In-House Counsel, Firm Lawyers Expect the COVID-19 Recession Will Trigger a Litigation Funding Boom

“You’re talking about a staggering sum of money that’s waiting to be turned into cash and waiting to be financed and monetized,” said David Perla, co-chief operating officer at Burford Capital.

By Phillip Bantz | October 19, 2020 at 03:05 PM

The number of in-house counsel and private lawyers who reported that their companies or law firms were using litigation funding has increased by more than 100% in the past three years, according to a new study from litigation financier Burford Capital.

Now, a majority of lawyers predict that legal finance will become “increasingly critical” as legal departments and firms look for ways to offset the financial toll of the COVID-19 pandemic and economic downturn, Burford found in a survey of 266 in-house counsel and 233 law firm lawyers.

“Even the late adopters now, the more traditional law firms, are sending us to their clients and using us to help bridge that gap,” Burford co-chief operating officer Aviva Will said Monday during a virtual press conference. Burford began trading on the New York Stock Exchange the same day.

Looking solely at the in-house counsel respondents, 70% reported that their companies had at least $20 million in unenforced judgments, a 5% increase compared with last year. What’s more, 55% of the in-house respondents in the latest survey said their companies had unenforced judgments of $50 million or more.

Burford Capital employees, including the firm’s co-chief operating officers, David Perla (far left) and Aviva Will (immediately right of Fearless Girl statue) stand outside the NYSE after the finance and asset management firm began trading on the NYSE. Courtesy photo

“You’re talking about a staggering sum of money that’s waiting to be turned into cash and waiting to be financed and monetized,” said David Perla, co-chief operating officer at Burford, which has headquarters in Chicago, London and New York.

Perla also noted that about half of the in-house lawyer participants said their companies have some form of a recovery program, “which is telling you that the legal department is thinking about itself as not just a cost center but as a potential money-generating center.”

At the same time, more than half of corporate counsel reported that their companies had walked away from meritorious claims due to the cost of litigation. Many also suggested that their companies would be more comfortable pursuing recoveries if they could shift the cost and risk to a third party, according to Burford.

In related findings, 81% of in-house lawyers said they wanted their outside counsel to be open to risk-sharing and a majority expected their firms to understand and advocate the use of legal finance.

When asked about significant challenges they faced for managing legal costs 53% of in-house respondents cited pricing uncertainty from their outside counsel and 71% identified a dearth of pricing options.