terms of the practice of it, there are a seemingly mushrooming number of people who say they’re in the market as litigation funders. Many of them may be so in name only. Perhaps they’re brokers positioning themselves as funders. That’s something to be careful about: the fact that you don’t know where money is coming from should be a concern.

Managing Partner, Corporate and Business Litigation Firm: I have to be comfortable with the relationship with the funder, that they’re not going to try to find client confidential information that I can’t share, that they’re not going to try to unduly influence the case, and that everything is done in a way that gives first priority to the client and to the ethical rules that govern our profession. I have found Burford to be very good at that. I don’t think all funders are.

What other recommendations do you have?

Partner, AmLaw 20 Firm: I think my overarching recommendation would be to focus on educating in-house people. I think it’s the general counsels of more sophisticated client and potential client companies that need your attention. For nine out of ten cases that we handle at those companies, I think they still don’t have an understanding of how litigation finance can be beneficial to them and their firms.

Ben Knowles: I believe the big thing that is required is a streamlining of the process.

Guy Harvey: I’m certain that with funding in place we’re well placed to deliver what our clients need and want. Without it we’re fighting with one hand tied behind our back. I think that firms that don’t explore litigation funding and aren’t offering it to clients are not providing the full range of service to clients.

Managing Partner, Corporate and Business Litigation Firm: I think we're invested in each other. I think when you build that kind of relationship over time, I don't want to show them a bad case because it would diminish our standing in their eyes. Likewise, I don't think they would want to be user un-friendly with me because I’m a loyal customer.

Click here to see Part I of the interview series

[1] Miller UK Ltd. v. Caterpillar Inc. (N.D. Ill. Jan. 6, 2014)