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Speaker 1: A person can buy or sell almost anything these days,

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Speaker 1: so why not lawsuits? The business of litigation finance has

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Speaker 1: taken off over the past decade. The idea is to

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Speaker 1: provide the funding needed for complex lawsuits in exchange for

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Speaker 1: a share of the recovery. The rapid growth has raised

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Speaker 1: questions about the impact on the litigation system. In the

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Speaker 1: world of litigation finance, no player is bigger than Berford Capital,

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Speaker 1: a publicly traded company that says it has more than

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Speaker 1: two billion dollars either invested in litigation or available to

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Speaker 1: be invested. Our guest today is a managing director of

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Speaker 1: Burford Capital. He's Travis Lechner uh and he is with

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Speaker 1: us on on the phone today. Travis, thanks so much

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Speaker 1: for joining us. Um tell us a little bit about

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Speaker 1: Burford Capital and particularly what kind of cases do you

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Speaker 1: fund and and how do you how do you select

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Speaker 1: what cases you're involved in? Sure? Well, thanks Gregg, it's

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Speaker 1: nice to be with you. Um So. At Burford we

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Speaker 1: are a global finance firm focused on law and at typically,

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Speaker 1: but not always means we're focused on litigation, finance transactions

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Speaker 1: and usually the types of litigation that we become involved in.

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Speaker 1: Our complex commercial cases. So you can think about breach

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Speaker 1: of contract, business tort antitrust, or intellectual property matters as

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Speaker 1: some of the leading types of cases where our outside

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Speaker 1: capital might be helpful and usually for us to make

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Speaker 1: an investment are our investment minimum size is a million

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Speaker 1: or two million dollars is about the smallest investment we

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Speaker 1: would make, and so that means that the smallest size

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Speaker 1: of the case in terms of the damages in dispute

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Speaker 1: in the case would probably be somewhere around twenty million dollars.

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Speaker 1: So these are high dollar, significant commercial disputes that are

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Speaker 1: being litigated by a lot of brand's name law firms

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Speaker 1: that that you and I and your listeners know very well.

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Speaker 1: And when you get involved in a case, is your

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Speaker 1: agreement with the law firm who's representing the party, is

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Speaker 1: it with the party themselves, is it with both of them?

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Speaker 1: And what are they giving up to you in exchange

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Speaker 1: for for your involvement in your in your financing. Well,

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Speaker 1: the answer is that it depends on why we're getting

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Speaker 1: involved and why we're being brought into the case. So,

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Speaker 1: in the most straightforward example of litigation finance, UH, the

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Speaker 1: user of litigation finance, a client, a litigant would approach

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Speaker 1: us to obtain our capital to pay some or all

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Speaker 1: of the cost associated with the lawsuit. And so in

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Speaker 1: that type of situation, which is kind of the garden

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Speaker 1: variety litigation finance investment, our agreement ultimately would be with

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Speaker 1: the client, the litigant itself. But the breadth of services

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Speaker 1: we provide extends also to situations where we might be

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Speaker 1: providing a financial solution to a law firm that does

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Speaker 1: a lot of work on a contingent fee and wants

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Speaker 1: to reduce the risk that all of those contingent fees

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Speaker 1: pose in the event that many or none of the

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Speaker 1: contingent fee cases are ultimately successfull. And so in that circumstance,

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Speaker 1: we might have an investment with a law firm based

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Speaker 1: on a single piece of litigation or based on a

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Speaker 1: portfolio of the of the firm's cases, and in those

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Speaker 1: types of situations, our agreements are with the firm. So

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Speaker 1: we have a lot of different investment in transaction structures,

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Speaker 1: and it's the structure that makes the difference of who

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Speaker 1: it is that's signing the contract alongside us. Well. One

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Speaker 1: of the questions that that sort of surrounds litigation finance

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Speaker 1: has been an issue of transparency. Is when you are

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Speaker 1: involved in in a case, is that something that is

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Speaker 1: that that is publicly known as part of the litigation.

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Speaker 1: It generally is not disclosed and is not required to

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Speaker 1: be disclosed. And the the analogy or one of the

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Speaker 1: analogies is actually to a contingent fee. Uh, It's very

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Speaker 1: rare that the details of or the terms of a

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Speaker 1: contingent fee agreement that a client would enter into with

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Speaker 1: a law firm would be disclosed to the court or

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Speaker 1: to the other side in the litigation. That is a

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Speaker 1: matter between the client and its counsel. And so to Here,

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Speaker 1: if a client has an agreement with a third party

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Speaker 1: that allows it to obtain capital secured by an asset,

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Speaker 1: unless that is actually relevant to the claims and defenses

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Speaker 1: in the litigation, which is almost always not the case,

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Speaker 1: then we would not typically be disclosed as part of

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Speaker 1: the case itself. Does it does it? Is it fair

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Speaker 1: to say that it alters the incentives in litigation when

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Speaker 1: a third party, when a a litigation finance company gets involved.

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Speaker 1: I mean, I'm thinking you know, if I'm if you

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Speaker 1: file a lawsuit against me, your interest is is uh

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Speaker 1: in getting is in winning the lawsuit, getting getting a

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Speaker 1: certain amount of justice for yourself, But then you get

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Speaker 1: somebody else who's involved and has a financial stake in it.

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Speaker 1: Doesn't that sort of change how everybody looks at things. Well,

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Speaker 1: if we're doing our job, greg, it's shouldn't change the incentives.

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Speaker 1: And what we try to do when we're structuring investments

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Speaker 1: that we make is to make very sure that that's

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Speaker 1: not the case. So I'll sort of give you a

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Speaker 1: back of envelope example. Our rule of thumb is that

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Speaker 1: our investment return should not be taking up more than

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Speaker 1: half of the client's share of the litigation proceeds. And

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Speaker 1: that is so that if the client is at the

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Speaker 1: settlement table or in a mediation, we want the client

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Speaker 1: incentivized to take a settlement as opposed to using our

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Speaker 1: capital to to take more risk and to swing for

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Speaker 1: the senses when the client otherwise would have settled the case.

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Speaker 1: A settlement is good for us, right because that's the way,

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Speaker 1: that's the only way, unless there's a win ultimately in

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Speaker 1: the litigation, that we receive a positive return on our investment.

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Speaker 1: So there's much talk about the incentives related to litigation,

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Speaker 1: and in connection with litigation finance, But in fact we

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Speaker 1: want the incentives to say the same because importantly we

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Speaker 1: don't have any control rights related to the litigation, so

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Speaker 1: we don't control the settlement decision. We can't force a

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Speaker 1: client to settle. So when the clients at the settlement table,

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Speaker 1: we want them incentivized in the same way that they

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Speaker 1: were before so that they make rational economic choices that

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Speaker 1: can benefit everyone. Does litigation finance encourage litigation? That's one

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Speaker 1: criticism that that I've seen lodged by folks like the

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Speaker 1: Chamber of Commerce right well there too. If if we're

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Speaker 1: doing a good job and if we're going to be

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Speaker 1: in this business for very long, uh, it shouldn't encourage litigation. Frankly,

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Speaker 1: we're discouraging litigation because we invest in a very small

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Speaker 1: single digit percentage of the number of opportunities that we see,

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Speaker 1: and much more often, when when as is almost always

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Speaker 1: the case, we are passing on an investment opportunity, we

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Speaker 1: are explaining to the other side why we are passing

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Speaker 1: on that opportunity and helping them understand more about the

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Speaker 1: likelihood of success or or the low likelihood of success

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Speaker 1: in their particular case. So generally speaking, we only want

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Speaker 1: to be involved in meritories cases. That that too is

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Speaker 1: how we are ultimately successful in this business. And so

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Speaker 1: where a case has merit uh is it weren't funded

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Speaker 1: by us, it would be picked up by a contingent

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Speaker 1: fee law firm. There would be some capital solution already

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Speaker 1: out there that would allow that to come into the

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Speaker 1: court system. So i've I have yet to see a

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Speaker 1: real example of litigation finance encouraging litigation. But as you mentioned,

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Speaker 1: that has not stopped the chamber no slave is it

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Speaker 1: two facts you know? That is that has not stopped

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Speaker 1: it from using that as a as a talking as

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Speaker 1: a talking point about what we do. Okay, I want

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Speaker 1: to thank our guests. It's Travis Linkner. He's the managing

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Speaker 1: director at Bervard Capital, which is the largest company involved

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Speaker 1: in litigation finance with some two billion more than two

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Speaker 1: billion dollars either invested or available for investments in uh

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Speaker 1: in in lawsuits. Uh. That's it for this edition of

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Speaker 1: Bloomberg Law. Thanks for joining us. Thanks to our technical

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Speaker 1: director Chris tri Comy in producer Mark Sinnis Cauchi. Coming

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Speaker 1: up next on Bloomberg Bloomberg Radio Bloomberg Markets with Cray

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Speaker 1: Johnson Corey is here to tell us what they're gonna

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Speaker 1: be talking about. How familiar are you with the dancing

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Speaker 1: hot dog phenomenon? Uh? Not very that not very well.

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Speaker 1: There are dancing hot dogs on Snapchat and all kinds

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Speaker 1: of other fantastic filters that make your disappearing matches that

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Speaker 1: look great. But nothing can make the stock lo grate.

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Speaker 1: It's down twelve percent today. Mo when is trading at

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Speaker 1: twenty nine dollars a shriff of the ibe O. It's

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Speaker 1: that with the tender wall making dogs, make those hot

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Speaker 1: dogs come alive. This is Bloomberg