Burford devotes great resources to shepherding a potential investment from initial client contact to signed capital provision agreement. Prior Quarterly articles have described the process of “getting to yes” in detail, including the legal and financial risk assessment and terms negotiation undertaken by our underwriting team. But the law firms and companies we fund are also understandably eager to understand what happens “after we say yes”—and although Burford is by definition a passive capital provider, we devote significant resources to monitoring our investments. I offer below an overview of our approach to case monitoring, with the caveat that it is not an entirely routine process. Litigation by its nature does not move quickly. Cases may resolve at idiosyncratic and unpredictable times, or they may unfold entirely predictably.
Either way, once Burford invests, we are in an ongoing business relationship that requires regular care and tending. Done well, case management and monitoring can help us maximize returns and develop stronger relationships with counterparties. Through this additional effort that occurs post-closing, we can improve results for our counterparties and investors by being prepared for case events before they occur, rather than reacting when it might be too late. Indeed, Burford’s ability to be flexible and to add value “after we say yes” is a benefit of working with us and sets us apart from more transactionally-minded “funders.”
What to expect during case monitoring
In monitoring the progress of the case, the team at Burford does the obvious things such as receiving electronic docket notices and reviewing the pertinent filings. We track court deadlines so that we know what the lawyers and court are doing and when. We draft monthly summaries of the investment’s status and prospects that are reviewed by senior Burford management and quarterly ones that are reviewed by Burford’s board of directors.
We also do less obvious things, like speaking at least monthly with our counterparties about how the case is shaping up substantively, about what challenges they see ahead, and about ideas for successfully resolving it. We regularly offer to (and do) comment on draft briefs. We join the panel on moot courts for motions or appeals. In short, we provide expert eyes and ears that can be beneficial for the case. Where some litigation finance providers ask for superficial, procedural status updates from their counterparties, we dig in and do our own substantive analysis so that we have the most complete possible picture of where the case is headed and when and on what terms it may be resolved.
But we do not foist ourselves upon our counterparties. Some of our counterparties may wish simply to provide the fairly minimal information required by our agreements. Others, however, actively seek out and benefit from our assistance. For example, we have participated in moot courts where the judges that ultimately heard the case asked the same hard questions that we’d asked and for which we’d helped the lawyers prepare.
We also track the legal spend and compare it to the stage that the case is in. Whether we fund all the capital at closing or fund tranches over time, the money we provide is the fuel that powers the litigation claim from which we hope to achieve our return. If discovery has just started and the lawyers have spent half the commitment, that’s a problem. We try to head off those issues before they arise by regularly reviewing legal bills and consulting with the counterparty on how they plan to bring the case to a successful conclusion with the money that has been allocated. Indeed, while we and our counterparties try to agree upon sufficient capital commitments during the underwriting process, budget management is not something that comes naturally to most lawyers. We can and do help them. For example, we do not wait for the lawyers to ask for more money—by then, it can be too late to avoid contributing capital that may not make economic sense.
Case study: Helping an insolvent estate maximize its assets
Monitoring and communication with the client can pay dividends to all concerned. In one of our now-resolved portfolio investments, our assistance in managing the budget helped the client resolve the cases effectively and profitably. We were funding the trustee of an insolvent estate. The estate had a pool of money, some claims against third parties, and some claims against the estate. Our capital funded the trustee’s administrative costs as well as legal fees and expenses in litigating the affirmative and defensive claims. Because there were ten different matters that evolved at different rates and pertained to different subjects, we were able to consult with the trustee and its lawyers on reallocating budgets from those cases that had resolved or where money would not be as well spent, to those that would give all concerned the most “bang for the buck.”
Having resolved or de-prioritized the less consequential matters, the trustee focused its efforts on resolving the remaining big-ticket claim against the estate, reaching a settlement that paid our return and took the trustee off risk. At bottom, this kind of consultation stems from seeing the claim as an asset that can be effectively—or ineffectively—turned into money.