Trending Now
  • An LFJ Conversation with Logan Alters, Co-Founder & Head of Growth at ClaimAngel
Commercial Deals

New research shows companies with large claims recover more and preserve budgets by using legal finance as part of their class action opt out strategies

September 13, 2022

New research shows companies with large claims recover more and preserve budgets by using legal finance as part of their class action opt out strategies

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research demonstrating the value of legal finance for companies with valuable commercial class action claims. In recent years, Burford has seen an increasing number of major corporations choosing to opt out of class action lawsuits to pursue high value claims individually and has commissioned independent research to examine the trend in greater depth.

Although companies are currently still more likely to remain in the class than they are to opt out, the research reveals that their reasons for doing so are economic—and solvable with legal finance, which de-risks the choice to opt out and provides a clear benefit to corporations with high value claims. As most legal finance is non-recourse, companies can receive risk-free funding to pursue meritorious claims as individual plaintiffs, as well as to accelerate the often-significant value represented by pending claims.

Given the results of the research, Burford expects the trend toward opt outs will continue, with major companies choosing to rethink their opt out strategies with legal finance.

Christopher Bogart, CEO of Burford Capital, said: “Burford’s independent research on commercial class actions demonstrates the clear benefit that legal finance provides to companies with significant claims. If you’re a GC and you have a claim that’s big enough to merit opting out, you should, because you’ll recover more, and you can do so without budget implications by using legal finance capital. Further, your competitors who are already using legal finance are opting out three times more often. As a former GC, I recognize the importance of maintaining control and maximizing returns in litigation, and Burford works with many GCs to use legal finance to reduce risk, maintain greater control and enhance the likelihood of achieving greater recoveries.”

Key findings from the research include:

  • Use of legal finance correlates to opting out.
    • Use of legal finance is 3x likelier among companies that mostly/always opt out vs. companies that mostly/always remain in the class, and 2x likelier than all companies.
  • Companies’ top reasons for opting out are maintaining control and maximizing return.
    • The #1 reason large company GCs opt out is their fiduciary duty to maximize recoveries to their company.
  • Companies’ top reasons to stay in the class are economic.
    • Not being able to justify the cost of pursuing an opt out claim (64%) and not having the budget to do so (61%) are the top 2 reasons companies remain in the class.
    • Legal finance ameliorates both cost and budget constraints.
  • GCs say the availability of legal finance would impact their opt out strategy.
    • 1 of 2 (52%) say that while they have not used legal finance, its availability would positively impact the decision to opt out. 

The Report on Class Action Recoveries can be downloaded on Burford’s website, where full results are also available. The research report was conducted in June 2022 by GLG via an online survey, with responses from 150 US GCs, heads of litigation and other senior in-house lawyers responsible for their companies’ commercial litigation.

About Burford Capital

Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its principal offices in New York, London, Chicago, Washington, DC, Singapore, Sydney and Hong Kong.

For more information, please visit www.burfordcapital.com.

Commercial

View All
Case Developments Commercial

Archetype Capital Partners Secures Injunction in Trade Secret Battle with Co‑Founder

By John Freund |

A significant legal win for litigation funder Archetype Capital Partners emerged this month in the firm’s ongoing dispute with one of its co‑founders. A Nevada federal judge granted Archetype a preliminary injunction that prevents the ex‑partner from using the company’s proprietary systems for underwriting and managing mass tort litigation while the underlying trade secret lawsuit continues.

According to an article in Bloomberg, Archetype filed suit in September against its former co‑founder, Andrew Schneider, and Bullock Legal Group LLC, alleging misappropriation of confidential methodologies and business systems developed to assess and fund mass tort claims. The complaint asserted that Schneider supplied Bullock Legal with sensitive documents and leveraged Archetype’s systems to rapidly grow the firm’s case inventory from a few thousand matters to well over 148,000, a jump that Archetype says directly undercut its competitive position.

In issuing the injunction, Judge Gloria M. Navarro of the U.S. District Court for the District of Nevada found that Archetype was likely to succeed on its trade secret and breach of contract claims. While the court determined it lacked personal jurisdiction over Bullock Legal and dismissed the company from the suit, it nonetheless barred both Schneider and Bullock from distributing proceeds from a $5.6 billion mass tort settlement tied to video game addiction litigation that had been structured using Archetype’s proprietary systems.

The order further requires the return of all materials containing confidential data and prohibits Schneider from soliciting or interfering with Archetype’s clients.

Case Developments Commercial

Law Firms Collect $48M from BHP Class Action

By John Freund |

In a development drawing fresh scrutiny to fee arrangements in class action proceedings, law firms involved in the high-profile shareholder lawsuit against BHP have collected nearly three times the legal fees they initially represented to the court. The firms took in approximately $48 million from a $110 million settlement approved in the Federal Court of Australia, despite earlier representations suggesting significantly lower costs.

An article in the Australian Financial Review details how the legal teams, including Phi Finney McDonald and US-based Robbins Geller Rudman & Dowd, initially indicated their fees would constitute a relatively modest share of the final settlement. However, court filings reveal a different outcome, with the firms ultimately securing a much larger cut after a revised funding structure was approved during the settlement process.

The underlying class action was brought on behalf of shareholders following the catastrophic 2015 collapse of the Fundão dam in Brazil. The case centered on allegations that BHP failed to adequately disclose risks associated with the dam's operations, leading to sharp share price declines after the disaster. While BHP did not admit liability, the $110 million agreement was one of several global legal settlements related to the event.

The revised fee arrangement was approved as part of a “common fund” order, which allows for legal and funding costs to be deducted from the total settlement on behalf of all group members. The final order was issued without a detailed public explanation for the increased fees, prompting concerns from legal observers and stakeholders about transparency and accountability in class action settlements.

Case Developments Commercial

King & Spalding Sued Over Litigation Funding Ties and Overbilling Claims

By John Freund |

King and Spalding is facing a malpractice and breach of fiduciary duty lawsuit from former client David Pisor, a Chicago-based entrepreneur, who claims the law firm pushed him into a predatory litigation funding deal and massively overbilled him for legal services. The complaint, filed in Illinois state court, accuses the firm of inflating its rates midstream and steering Pisor toward a funding agreement that primarily served the firm's financial interests.

An article in Law.com reports that the litigation stems from King and Spalding's representation of Pisor and his company, PSIX LLC, in a 2021 dispute. According to the complaint, the firm directed him to enter a funding arrangement with an entity referred to in court as “Defendant SC220163,” which is affiliated with litigation funder Statera Capital Funding. Pisor alleges that after securing the funding, King and Spalding tied its fee structure to it, raised hourly rates, and billed over 3,000 hours across 30 staff and attorneys within 11 months, resulting in more than $3.5 million in fees.

The suit further alleges that many of these hours were duplicative, non-substantive, or billed at inflated rates, with non-lawyer work charged at partner-level fees. Pisor claims he was left with minimal control over his case and business due to the debt incurred through the funding arrangement, despite having a company valued at over $130 million at the time.

King and Spalding, along with the associated litigation funder, declined to comment. The lawsuit brings multiple claims including legal malpractice, breach of fiduciary duty, and violations of Illinois’ Consumer Legal Funding Act.