- General counsel say they expect to see an aggressive litigation terrain over the next few years because of the uncertain economy, but how much they pursue even meritorious cases will depend in part on their company’s cash picture, a survey by Ari Kaplan Advisors finds.
- If they can work with law firms to take some of the risk or otherwise offer creative ideas for softening the cost, GCs say, they would pursue more recovery cases as a value-add to their company. However, many law firms won’t abandon the billable-hour model, the 2023 General Counsel Survey of 63 in-house legal leaders says.
- About a third of GCs say they would consider litigation funding as an alternative for financing recoveries at a time when the company doesn’t have cash to spend, says the survey, which was commissioned by a litigation funder, Burford Capital.
Almost two-thirds of senior in-house lawyers say company liquidity is key to whether or not they pursue a claim, even a meritorious one.
“Cash flow is the most important factor for us when pursuing litigation,” the GC of a software company said in the survey report.
Another GC said their company is unlikely to pursue a case when it’s cash-strapped because that’s not how it wants to spend its limited resources.
“Lawyers are not where companies want to put their money when they do not have enough of it to spend,” the GC said.
Two-thirds of GCs say the ability to control the timing of recoveries is important, which means they would be looking to an outside law firm or a third-party funder to step in on the front end in exchange for a share of any recovery on the back end of a lawsuit.
“I would structure [litigation] so that we don’t have cash outlay at the beginning by using a law firm on contingency or litigation finance,” a senior legal director of a food and beverage conglomerate said. “This is not the time for the company to spend its own money on [a] potential future recovery.”
Almost 80% say it would be useful to have the capability, either in-house or in the outside firm, to do quantitative modeling to help them decide whether to pursue a claim, but two-thirds say they or their outside counsel don’t have that expertise.
“Most law firm litigators don’t think about the business aspects of a case,” a telecommunications company GC said. “Rather, they just think about litigating the merits.”
The capabilities to financially model a case would help arm GCs to be a value-driver in an uncertain economy, the survey said.
To that end, more than half of GCs that have a recovery strategy say their goal is to transform the legal department from a cost center to a profit center.
“Our job is not just to defend lawsuits,” the vice president of litigation for a food and drug company said. “Instead, we also look at how to use litigation to secure large recoveries.”
A third of GCs say that some kind of monetization — taking in money upfront on the expectation they’ll win an award later —would be appealing to their company.
“I would welcome litigation funding when I would need to recover the claim and it [is] difficult to find a lawyer to take the case on a contingency matter,” a GC said.
GCs say they expect their outside counsel to be an information source on third-party funding but that doesn’t happen enough.
“Many say that their law firms aren’t speaking to them about legal finance, but should be,” the report says.