Connor Murphy is a Director at Burford Capital who focuses on originating new business with US law firms and corporations.
You were formerly GC for Capstone Advisory Group. What is one misconception GCs have about legal finance?
As a GC, I was not aware that litigation finance was an option. We came across a commercial matter that was essential to our business, and we hired a prestigious law firm to bring the case on our behalf. Litigation finance would have been a good option for us and something we would have likely considered.
All companies will likely have a matter or matters that would be a good candidate for litigation finance, and the more GCs that are aware of it, the better.
As you recently noted, the surge of bankruptcies expected during the pandemic never happened. Now that economies are beginning to recover post-pandemic, is there any industry you believe is particularly vulnerable?
Current economic conditions don’t necessarily pose a threat to any particular industry that didn’t exist for that industry pre-pandemic. However, that doesn’t mean there aren’t companies that are vulnerable. There has been a lot of ink spilled around the inevitability of inflation, especially given the money that has been pumped into the economy to revive it.
If an inflationary environment emerges and interest rates spike, any company that is over-leveraged is at risk, regardless of industry. Other uncertainties businesses will face if the inflation is long-term include potential hikes in worker wages and an increase in the cost of raw materials and services.
The Supreme Court of Canada approved the use of legal finance in the context of insolvency in 2020. How does that change the insolvency landscape in Canada?
While the approval of legal finance use in the context of insolvency doesn’t change the landscape—Canadian entities will still continue to file for bankruptcy for the protections that come along with it—it does afford Canadian entities that do file access to an additional source of liquidity. They can now seek litigation funding to unlock value associated with those claims and provide recovery for unsecured creditors while preserving capital for business operations.
Legal finance comes in different forms. The most common is where the funder covers legal fees and expenses associated with a legal claim. Funding can also accelerate capital that the estate may receive in the future, through settlement or adjudication of pending claims, by providing a portion of that award to the estate and its creditors upfront. Finally, some litigation claims can also be sold outright to the funder, avoiding the need for the estate to wait many years to access that capital. The latter option is especially attractive to entities in liquidation as it mitigates the concern of the estate being closed long before the claims are settled or adjudicated.
What is the most underrated benefit of legal finance for corporates?
Legal finance changes the mindset and mandate of the general counsel’s office from being a cost center to being a revenue generating center. Typically, the GC’s office is given an annual budget to defend the company in cases brought against them. With a corporate recovery program that takes advantage of legal finance, the GC’s office becomes more commercially minded as, rather than just remaining in a solely defensive posture, they can actively pursue affirmative commercial claims and generate revenue for the business.
Therefore, the most underrated benefit is this: Legal finance creates potential corporate assets from corporate affirmative litigation claims. Like other corporate assets such as machinery or real estate, litigation claims can be leveraged to unlock additional capital through corporate finance. Litigation finance is corporate finance for litigation claims.
Top five…. getaways in Connecticut for New Yorkers looking to escape their city?
I live and grew up in Connecticut, but work in New York, so I understand the need to escape the dense urban life of the Big Apple. Here are my top five weekend destinations:
- The West Lane Inn – Ridgefield, CT
- The Mayflower Inn and Arethusa Farm – Litchfield County
- Inn at Graybarns – Norwalk, CT
- Winvian Farms – Morris, CT
- The Griswold Inn, Essex, CT