In May 2020, Burford Senior Vice President Elizabeth Fisher and Vice President Rufus Caine III asked a select group of leading law firm lawyers about the challenges corporate legal departments face due to the current economic climate and how those lawyers and their firms advise GCs to adjust. Their answers are excerpted and collected below.
Law firms serve as trusted advisors and problem solvers for clients, and now is a time that clients really need that kind of guidance. How have you guided clients concerning the use of legal finance as a solution to specific business problems, and how has that enhanced your role as a trusted advisor? When clients have lacked prior experience with legal finance, what was the tipping point for them in deciding to use it?
Cindy Sobel: The appetite for pursuing new litigation related to thorny commercial disputes wanes as clients face an uncertain economic environment. Part of our job as a trusted advisor is to remind our clients that tools such as litigation finance permit in-house legal teams to move forward with meritorious claims that they might not otherwise pursue due to financial constraints. Clients may benefit from an assessment of their current matters to determine whether litigation finance is an option to help de-risk and obtain capital in the near term. Litigation finance eliminates the economic burden of pursuing meritorious claims and can prevent a corporation from abandoning a future monetary reward due to the current economic climate.
Charlie Lightfoot: One of my clients has, at any one time, a large portfolio of claims or potential claims (both for and against) which vary in value from the insignificant to the highly material. Finding a solution to managing that portfolio from a cost perspective has been a problem for them. I introduced them to a funder in order to tailor a solution that allowed them access to uniformly high-quality legal support across the portfolio in a financially manageable way. This undoubtedly was a step that helped bridge the gap between litigation counsel and “trusted advisor”. As for the tipping point, I find most sophisticated clients are now fairly familiar with the relevant concepts and well-versed in the pros and cons. As in many things, it therefore often comes down to individual relationships and trust, i.e. whether the litigation funders are people the clients feel comfortable and content working with over a potentially long-term project.
Reed Oslan: From time to time, when asked by clients, we have supported their efforts to obtain litigation financing. These discussions start with Kirkland first analyzing the case to confirm that it is meritorious and a case in which we would share considerable risk. Once we reach that point, we facilitate client discussion with funders and react as requested. Clients obtain their own counsel in those circumstances where independent legal advice is helpful. We are mindful of our duties to our client in connection with the underlying matter and we do not allow financing to disrupt our client relationship in any way. Since our firm has traditionally funded our own contingency fee cases, our direct involvement with litigation finance is quite modest.
Scott Gant: It is incumbent on lawyers to educate their clients about all options, including litigation finance. Personally, I draw a line between educating and advising clients. I don’t see it as my role to advise the client on whether to undertake a specific arrangement or advise them on the particulars of a contract with the third party.
Given the current economic disruption, it’s likely that clients will have more disputes and less cash to pursue them. Burford’s research shows that more than three fourths of GCs say their companies have unenforced judgments valued at $10 million or more. How can law firms best work with clients and with legal finance providers to help their clients avoid leaving money on the table?
Cindy Sobel: During this unprecedented time, it’s more important than ever to help our clients understand all of the options available to pay for both pending cases and potential new cases. Clients are turning to counsel for innovative solutions to their problems, including how to use and structure litigation finance to meet their specific needs. This requires law firms to understand their clients’ businesses, their potential litigation assets and liabilities, and to understand what financing options exist that may meet those needs. Litigation finance, in that light, becomes part of a broader discussion in which firms help to ensure clients can make the most informed decision for their business.
Scott Gant: In a recession, virtually all clients and prospective clients will have less cash and be tightening budgets for legal spending. But it’s a buyer’s market for legal departments. Lawyers whose business is slower than usual are looking for opportunities to develop new clients or new matters with existing clients, presenting an opportunity for GCs and CLOs to go out and bargain hunt. GCs and CLOs are likely to find that lawyers are more willing to pursue cases on attractive terms for the client because of the pandemic and associated economic downturn. Shrewd legal departments will strike while the iron is hot because if they wait a year or two, they may find themselves spending more than they would have if they’d pursued matters today.
Charlie Lightfoot: Planning is key. Have a strategy in place early as to how you are going to execute a judgment or compel its satisfaction by the debtor and, once the pieces are in position, act fast. Playing catch-up with a sophisticated recalcitrant debtor can be difficult and expensive, so it is well worth the investment of having an enforcement strategy planned and ready to go.
Maja Zerjal: This crisis will force companies to unlock any and all pockets of value, and litigation funders can expect demand to continue increasing significantly. If before this crisis the analysis of viable claims got stuck at the cost-benefit analysis done in-house, companies will now be forced to explore the next step and potentially bring a litigation funder into the picture to either ascertain claims are not viable (more demand does not necessarily mean more funding—in fact, the underwriting process will likely be more rigorous given heightened risks for everyone), or move forward with a litigation funder. With respect to unenforced judgments, companies may not be willing to spend time and money to pursue the debtors (especially when they may be foreign entities). Here, again, litigation funders can be helpful in determining which enforcement makes economic sense. Law firms will be instrumental in helping clients identify claims the client does not consider, and, once identified, exploring creative ways to move forward with, and ultimately enforce, such claims —which could include involving a litigation funder.
Read more of "Law firm roundtable: Helping GCs adjust to new economic pressures."
Part I • Part II
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Issue 3/2020 of the Burford Quarterly features new thinking on a variety of topics, including how Burford, as the leader of an evolving industry, can be a valuable partner to in-house and law firm lawyers today.