Law firm challenge
A respected law firm that works almost exclusively on an hourly fee basis is approached by the former co-owner of an international energy company with a breach-of-contract dispute after his former partners failed to share profits resulting from their venture. The firm thinks the claim has strong legal merits and estimates potential damages at $70 million.
The potential client—which is talking to other, competing law firms—does not have the means to pay the firm’s hourly fees for the duration of the litigation. Firm management is unwilling to expose the firm to the risk of taking the case on full contingency, although it is willing to consider a reasonable discount to its regular fees with a corresponding uplift from any award.
Burford legal finance solution
The partner assigned to the case does not want to lose the opportunity to work with the client, and she contacts a third-party litigation finance provider. She receives the following proposal:
- The law firm can accept the case on a fully contingent basis, and the litigation finance provider will finance $4 million of the $5 million budget, with the firm risking $1 million
- In exchange, upon successful resolution of the case, the litigation finance provider receives its investment back, the firm receives its $1 million investment and uplift and the finance provider receives the remaining contingency
Legal finance impact
After reviewing the proposal, the law firm determines that the financing arrangement bridges the gap between the firm’s hourly model and the client’s budget issues, enabling the firm to pursue a strong case that will add value to the business.
The law firm establishes a relationship with a new client and generates new business for the firm without upending its hourly model.
This is a hypothetical example of one type of matter Burford routinely encounters and finances. It is meant to help demonstrate different use scenarios for our capital and the associated quantitative benefits.