The Inside Track on What Makes the World's Elite Law Firms Successful
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The inside track on what makes the world’s elite law firms successful JUNE 2019 THE FREE MAGAZINE FROM THE LEGAL 500 Issue ⁰⁷ Talking Brexit: Where HEIDI KEEFE Talking Brexit: Where next for COOLEY Londonnext for as London a disputes as centre? a disputes centre? Clyde & Co.’s PETER HIRST Trial lawyers must be better listeners DOROTHY CORY-WRIGHT DECHERT Scaling up in London OZ BENAMRAM WHITE & CASE From Uber to Lawber? TRAVERS SMITH’s DANIEL GERRING HOGAN LOVELLS’ JUAN FRANCISCO TORRES LANDA RUFFO HERBERT SMITH FREEHILLS’ GEORGIOS ZAMPAS MOURANT’s JESSICA ROLAND FRANKFURT KURNIT KLEIN & SELZ’s TANYA FORSHEIT AND JAMES MARIANI OUTER TEMPLE CHAMBERS’ REBECCA PRIESTLEY COOKE YOUNG & KEIDAN’s ROBERT COFFEY and SINEAD O’CALLAGHAN plus many more June 2019 fivehundred 01 Editors’ views Is funding defendants the future of disputes? Litigation funding has secured a place in the US disputes landscape, yet questions remain about the benefits – and future – of third-party involvement, writes Laura Pollard espite initial reluctance from corporates and law firms, litigation funding has become a more accepted feature of the US commercial litigation Dlandscape, although it has only been largely embraced by plaintiffs thus far. That, however, may be about to change as funders are expected to step up their pursuit of defendants. Litigation funders provide all or some of the financing to cover the costs of disputes. In return, they receive a slice of the winnings if the case is successful; this may be a percentage of the damages or a multiple of the amount of funding provided. If the case is not successful, the funder may simply lose its investment. For investors, it is easy to see the allure of an asset class which is uncorrelated with economic cycles, particularly in the context of low interest rates or stock market volatility. Litigation funding has proved an attractive option for major 92 fivehundred June 2019 June 2019 fivehundred 93 “Ten years ago it wasn’t very common, but “One obvious area of concern is that the now, most lawyers who are handling large, litigation funder will have inappropriate sophisticated disputes will receive outreach or undue influence on the plaintiff being from potential litigation funders” funded” Tad O’Connor, partner, Kasowitz Benson Torres Mark Goodman, co-chair of litigation, Debevoise & Plimpton investors, including hedge funds. The Mark Goodman, co-chair of they may not have sufficient firm, they’ll trust the firm to do what potential returns are large, although Debevoise & Plimpton’s litigation resources to fund themselves. is in it and the client’s best interests. the unpredictability of litigation, and team, notes: ‘Litigation funding is This access to justice argument is Then it’s all set up so that the the confidentiality of the agreements, more routinely being used to fund certainly appealing in what can be a funder benefits too.’ can make it a tricky asset class to business-to-business disputes, which prohibitively expensive legal system. analyse. are the types of cases in which large, Not everyone shares this rosy view, Still, the fear that funders could traditional firms feel comfortable however, and some commentators try to direct a case is a pervasive Third-party funding has not always being involved. Commercial contract ask whether an industry centred one. Others question whether the been greeted with open arms, though. disputes, for example, don’t raise the on profit-making can rely on introduction of a third party could Steven Davidson, partner at Steptoe kinds of conflicts for firms like our arguments about fairness. reduce the plaintiff’s own financial & Johnson, notes how the largest law firm that might arise in, for example, incentive enough to affect their firms have historically represented mass tort cases.’ ‘One obvious area of concern is interest in the case. defendants, rather than plaintiffs, in that the litigation funder will have personal injury, wrongful death, and Funders are also increasingly visible inappropriate or undue influence There are also operational mass tort litigation, which in the market, touting for work. ‘More on the plaintiff being funded,’ questions. As large amounts of may account for such firms and more funders are reaching out to says Goodman. ‘However, in money are now being directed feeling a level of suspicion towards lawyers or law firms to see whether our experience, as long as we towards litigation funding, some funders. their clients would like to consider are working with a funder who is fear this could lead to weak claims litigation funding,’ says Tad O’Connor, ethical and who has put in place an being pursued, simply because ‘I think that’s changed, because a lot partner at Kasowitz Benson Torres. appropriate funding agreement and money is available. The of the litigation funding has moved ‘Ten years ago it wasn’t very common, other governing documents that obvious counterargument is that into traditional commercial disputes, but now, most lawyers who are clearly define the funding entity’s funders want to make good where there isn’t necessarily a real handling large, sophisticated disputes role, this has not been an issue.’ returns, and will only invest in dichotomy between plaintiff and will receive outreach from potential cases likely to succeed. defendant,’ Davidson says. After all, litigation funders.’ Gerry Silver, leader of Sullivan & he adds, ‘it’s certainly commonplace Worcester’s litigation group, notes Unsurprisingly then, successful for a large company to have a Access to justice? that while funders typically want to funders will employ experienced commercial dispute with another Proponents of litigation funding receive updates on their investment, lawyers, previously from leading large company or a country’. argue that it allows plaintiffs to they do not dictate the strategy. ‘If law firms, who can effectively pursue meritorious claims which the funder is aligned with the law analyse a case. ‘These people 94 fivehundred June 2019 June 2019 fivehundred 95 “If the funder is aligned with the law firm, “The more new entrants to the market there they’ll trust the firm to do what is in it are, the more competitive and potentially and the client’s best interests” saturated the market for litigation funding becomes” Gerry Silver, litigation lead, Sullivan & Worcester Tariq Mundiya, chair of litigation, Willkie Farr & Gallagher know what they are doing,’ says which the industry raises. protection had not been While it is clear litigation funding Silver. ‘They know what the ‘If the plaintiff is receiving waived. is playing a role in the US problems could be, and they litigation funding, a key question commercial litigation market, what know the upside and the potential is whether that should be This decision concurred with an remains to be seen is how far new cost.’ automatically discoverable,’ earlier case, Miller UK Ltd v developments, such as those in says Mundiya. ‘Should there be Caterpillar Inc. Here, the court defence-side funding, might impact The best-known funders are mandatory disclosure? There held that materials provided the industry – and the litigation those which have been around are arguments on both sides, to prospective funders under a landscape – in the the longest, like Burford Capital but I think that transparency in a nondisclosure agreement were future. and Bentham IMF, but there are dispute always helps.’ protected. newer players too. ‘The number ‘There’s a fair amount of money of litigation funders seems to be Many courts have thus far been In 2018, the New York City Bar in the market from litigation increasing, almost exponentially. reluctant to compel disclosure Association established a litigation funders and other investment There used to be a handful of of funding documents, often funding working group, which is vehicles – like hedge funds – and big players, but we’re learning referring to the work-product studying the issues involved in they’ll be looking for new ways about lots of new entrants to doctrine, which protects from third-party financing, including to make investments,’ remarks the market,’ says Tariq Mundiya, discovery certain materials disclosure. It expects to publish Davidson. ‘Funders chair of litigation at Willkie Farr prepared in anticipation of a report by the end of 2019 and moving to the defence side & Gallagher. ‘The more new litigation. has invited comments from could be the next trend.’ entrants to the market there stakeholders. are, the more competitive and In Viamedia Inc v Comcast Davidson is not the only lawyer potentially saturated the market Corporation et al, before the ‘Although the practice of litigation to speculate on funders investing for litigation funding becomes.’ Northern District of Illinois in funding has become much more in defendants' cases in the near 2017, the defendant sought prevalent,’ says Davidson, ‘it is still future. How this could work Disclosure issues production of documents not exactly clear whether courts in practice, however, is not As third-party funding becomes disclosed by the plaintiff to and arbitral bodies will just accept yet clear, but the legal market – increasingly prevalent, the prospective funders. The court it as a normal part of the litigation and this particular researcher – courts have more opportunity found the documents were process, or whether they’ll show will no doubt be watching with to consider the technical issues shielded from discovery, and that some scepticism towards it.’ interest. n 96 fivehundred June 2019 June 2019 fivehundred 97.