At its inaugural annual conference on October 24 in New York, the International Legal Finance Association (ILFA) gathered a group of senior in-house lawyers to talk about how GCs think about the economics of litigation and the role of legal finance.
“[An antitrust claim] is going to last and you’ve got to be patient, it’s going to take three, four, five years, right? It's going to drain your legal budget. The day you win that case it goes below the line, it does not count toward EBITDA, and if you're in the grocery industry, you are being measured every three months on your EBITDA…. If you engage in some litigation funding, you can look at that holistically…. And therefore, it's not hurting you from your quarterly and annual budgets. That's an important piece for companies like mine.”
- Sandy Grimm, Chief Legal Officer, Southeastern Grocers
Chief Legal Officer of one of the largest supermarket chains in the US, Grimm’s comment drives home the impact of affirmative litigation on corporate budgets and the benefits of legal finance in removing many of those impacts. Time is money, and it can take many years for litigants to go through the courts and appeals process and eventually get paid. Monetizing pending claims is, not surprisingly, an increasingly popular solution among large corporates.
As Grimm notes, when a company pursues a litigation claim, the money it spends doing so is counted as an expense on the company’s P&L—effectively reducing operating profits and negatively impacting EBITDA and overall value of the company. Even when the claim succeeds it is recorded “below the line” as a non-operating item because, from a finance perspective, litigating claims is not a part of the core business of the company. Legal finance can improve the situation by removing legal expenses from the company’s P&L.
About the panel
The panel was moderated by Aviva Will, Co-COO of Burford Capital, the panel included Steven Greenspan, Corporate Vice President and Chief Litigation Counsel, Raytheon Technologies; Sandy Grimm, Chief Legal Officer, Southeastern Grocers; Nicholas Trutanich, Executive Vice President of Litigation, Fox Corporation; and Rishi Varma, General Counsel and Corporate Secretary, Hewlett Packard Enterprise.