Experienced litigators feel justifiably proud when a client wins a significant trial judgment or arbitration award in a complex commercial matter— but with years of hard-won wisdom litigators also know that even at that moment of victory, it is often far from the end of the road.
Substantial trial judgments or awards in commercial matters are often targets for multi-year appeals, and more often than not, the client faces years of additional effort and ongoing hurdles of cost and risk before achieving a final payment. The client—and the firm, if it’s working on a full- or partial-contingency basis—will continue to wait to be made whole and are subject to ongoing appeal and timing risk for their recovery.
Litigation finance provides clients and law firms with a better choice than waiting: the ability to monetize a judgment now on a non-recourse basis in exchange for a portion of the ultimate award later. Although the nuances vary, this same choice is also available to firms that are still waiting to collect payment following settlement where final payment must await court approval.
After judgment, the client and firm face the risk that a judgment will be reversed or reduced on appeal. A litigation financier working on a non-recourse basis assumes that risk.
Make funds immediately available
Rather than waiting years for a final resolution, litigation finance can advance a significant portion of a client’s ultimate award, making funds immediately available for business needs.
Bring forward fees
Law firms that work on a full- or partial-contingency basis may wish to advance fees in one or more matters to create cash flow and free up capital for the firm.
Litigation finance can be used to finance fees and expenses during appeal—either in connection with monetizing the judgment or as a separate matter.
When a judgment is obtained against a defendant that won’t pay, Burford can provide leading global enforcement services to find and recover assets in jurisdictions across the world.
Again, although the nuances are different, many of the same principles apply in settlement scenarios. For the latter, litigation finance simply bridges the time gap between settlement and payment when payment is subject to court approvals and possible appeal; because there is typically little risk involved beyond timing, capital is priced advantageously.
Although monetizing a judgment is among the more straightforward applications for litigation finance, clients and firms should consider carefully their options. Typical questions include:
How is financing priced when monetizing judgments?
Matters for which a judgment has been secured typically carry much less risk than matters at earlier stages of litigation, and the litigation finance is priced accordingly. At Burford, there’s no one-size-fits-all pricing, but for a typical enforceable commercial award we may combine a return of advanced capital with an additional return based on the time to resolution. If there is enforcement risk, Burford’s return may include a combination of a multiple of its investment and/or a percentage of the ultimate recovery.
Can multiple matters be bundled?
There are significant advantages to securing financing for a portfolio of litigation matters— chief among them that pricing will be favorable because risk is diversified across multiple matters. This applies in litigation finance generally and in monetizing judgments specifically. It’s an especially robust way for law firms with significant portfolios of contingent work to secure short-term capital with preferred pricing.
Why choose one litigation financier over another?
Law firms and clients may assume that securing financing in a post-judgment situation is a simple matter of choosing the best price. They would be wrong to do so: litigation financiers with permanent and available capital and fully in-house underwriting teams, both of which Burford has, can provide significantly more capital more quickly and will not be looking for an exit if appeal and enforcement take longer than expected. Unlike some others, Burford is also a passive investor that does not have rights to control the appeal or settlement authority. Control remains with the client and lawyers. Litigation financing is not a commodity—and that is true for monetizing judgments as much as it is so for financing a case from the outset.