How can Burford help clients quantify legal risk?
Liz Bigham: Chris, could you start off by addressing why it's so important for businesses and law firms to have accurate damages expectations when pursuing a claim?
Chris Catalano: Well, if the plaintiff's goal is money compensation and not some sort of injunctive relief, then it's critical to have a reasonable damages expectation to decide whether the claim is worth pursuing in the first place. Is the case a winner on the merits? And if we do win or settle it favorably, will there be enough money to have paid my lawyers and still leave something meaningful for me? It's pretty simple. If you have unrealistic expectations about how much you would recover if you're successful, you're going to be disappointed if you technically win the case because you'll spend a lot of money on fees and expenses on a case that doesn't generate enough money to pay for all that and still be worth your trouble.
LB: What are some of the factors that can impact the quantum of damages?
CC: The quantum of damages is basically how much you would recover if the case is successful. First and foremost there's a threshold issue. The case has to be strong on the merits before you even get to damages. You have to believe that there's a reasonable likelihood that a court will find in your favor on the key merits issues in the case. As for how much you might recover if you do win, that's the quantum of damages and that really depends on the area of law and the industry at issue. So for example, in a patent case, it'll include the quantity and dollar amount of sales of the infringing product. It'll also include the amount of a reasonable royalty and if you multiply those two together, that will get you some measure of your damages. In an antitrust case alleging overcharges, it can include the volume of sales and the percent of overcharge. In other cases it's lost profits so you need to calculate the profits that the plaintiff would've made. But for the defendant's unlawful conduct, that will turn on the number of sales, the profit margin and other factors. So it's really industry and case specific. But again, you have to have a strong case on the merits before you even get to that issue.
LB: Legal finance providers have expertise in quantifying legal risks. Can you talk about some of the ways that Burford works with clients to anticipate likely outcomes and quantify the risk?
CC: A key way that legal finance providers can help is by analyzing themselves whether the case is investible. In other words, does the case have enough merit? Is it large enough? Will a win make the claimant and any investor happy? It's the same analysis that a claimant themselves will do on whether the case is worthwhile. When we diligence a case, we handicap the likelihood of success. That's the merits question I was talking about. What amount of damages or settlement might be received in a successful scenario, and how much the case will cost to litigate.
That's really the same thing that a business would do when it's setting out on its own business venture and it's also the same thing that anyone should do when they have something that they can pursue and they decide whether or not to do it. But we help them do it because at the same time that we're deciding whether we want to invest in it, the counterparty themselves can decide whether this is something they want to pursue or not. And we help them isolate what the risks and the possible rewards are in terms of damages or settlements and whether the fees that will be necessary to get you there are going to be worth it, leaving enough around for everybody to make them happy.
LB: Finally, Chris, help us understand if a client has multiple claims and they're trying to set priorities and think about how to proceed programmatically, how could Burford be helpful to them?
CC: Well, we can add value by helping them prioritize in the first place and the way we would do that is by providing an assessment of each case. If they have four different cases on their docket that they could potentially pursue, they have four claims against, let's say four different companies that might have breached contracts with them. We can help them with their attorneys work up the case and assess how strong is each case? What is the likelihood of success at each stage in the litigation? How much will it pay off? And how much will it cost to litigate? We can basically prioritize them in that order.
The ones that have the biggest damages claim and an amount of fees and expenses that's reasonable in proportion of that claim, and there's a likelihood of success that's sufficient. We can basically create an expected value for each case. And then they could say, okay, you know what? I'd like to pursue these two cases because I think it's a positive expected value proposition and we'd like financing for that or not, and we don't want to prioritize these two because really even an optimistic outcome would not be enough to pay our attorney's fees. So we can help them do it really by assessing the investability of each case.
