Adding value beyond capital: During case review

Cost-based comparison-shopping may be an understandable mainstay of consumer decision-making, but what’s relevant for buying a toaster doesn’t apply when it comes to financing commercial disputes. For in-house and law firm lawyers it’s an at best limited and at worst potentially harmful way to select a legal finance partner.

So if lawyers ask us why they should take Burford’s capital rather than someone else’s—reasoning that money is money, and so why not get the cheapest money available?—we note that given the scale and diverse sources of our available capital, Burford will always be competitive on cost. But we also note that after a decade in business and having reviewed many thousands of requests for funding for commercial disputes, it’s clear that the challenges our clients face are rarely (if ever) just about the money. And it’s also clear that they routinely choose Burford because of the value we offer beyond the capital we provide.

To unpack what that can look like, we review below the ways in which Burford can add value for companies, law firms and lawyers from the earliest stages of the review process through to when Burford makes an investment, which we oversee in our respective roles managing Burford’s US investment pipeline and its US litigation investment portfolio.

Adding value during case review

Not surprisingly, given the fact that we typically assume upfront dispute costs and lose our capital if the underlying matters aren’t successful, Burford’s case review process—what we call underwriting or diligencing—is careful and thorough. As a general matter, it’s a three-stage process:

• First, after signing an NDA, we conduct an initial assessment to confirm that matters meet our basic investment criteria.
• Second, we conduct a merits diligence review to assess the underlying merits, damages theory, counsel, counterparty and enforceability.
• Third, we conduct an economic analysis to confirm that the budget, risk-share, damages and settlement ratio allow for appropriate recoveries to the client, the lawyers and Burford.

Burford can add value to the client and the law firm regardless of whether we end up financing a matter at the end of this process—and I’ll note that Burford reviewed more than 1,400 funding inquiries in 2018, but ultimately invested in far fewer.^[1] Our hope is of course that we’ll be able to provide financing, but even if we don’t we become familiar with a case and the parties involved. As we gain that familiarity and dive into matters, we can add value in a variety of ways:

• Responding quickly with in-house expertise
  Burford has the distinct advantage of conducting all our case review in-house. As a result, we can act more quickly—and we see and learn from thousands of matters each year. Our team of 113 is generous in sharing our resulting expertise in assessing and quantifying commercial dispute cost and risk.
• Building litigation budgets
  Few litigators are passionate about budgeting, but budgeting is foundational to legal finance and highly valued by clients. We work with claimants and law firms seeking funding to align the budget with the litigation strategy, ensure that the anticipated spend is realistic and model likely economic outcomes. Whether or not we finance matters, these economic insights provide a helpful check for law firms and claimants.
• Developing damages theories
  Damages theory represents one of the most difficult aspects of building a case—especially if experts have not been retained. We can and do help the claimants and law firms we work with to develop a realistic range of damages. Whether or not we ultimately provide financing, this information can help them make informed decisions down the road.
• Defining legal theories
  As veterans of some of the world’s most respected law firms and in-house litigation teams, Burford’s 55 lawyers have a broader range of legal backgrounds than a typical dedicated practice group. That means we can weigh in on how to tell the factual story, provide guidance on where to file, offer insights into issues that may be outside of counsel’s areas of expertise and generally help finetune legal thinking.
• Closing transactions efficiently
  In addition to our investment team, Burford has a robust in-house legal team with expertise in completing the most legal finance transactions—meaning we can close transactions efficiently.

A law firm or claimant who seeks a legal finance partner based solely on price risks missing out on these qualitative benefits. Of course the cost of capital matters—but law firms and claimants can and should expect more.

[1] Burford 2018 Annual Report, available at http://www.burfordcapital.com/FY2018.

Read more of "Adding value beyond capital": 

Part I • Part II

To read the article in full, download the Spring 2019 Burford Quarterly.