Among Am Law 50 Firms, a Growing Appetite to Share Risk With Clients on Plaintiff-Side Matters

There seems to be a growing appetite among litigation departments among the Am Law 50 law firms—a cohort long associated with defense-side work for corporate defendants—to share risk with clients on plaintiff-side matters.

Let me present Exhibit A: Leaders of the litigation department at Kirkland & Ellis, the top-ranked firm in terms of gross revenues on the Am Law 100, notably announced four years ago via an interview with my predecessor at the Litigation Daily that they were launching a self-funded, plaintiffs-side trial group aimed an increasing the number of the firm’s contingency matters by 10-fold or more.

What’s Exhibit B?

This morning Burford Capital is publishing a roundtable the litigation funder conducted with four litigation department leaders at law firms that sit in the top 40 of the latest Am Law rankings: Troy Brown of Morgan, Lewis & Bockius (#8), Theane Evangelis of Gibson, Dunn & Crutcher (#9), Michael Lackey of Mayer Brown (#19) and Timothy Mungovan of Proskauer Rose (#39). Burford’s Evan Meyerson—who himself previously logged time as an associate at Paul, Weiss, Rifkind, Wharton & Garrison and Sullivan & Cromwell—handled the moderator role. Although Meyerson’s questions didn’t prompt pronouncements quite as explicit as Kirkland projection of “10-fold or more” growth, all four Big Law litigators who participated in the roundtable indicated there’s a growing appetite among both clients and firms for some shared risk through plaintiff-side contingency and partial contingency fee arrangements.

Brown, the leader of the global business disputes practice at Morgan, Lewis, stressed that the trend is both firm- and client-driven. “While many of our clients expect their outside disputes counsel would put some ‘skin in the game’ for plaintiff-side work, there appears to be a growing appetite for these matters in recent years, and we want to be on the frontlines prosecuting these claims,” he said.

Mungovan, the chair of the securities litigation practice at Proskauer, and immediate past chair of the firm’s whole litigation department, said the firm has always handled some plaintiff-side work for corporate clients, but what’s changed is the firm’s desire to share some of the risk. He said the practice originated in plaintiff-side patent litigation in the mid-2000s and picked up significantly after the credit crisis. “Some of the impetus is coming from clients, but there are other factors at play too, including the opportunity for profits above a pure hourly rate model and the availability of third-party capital to underwrite some of the risk,” he said.

Evangelis, one of the co-chairs of the global litigation practice at Gibson Dunn, said while client demands are driving the trend, advances in technology and data analytics have made it easier for the firm to gauge risk on particular matters and in its broader contingency portfolio. “Increased access to funding sources to help offset some of the firm’s risk also plays a role,” she said. “In other words, it is partly client demand, but in many respects the expansion is driven by the availability of better tools and platforms to allow us to take on cases that may have been harder to take on in the past.”
Evangelis added that plaintiff-side work “is often the epitome of bet-the-business work” and being in a position to share risk on that work helps win assignments on cutting-edge cases. She said taking on those sorts of tough cases and delivering results can help the firm land more plaintiff- and defense-side work.

Lackey, who is a member of the global management committee at Mayer Brown, said helping clients identify valid claims where it makes business sense to pursue them is just another valuable service firms can provide for clients. He said allowing in-house legal departments to make a positive contribution to their company’s bottom line can help burnish their internal reputations as well.
Lackey added he doesn’t think the transition from handling cases on the defense side to pursuing them as a plaintiff is all that difficult. Both plaintiff and defense counsel, he said, make an assessment about the validity of claims, the potential damages at stake and whether the case would appeal to jurors. “Thus, I think there is substantial overlap between the two sides, and even attorneys who predominantly defend clients are sometimes retained by their defense-side clients to pursue claims,” he said.

Evangelis agreed with that sentiment, adding that “foundation skills of an effective litigator”—thinking strategically, being creative, communicating effectively, and negotiating effectively—are “universal” to the practice. “To be an effective litigator, whether defense- or plaintiff-side, you have to put yourself in the shoes of your adversary,” she said. “By understanding motivations and strategies, you can better anticipate the other side’s moves, identify weaknesses in your opponent’s argument, and develop a stronger case.”

She said the same concept applies to the economics of a case where defense counsel will want to analyze the economic motives of plaintiffs to shape strategy. She said when it comes to taking on contingency-fee assignments it’s key to partner with the right clients to make sure the arrangement has enough upside for everyone involved. “You need to make sure you have agreed-to objectives and are aligned on how to proceed should unanticipated events occur,” she said. “As the risk profile increases, it becomes more and more critical that you are not just asking these questions on a case-by-case basis, but making sure that you have a clear understanding of the overall risks of all your contingency work.”

Mayer Brown’s Lackey added that he thinks firms need to be “very deliberate and strategic” about developing a portfolio of cases, and creating a budget to track performance for individual cases as well as the portfolio as a whole. “You need to have a plan and manage to that plan,” he said.

On that point, Brown of Morgan Lewis said his firm looks at its portfolio from the same sort of holistic perspective an individual would look at their personal investments. “There are no guarantees of success. Some investments will pay off and some will not,” he said. “With sound analysis, disciplined management of matters across an entire portfolio and top-of-market litigators and trial lawyers involved in every case, our clients and we expect many more successes than setbacks.”