Legal finance misperceptions addressed at NYU Center on Civil Justice panel
Summary
This past October, Burford Managing Director Andrew Cohen participated in a panel discussion hosted by NYU School of Law’s Center on Civil Justice, focusing on disclosure of legal finance. The panel was moderated by Emily Siegel, Senior Reporter at Bloomberg Law. Other panelists included Dai Wai Chin Feman, Managing Director at Parabellum Capital; Maya Steinitz, Professor at Boston University School of Law and Mark Behrens, Partner at Shook Hardy & Bacon.
Throughout the discussion, several key misperceptions about legal finance arose and were discussed by panelists. The full panel is available here, and key takeaways from these discussions are distilled below.
Are legal finance agreements subject to disclosure?
Critics of the industry have been pushing for legislation to mandate the disclosure of legal finance agreements. Such agreements are not currently disclosed by default, and any disclosure requests are subject to judicial review.
As Andrew Cohen noted during the panel, claimants are neither required nor expected to disclose private financial transactions when financing their claims through mechanisms such as general recourse bank loans or even law firm contingency fee arrangements. Therefore, there’s no reason to subject commercial legal finance arrangements to different rules.
Further, judges and courts have consistently demonstrated their ability to exercise discretion and make sound decisions regarding the relevance of legal finance to individual cases. They are also capable of determining whether disclosure requests are necessary, considering the risks of unfair prejudice, misleading the jury or wasting time.
Do legal finance providers exercise control over litigation?
A central topic of the panel was the debate over whether legal finance contracts that stipulate that the funder cannot control litigation truly result in that outcome — and how the concept of "control" should be defined.
Simply put, Burford and other commercial legal finance providers do not exercise control over the litigation that they finance.
Burford’s funding agreements explicitly state that we do not exercise control over the matters we fund. Throughout our 15 years in the legal finance industry, we have worked closely with clients and industry associations to dispel the misconception that legal finance providers exert control over the cases they support. Except in rare instances explicitly agreed upon by the client, legal finance providers act as passive investors, with no control over the legal assets in which they invest.
While some of our clients seek to benefit from the value beyond capital that Burford can provide after we make an investment given our deep experience and expertise in commercial dispute resolution, any “sense checks” or views we provide on matters in which we have invested do not constitute “control”, and the client is free to take or ignore our input.
Cohen, who has also written previously about control in the legal finance space, countered skepticism by pointing out the ethical issues that would come into play if legal finance providers were truly exercising control over cases and influencing the lawyers paid with their funding. Cohen stated that “If any funder thinks that they're going to take control over what the lawyer's doing, and step in front of the lawyer's ethical obligations, we've got a totally separate issue here, which is that we no longer trust lawyers to perform their obligations ethically.”
Does legal finance lead to frivolous lawsuits?
Commercial legal finance providers like Burford focus exclusively on funding meritorious litigation. Critics who argue that legal finance promotes frivolous claims overlook a fundamental aspect of the industry: Weak cases do not succeed at trial, and funders who have invested in them would thus lose their money.
Legal finance providers, including Burford, conduct comprehensive evaluations to ensure a claim’s merits and legal and financial viability before committing to funding. Moreover, because Burford’s funding is non-recourse — meaning we only recover our investment if the cases we fund succeed — there is no incentive to back claims that lack strong merit. Our success is directly tied to the success of the cases we support.
Burford continues working to combat misperceptions surrounding legal finance
Even 15 years after legal finance entered the litigation landscape, misperceptions around disclosure, control and frivolous lawsuits persist. Critics of legal finance continue to push for legislative agendas designed to mandate disclosure in all circumstances, often ignoring the realities of the industry.
Burford is proud to continue educating potential users of legal finance about how our business truly operates, addressing and dispelling common misperceptions along the way.
