With litigation increasingly advancing to trial, the appetite for lawsuit lenders among corporations is growing, according to an International Legal Finance Association (ILFA) panelist.
“The idea that they're launching this conference now suggests there is definitely momentum,” said Rishi Varma, Hewlett Packard Enterprise general counsel (GC) and corporate secretary. “We've just been exploring it as an opportunity.”
Varma was among the lecturers on a panel called The Client View: The Economics of Litigation and What GCs Think About Legal Finance Now at the inaugural conference of IFLA this week at the Morgan Library and Museum on Madison Avenue in Manhattan.
The conference brought together corporate attorneys, funding advisors, law firms, insurers and litigation funders, such as Deminor, PLA Litigation Funding, Burford Capital, Longford Capital Litigation Finance and Lass Legal Capital.
“The criticism that people have suggested is that if you're not paying, you're not worried about how long this takes and your risk profile goes down because you're not as invested but that's no different than plaintiffs' lawyers who take a case on contingency,” Varma said.
Other panelists included Raytheon Technologies Corporate Vice President and Chief Litigation Counsel Steven Greenspan, Southeastern Grocers Chief Legal Officer and Secretary Sandy Grimm, and Fox Corporation Executive Vice President of Litigation Nicholas Trutanich. The moderator was Aviva Will, Burford Capital's co-chief operating officer, and Attorney Brad Hildebrandt of Hildebrandt Consulting was the keynote speaker during lunch.
“We have not entertained litigation funding,” Varma added. “There are roadblocks in our minds, such as how passive is passive, what happens if there's a counter claim and we want to control the case or settle earlier? All of those, in our perspective, require more education.”
Grimm likes the idea of litigation funding because of its limited impact on quarterly and annual budgets.
“Being in the grocery industry, you are being measured every three months on your EBITDA,” he said. “If you engage in some litigation funding, you can look at that holistically, set aside funds in reserve for the expert expenses, and even though you’re paying them, it’s not against your day-to-day expense budget, and therefore it's not hurting you. That's a big important piece for companies like mine.”
EBITDA stands for earnings before interest, taxes, depreciation, and amortization.
“For me, low margins and lettuce need a hedge,” Grimm told a tickled audience.
At Raytheon Technologies, recovery scenarios in which a lender out earns Raytheon or the outside litigator is a red flag.
“That's something that's going to push me away back to self-financing,” Greenspan said. “So to the extent you can structure these deals in a way where recovery is equally shared at more modest levels, I think you'll get more receptivity from companies.”