Reed Oslan, one of the litigators behind Kirkland & Ellis' new push into contingency work, said this week he views these cases as "currency" that could be traded for other discounts. They even could help dislodge the billable hour. What does he mean? Want this dispatch in your inbox every Thursday? Sign up here.

Contingency as Currency?

There's a fine line between contingency work and litigation finance. That's one of the messages that kept emerging in a discussion yesterday in the second annual LF Dealmakers Forum in New York. It popped up in Susman Godfrey founding partner Steve Susman's keynote address, and again in a provocative discussion on "best practices in law firm finance" featuring voices from Kirkland & Ellis and Quinn Emanuel.

Kirkland, remember, announced a couple of months ago that it was "doubling down" on contingency-fee litigation. In response, John Quinn told my colleague Jack Newsham that the announcement was a non-event, saying that he had little doubt that any contingency case Kirkland is taking now, it would have also taken six months before the announcement.

But yesterday, Kirkland litigator Reed Oslan, who has had a hand in a significant number of contingency cases over the years, agreed with Quinn Emanuel's Richard Schirtzer that the rise of litigation finance could prompt a philosophical shift in how both clients and law firms approach their contingency cases. That shift might even make a dent in … wait for it … the primacy of the billable hour.

When looking to score points about their foresightedness, lawyers are often quick to bemoan the stubborn persistence of the billable hour. So I appreciated Schirtzler's honesty here:

"Even in a place like Quinn, that's pretty entrepreneurial … as long as we could continue with the straight hourly rate model, we would," he said. "Pressures are going to come from clients and from the market rather than from within the firm."

But as clients become more comfortable with litigation finance and begin viewing their affirmative claims as potential assets, they could even start to serve as "currency" that could shift the discussion away from billable hours and discounts, at least for clients whose primary need is defense-side and corporate work.

Oslan explained it like this: "I'll give you two plaintiffs' cases, I'll give you all of my plaintiffs' cases if you give me 50% on a fixed fee of work, or whatever the structure turns out to be."

For Oslan, this was one of the key reasons underpinning Kirkland's newly public receptiveness to contingency work, beyond one other simple point: the work is more fun.

"The atmosphere is fantastic," he said. "It puts you in full alignment with the client."

Self Regulation on the Horizon?

What were the litigation funders talking about?

A more compelling question, considering the generally rosy outlook surrounding the industry that comes from their communications, is what are they worried about?

Anything that puts the industry in a negative spotlight, for one. Like overly optimistic, inexperienced, or unscrupulous capital charging in and causing a stir. Aligning the interests of funders, claimants and attorneys is a delicate procedure that has to be handled with care.

"Don't try this at home," said Aaron Katz, chief investment officer at Parabellum Capital. "The ethics and the boundaries, these things really matter."

Allison Chock, CIO at IMF Bentham, also raised alarm about what she called "garage band funders." She recently received a subpoena in a case where a litigation funder threw money at a claim after learning that Bentham had expressed interest in a case.

"You know everyone can call us, right? We'll send out an NDA, we'll collect information. But that does not mean that we've vetted the case, that we want to fund the case, that we've given any sort of validity," she said. "It is really interesting the credulity that has been thrown out the window by these folks."

Consequently, while these leaders remain alarmed by the U.S. Chamber of Commerce's assault on the nascent industry—which Chock said has moved from the federal level to state legislatures where lawmakers are largely uninformed about the industry—regulation was not a dirty word on Thursday.

"I'm in favor of reasonable, smart regulations that understand what we do," she said.

In an industry filled with formerly practicing lawyers, self-regulation is an appealing prospect. It's familiar, at least. But there's been very little serious talk of it up to now, I learned yesterday, although that could change.

"It would behoove the industry to start a self-regulating institution to lay out the parameters," said Michael Kelley, an attorney at Parker Poe, whose practice includes advising on structuring litigation finance transactions.

That organization could also take up the outreach to the judiciary necessary to fill in judges who are "just getting their feet wet" about the goals of funders.

"This would be the perfect subject for a trade group. They could do that in a fully neutral way," said one attorney attending the discussion. "Hell, you could invite the Chamber."

In the News

➤➤ Lots of talk about efficiencies and redundancies this week, with the news that Morgan Lewis is offering buyouts to its U.S. legal secretaries. My colleague Lizzy McLellan found that efforts to streamline the secretarial function in law firms have been going on quietly for years. And it's not just the U.S., nor the legal industry. The FT reported yesterday that KMPG U.K is cutting between 200 and 250 administrative roles, and noted that law firms like Allen & Overy, Herbert Smith Freehills and Freshfields had pared back their pricey London offices by moving administrative operations to cheaper cities like Belfast and Manchester.

➤➤ One place money is flowing: legal tech. Bob Ambrogi found that, with $1.2 billion invested in the field and over three months remaining in the year, 2019 is going to blow past last year's numbers.

➤➤ And finally, I'm always interested in hearing what new law firm leaders say when starting on new terrain. GrayRobinson's new president and CEO Dean Cannon—the former Speaker of the House in Florida's state Legislature—highlighted the firm's "very thin architecture of management and minimal bureaucracy" in a conversation with my colleague Dylan Jackson.

Back again next Thursday! What do you want to hear about? Tell me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.