If the litigation finance industry received a jolt forward during the Great Recession, what does the COVID-19 pandemic have in store for an industry that's grown in leaps and bounds? And are litigators prepared to take advantage? Want to weigh in? Email me here. Want this dispatch in your inbox every Thursday? Sign up here.

Shining In a Dark Time

Litigators and litigation funders alike are trying not to revel in the moment. It's obvious that many strands of misfortune emerging from the COVID-19 crisis will ensure that the courts stay busy through the next few years. We can see just one element of this in the growing debate on Capitol Hill on whether to shield manufacturers and other employers from coronavirus-related lawsuits.

Regardless of how that fight gets resolved, it's a delicate balance to project empathy while at the same time embracing the opportunities out there.

"As difficult as these times are, this is a little bit of gas on the fire for what has been some pretty remarkable growth for the litigation funding industry," Kirkland & Ellis partner Reed Oslan said during a Thursday roundtable about the state of the sector, taking a stab at hitting the right tone.

One of the key figures behind Kirkland's recently publicized push into contingency work, Oslan shared that the phones at the firm have been "ringing off the hook" with clients looking to convert existing fee-based litigation into matters where they don't have to pay up front.

Kirkland, for its part, has both deep coffers and an appetite for risk taking, the two prerequisites enabling a firm to put its own money on the line.

But for other law firms, that call from the client suddenly looking to marshal its own liquidity is more likely to be followed with an outgoing call to a third-party funder so the firm itself isn't on the hook.

Olsan drew a comparison to the Great Recession, which he pegged as a foundational moment for the business of third-party finance.

"What I find interesting about the sort of unfortunate circumstances we're in today is I think that the demand for risk sharing and therefore litigation funding will be even greater, far greater, than it was in 2008," he said, contending that the burden then was being borne disproportionately by clients.

"While I think that's sort of true now, I think that law firms also, for the most part, are feeling very significant pressure themselves," he added.

Nonetheless, in spite of what industry voices have been saying for some time now about greater openness to third-party capital, there's clearly still hesitation. The Dealmakers Forum, which organized the conversation, took a flash poll of attendees in law firms to see who in the "virtual room" had reached out to outside funders. In a crowd that had already self-selected towards curiosity about the practice, only 10% of respondents said they had made contact, with another 30% saying they were "thinking about it," leaving a majority who showed no signs of getting on board.

But even if the firms aren't yet driving the bus, they might still wind up at the destination. Oslan expressed initial amazement that many clients were going directly to funders rather than approaching firms, but said he then realized they were simply doing a better job of marketing.

"As funders open doors, they will seek out law firm partners and say, 'We have an opening at XYZ company. Will you come pitch with us?" he said. "We think that's a fantastic thing."

And for the firms on the bleeding edge, there are opportunities to leverage their relationships with funders to push these opportunities to clients. Those firms that can promise, based on these ties, that they can provide capital to support a strong claim are bound to have an advantage.

"It will become easier as it gets more accepted," Dentons partner Alanna Clair said of co-marketing arrangements.

Also on the rise? Monetizing claims. Law firms may have always had the power to cover litigation costs, but one thing they can't do is offer struggling clients a lifeline to keep their businesses afloat while a case plods along to resolution. Third-party funders can advance millions of dollars against the expected value of a claim. And as the tide of misfortune continues to swell, that one strong case might be the difference between an enterprise that survives the pandemic and one that doesn't.

That's a big deal for the players who have a role in advancing these cases, litigators and funders alike.

In the News

➤➤Dealmakers Forums aren't the only event organizers turning to virtual conferences to fill the void of in-person assemblies. My colleague Frank Ready found that Zoom fatigue is a real concern, as other groups look to bring previously scheduled meetings online. "One person said to me the other day, 'I've never been on so many useless video calls in my entire life,'" Joy Heath Rush, CEO of the International Legal Technology Association, told him.

➤➤Nonetheless, as I've talked about here before, this pandemic is fundamentally altering lawyers' relationships with technology. Over at Above the Law, Bob Ambrogi situates this among seven inevitable changes to legal practice; a few of the others will also be familiar subjects to regular readers here.

➤➤And, in our pages, consultant Jay Harrington says now is the time to adopt systematic reforms to how law firms operate, moving away from ad hoc strategies to measures that ensure accountability and follow through. Firms also need to recognize that they're operating in an ecosystem where they'll be increasingly asked to perform discrete tasks in conjunction with alternative providers and software algorithms. It's time to embrace what he calls the "Hollywood model" of work, where a producer (or a law firm) builds a team based on the specific needs of the film (or engagement.) Food for thought.

Wash your hands, keep your distance, try your best to stay sane, and you'll hear from me again next Thursday. Thanks again for reading, and please feel free to reach out to me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.