Tired of feeling like your legal department is a cost center? Fielding too many questions about the outside counsel spend, headcount and all the costs you generate? In this episode, you’ll learn how to start an affirmative recovery program that can generate millions of dollars for your company. Veteran GC Andrew Johnstone, formerly in-house at Sears and US Foods, joins Greg McPolin of Burford Capital to share the “how” and “why” of building an affirmative recovery program in your in-house legal department. If you’re not pursuing affirmative claims for your company, you’re leaving money on the table. Tune in to learn how to generate positive cash flow and an ROI from your in-house legal work.

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Make Your Legal Department A Revenue Generator With Greg McPolin And Andrew Johnstone [E77]

My name is Greg McPolin. I am a managing director at Burford Capital. A fun fact is that in law school, in my Fourth Amendment seminar, I was awarded the American Jurisprudence Award after I wrote a screenplay for the final. 

I’m Andrew Johnstone. I am outside counsel. I buy more champagne than anyone you know. My champagne collection is over 6,000 bottles.

In this episode of The Legal Department, I’m pumped up to talk to my guests. I have Greg McPolin, who’s Managing Director at Burford Capital, and Andrew Johnstone, who’s currently outside counsel, but previously in-house at US Foods and Sears. We’re going to be talking about affirmative recovery and how in-house counsel can get on the other side of the table in litigation. Guys, how are you?

We’re doing great, Stacy. Thanks so much for having us.

Defining Affirmative Recovery & Real-World Results

I’ve been wanting to do this episode for over a year. Greg, you and I met about a year ago. Our conversation got me pumped up. I’ve had some good results in the recovery space. This is an area that in-house teams don’t have on their radar. I’m hoping we can deliver some value to the audience. I want to start off by setting the table. We all three know what affirmative recovery is, but what is an affirmative recovery practice? What results can you get? Andrew, can you lead us off?

Affirmative recovery is basically a matter, an engagement, and a lawsuit where you bring in money for your client, for your company, and for your legal department. As an example, when I was at Sears, Sears, as a retailer, bought lots and lots of consumer electronics. For a long time in the ’90s and the 2000s, there were some pretty active antitrust matters in that space. Sears had a rather large claim in what was called the CRT television litigation. If you remember big fat tube TVs, that’s what we used to watch TVs and movies on. Sears bought a lot of those. There was a big antitrust case involving those televisions. At Sears, we recovered more than $500 million through the cases that we had against suppliers of CRT TVs.

Your team did that?

Yes.

Mic drop right there.

Unbelievable. What a result.

That sounds like a once-in-a-lifetime. When we spoke before, this was a regular part of your portfolio at both companies. Let’s talk a little bit more. It wasn’t just one lottery ticket that hit.

When you're interacting with clients, it's because they're coming to you about an instance where you're playing defense, not offense. Share on X

No, absolutely not. I talked about how consumer electronics were a fertile ground for recoveries. When I was at Sears, we had cases that involved all sorts of things, not just CRTs, but LCDs, DVDs, Blu-rays, and stereo equipment. We even went further down into the components of consumer electronics. We had cases involving capacitors and drives, like CD drives or DVD drives. We had literally dozens and dozens of recovery opportunities that we were pursuing at Sears, in the consumer electronics space alone.

Looking at the products that your company sold, was it an antitrust pricing litigation?

Beyond Antitrust: Diverse Recovery Opportunities

Yes. Those cases were about antitrust pricing litigation. That’s obviously fertile ground, depending upon your industry, for potential recoveries. We had recoveries in all different areas that didn’t involve antitrust. As an example, when I was at US Foods, we had a recovery that related to defects in trucks that we purchased. US Foods is a big distributor of food to restaurants, hospitals, and other customers like that throughout the United States. To do that, they use trucks. US Foods is a big buyer of trucks. Because of a defect that existed in one of the engines of the trucks that we bought, we had a major recovery against the manufacturer of those trucks. It had nothing to do with antitrust.

A product defect case?

Yes, it was a product defect case.

Greg, I want to turn to you real quickly. Burford Capital is a litigation financing firm. You are on the ground, aware of different claims that are out there. Talk a little bit about general categories that different companies may have claims in.

It does run the gamut, as Andrew talked about. There are lots of opportunities in the antitrust opt-out context, for sure, and price-fixing litigation. Big companies, as they are producing and manufacturing the products that they sell, have to buy all of the component elements of those products that they sell and are purchasing in large volumes.

When the companies that they purchase those elements from, those building blocks, engage in potential price-fixing or cartel behavior, that drives a lot of antitrust litigation. Companies can decide to opt out of those class action antitrust cases. That is a very lucrative area for companies to become corporate plaintiffs because they typically do much better in terms of recovering dollars, monetary redress from that behavior than if they remain passive class members.

It’s definitely the class action opt-out claims. It is any kind of commercial dispute. Companies are engaged in lots of complex business arrangements with suppliers, vendors, partners, etc. That often leads to disputes. To the extent a company is wronged in the form of fraud or breach of contract, etc., they can seek monetary redress by filing an affirmative claim, whether it’s a litigation or arbitration.

In any breach of contract or fraud, insurance recovery is another one that we see on occasion. When companies are denied insurance coverage by their insurers, there is an opportunity for them to fight against those claim rejections. Defect litigation, Andrew mentioned that. That’s another one where companies can become corporate plaintiffs because they bought faulty or defective products as well.

This is an area where you can't just jump in overnight and expect to generate big dollars. It rewards time, effort, and investment. Share on X

Overcoming In-House Mindset Barriers

As you’re talking, I’m sure a lot of my in-house colleagues are thinking about the notices they get. Everybody gets the little cards, or you get the bankruptcy petitions, warrants, and all these notices. It feels like noise. It feels like if you’re not already aligned, that this is maybe your $500 million lottery ticket, you’re like, “I don’t have time for this.” That’s where I started. Andrew, I want to get a little bit more from you. Are there other issues or other reasons that you think in-house departments don’t make this a priority?

It’s partly a culture issue, a mindset issue. If you’re working in-house, you’re thinking defense primarily. That’s generally what your job responsibility is. That’s what you’re asked about. That’s when the business brings you in. It is to defend your client against litigation that’s brought by somebody else. At least in my experience, I worked in-house departments for more than ten years. It was very rare for one of my clients to bring me an affirmative case. It did happen, and I’m sure it happens to everyone. Most of the time, when you’re interacting with your clients, it’s because they’re coming to you about an instance where you’re playing defense, not offense. It does involve a different mindset. That’s one of the problems.

The other problem is that this is an area that you can’t just jump into overnight and expect to generate big dollars. It’s something that rewards time, effort, and investment, which makes it feel, when you’re getting started, a little overwhelming, perhaps. A lot of lawyers that I talk to in in-house departments struggle with, “Where do I get started? How do I begin the recovery effort?” Once you do that, then it snowballs. You can take it from there. That first step can be hard for a lot of people.

I definitely want to dig into how to get started. As you’re talking about the mindset shift, I’m thinking about a specific example I had where an in-house client of mine had bought an IT solution, some software. It didn’t work. We lost a couple of million dollars, we lost revenue, etc. It never occurred to them to try to get their money back. They’re just moving on. I notice with the clients I’ve worked with that they’re just doing the work. They’re just running the business. This feels like a white noise distraction.

There’s a certain amount of tolerance among our business clients for that sort of noise. They don’t think to themselves, “This consultant screwed up this engagement,” or “This provider is three months or six months late on delivering some project for the company.” They don’t think about, “What’s the redress there? Is there something that makes up for the failure, the delay, or the problems on the other side?” Oftentimes, there is.

I’ve had other situations where there were warranty issues. By writing a couple of letters and having a couple of phone calls with in-house counsel on the other side, I got a refund, I got credits, or something. Greg, it doesn’t have to be a major opt-out, get a law firm, and all that. It can be just cleaning up the failed business relationships.

For sure. It rewards companies where the relationship between in-house legal and the business is coordinated and tight. As you saw, Stacy, in your example, you were having conversations with the business, learning about this problem, and then presenting a solution that had not occurred to them. Had you not been close with the business, that may not have happened. Once companies begin to flex that muscle, to use Andrew’s term, things snowball. Suddenly, the business will come to legal and say, “We’ve got a problem here. Can you help us, from your angle, solve this? Are there other opportunities to bring these affirmative claims because we’re missing some objectives, or we’ve got some issues that we want to address?”

I want to say I talked about there being a cultural issue or a mindset issue with the in-house lawyers, but it’s also on the business side. There’s a real chicken and an egg problem or issue here because the lawyers don’t necessarily know when there’s an opportunity that sits on the business side. The business doesn’t necessarily think that this problem, this challenge that they’re facing, has a legal solution or a legal avenue that can make things better for them. You need to get that understanding on both sides before you can take advantage of those opportunities. That’s part of the problem in getting started with an affirmative recovery program. It’s getting that awareness and knowledge on both sides of the fence.

First Steps To Building A Recovery Program

Let’s talk about getting started. As we kicked off, I’ve got the mindset. I am a treasure hunter. Someone asked me the other day, “What gets you started?” For me, it’s winning. I like to win. I like to bring in the meat. I like to hunt and gather. For me, I’ve got the mindset. Aside from that, Andrew, if you were talking with a GC or head of litigation in an in-house department, what would you advise them to take as a first step?

What I try to say to people in this spot who are looking to potentially get started with recoveries is to try and explain to them that they’re already in the recovery business and they just don’t know it. You talked about those postcards that we all get as people at our homes about class actions involving whatever product or service that we buy. Companies get those things, too. I think you mentioned this. There’s a tendency to throw that to the side and think it’s not that big a deal, but when you’re talking about a company claim, it is potentially a big deal.

As a company, you're already dealing with these recoveries today, but you're definitely not maximizing the value. Share on X

The problem is that oftentimes at companies, there’s not the awareness that responding to a class action settlement notice like that shouldn’t be hit or miss. It shouldn’t be opportunistic or handled by individual people down low because doing it that way doesn’t maximize the recovery. You do need to try and collect those notices and respond to them in a systematic way to maximize the recovery that you get in response. Oftentimes, submitting a recovery like that isn’t simply a matter of sending in the postcard with, “This is where you mailed the check. Here’s our address.”

You have to submit evidence showing the value of the claim. Unless you do the work and collect the information on behalf of your client as a whole, you’re going to shortchange yourself. What I say to people who are just getting started here is that you’re already as a company dealing with these recoveries today, but you’re definitely not maximizing the value. The first thing that you should do is make sure that you get that stuff, approach it in a systematic way, and ensure that you get as many dollars as you can back in response to those.

You do get the cards. Let me ask this. How do you evaluate? Greg can help out here, too. What is the path of least resistance? Again, it feels like a nuisance. Somebody in my finance team brought me this notice. “I’ve got to look into it. It’s some firm out in New Jersey. I have never heard of them.” How do you start evaluating, and how do you make a decision on what to do?

You have to build the muscle to handle this sort of thing. Part of it is that you need to have the infrastructure in your own company and in your own legal department, in order to pull together the information to build the claim so that you can see what it is that you, as a company, are able to say in response to one of these settlement notices. That’s part of it. You also need to be able to evaluate where you stand in the broader context of the claim.

We’ve talked about opting out or staying in the class. There’s more art than science involved there, but at some point, as an in-house lawyer and as a company, you’re going to have to make the decision. Do I stay in a class, or do I pursue a claim outside the class? Part of that is getting an understanding of the context and the claim. You do that by building your network, by developing relationships with law firms that play in this space, and by developing relationships with firms like Burford Capital that live in this space and understand it at a fundamental level, what the dollars are, and what the potential is.

Once you build that network and once you have that infrastructure in your own legal department, then you can start to make smart decisions. Do you stay in the class and take what’s given? Do you opt out and pursue a claim on your own and maybe realize 2x, 3x, or 10x what you could have done if you had stayed in the class?

Greg, you’re in this space. You’re a publicly traded company. You’ve got analysts and lawyers. I feel like you’re going to know better than me with my little calculator what my claim is worth.

More than that, we are now at a point where the majority of the dollars that we commit on an annual basis go to companies. We’ve tipped over where the majority of our client base are companies. We’re investing capital in the affirmative claims that those companies are bringing.

Do you use to invest it with law firms?

Several years ago, it was mostly via law firms. That has switched over the past few years. We are constantly evaluating these claims for their merits, potential damages, etc. We’re working hand in glove with firms that are working on these affirmative claims. We become an important resource for our corporate clients who are evaluating, “What are my options here? What can I potentially do?”

We're working hand in glove with firms working on these affirmative claims, becoming an important resource for our corporate clients. Share on X

How do I know if it’s worth it to take a more aggressive stance and not minimize the work it takes to be part of a class if you want to have a real recovery?

To be clear, Burford is not a law firm. We have lawyers working here, and we’ve got finance analysts. We underwrite these investments. We look at merits, we look at damages, etc. You’re going to be seeking counsel from the firms that you trust and that you’ve got relationships with, and the counsel who know these cases. They’re going to give you their opinions and their advice on your potential recoveries.

As Andrew said, to the extent you’ve created that internal infrastructure, so that you’ve got lawyers and your own finance people, you’ll take that advice, distill it, and come up with a decision as to whether or not it’s worth it to opt out or bring an affirmative claim. Many of the firms will take claims or take cases on a fully contingent basis. You’ll eliminate the risk of having to pay out of pocket. They may or may not also pick up the expenses associated with discovery costs and expert costs. If they don’t, that’s where Burford Capital comes in. We could take that risk off the table by financing the fees and expenses associated with bringing the claim.

Building Your In-House Recovery Infrastructure

We’re going to talk more about fees and how to manage them. Andrew, aside from shifting the mindset, having a system for notices, and starting to build a network, what other resources does an in-house department need? When we talked before, I was asking you, “Did you have a dedicated litigator? Did you have a dedicated paralegal? Did you have any tech?” What are the blocking and tackling of the infrastructure needed to set up one of these programs?

I don’t think you need very much to get started, but what you’ll find as you go along your recovery journey is that those things definitely help. When you’re first getting started and you’re dealing with a small volume of claims, you’re probably not going to be able to get in this current environment. Budgets are tight for in-house departments. Staffing is a challenge. You’re not always able to fully staff your department to begin with. Adding additional resources to handle affirmative recoveries is going to be hard for many people.

When you get started, you’re going to have to try and do it with your existing resources. As time goes on, and especially if you can demonstrate to your executive team, to the business side, that there’s real value being driven by this effort, you can justify investing in the program. Even if you don’t have a litigator dedicated full-time, when I was at Sears, we had a paralegal resource where this was a significant portion of her job responsibility.

It wasn’t her sole responsibility, but she dedicated a significant portion of her time working exclusively on recoveries, whether it was coordinating the response to settlement notices, gathering data, or working with outside counsel on claims that we were pursuing as opt-outs or independently. That was a resource that we had. We also made investments on the tech side at both of the companies where I worked because we’re all familiar with matter management software at in-house companies. It’s not necessarily set up to deal with recoveries.

It can help you track the expenses or the fees, but it’s not great for keeping track of what you’ve got and what you’ve got coming. As you become more successful, one of the challenges with success is that you may start to get mindshare with your executive team or with your business team about what recoveries can do for you. That leads to those leaders coming to you and saying, “What can you do for me now?”

That has happened to me, by the way. “What can we count on you for next year?”

That’s your reward for doing good work. It’s incumbent on you, as someone leading a recovery team, to have a handle on what is in the pipeline. You need to be able to say to your CEO or to other business leaders, “This is what we’re looking at in 2026 and 2027.” You need to caveat it. You need to hedge because recoveries are never certain until the money is deposited in your account or until you receive the check.

You don't need very much to get started, but as you go along your recovery journey, you'll find those things definitely help when you're first getting started. Share on X

We have to live in reality. Our business clients want to know what we think is going to happen. The only way to do that is to systematically track, forecast, and have a calendar that lays out when you expect recoveries to hit and what you think the potential might be. As I said, existing management software doesn’t do that. You have to create those tools or build those tools internally in order to have a good handle on that. That does help you maximize your program.

Cultivating Strategic Law Firm Relationships

When we talked before, you called it an affirmative recovery docket. I liked that because for me, you were intentionally framing this as something that we are expecting. It’s like you would with a defense case. You are mapping it out. It is not a set-it-and-forget-it. I liked that. I would like you to talk a little bit about some of the law firm relationships we talked about before. I have a little bit of a jaundiced eye about class action lawyers, no offense to anybody who might be a plaintiff’s lawyer in that space. My bias is that they want to get as much money for themselves, and maybe aren’t so worried about individual clients in the class. You had some good tips about how to engage with those lawyers handling your affirmative cases.

I’m a defense-oriented lawyer. I started on the defense side, defending against class actions in my 17 or 18 years of practice with law firms. I have a similar mindset. When you pursue an affirmative recovery program, you need to realize that those class action lawyers and the lawyers who bring opt-out cases are your allies. They’re your friends. You need to build relationships with those people.

Even if you’re going to opt out of cases, it’s good to have a line of sight or communications open with the firms that are bringing those cases. It is because sometimes, you may want to stay in the class. You may want to maximize your recovery as part of the class. Sometimes, you may want to opt out, but you want to continue to have good relationships with the class because the class doesn’t go away when you opt out of the case. You want to be able to litigate alongside them.

It helps to have a good relationship with those lawyers when you do that. I have found that building those relationships, maintaining those relationships, is extremely important to maximizing your recovery program. There are class action law firms that, typically, in my defense days, I would have seen as the bane of my existence. Nowadays, some of them call me up and let me know, “There is this potential recovery out there. Let’s talk about it,” because they’re constantly looking.

They’re constantly trying to identify new opportunities. Oftentimes, when you’re in-house counsel, you represent the biggest potential slice of that particular pie. They have an incentive to talk to you. You should engage in those conversations, learn from those conversations, and encourage those people to keep the lines of communication open because you never know how or when that might benefit you down the road.

A great advice for any lawyer is to build relationships.

I might add to that, Stacy, that a trend that we’ve certainly observed over the past few years is the entry into the plaintiff side world by lawyers at firms that we would all traditionally think of as almost exclusively defense side-oriented. That’s particularly on the class action opt-out side. You see firms now publicly saying, “We are setting goals to build our plaintiff side practices and take more on the plaintiff side for corporate plaintiffs. It’s not just the traditional class action firms that are now playing in this space.

Navigating Business Relationships In Recovery Claims

Greg, you mentioned this earlier about the partnership with the business. I’ve had experience where I see that we have a claim against a firm that’s still a business partner with ours, but they’re not paying, there was a warranty fall, or some kind of issue. There can be reluctance on the part of the business to sue an active business partner. That puts the lawyers in a little bit awkward position because you see that there is this opportunity. What advice do you have for in-house lawyers to try to get over that?

I might share here three things, initially recognizing that that’s a very real struggle. There are deep, important business relationships with third parties, suppliers, vendors, partners, etc., that everyone needs to be sensitive to. There are three things that I’ve seen play out in this aspect. One is, at some point, if the behavior is so egregious, particularly if there are government investigations, criminal investigations, etc., a company has a clear right to be a corporate plaintiff and maybe is obligated to be a corporate plaintiff against a defendant who has behaved so badly. There’s the scale of the behavior.

Remember that, depending on the agreements in place between you and these third parties, arbitration is the way to resolve claims. Share on X

The second is, look in your industry. What are your peer companies doing? Is this something where you’re going to be alone, bringing claims against an important provider or partner in the industry? Are there other corporate plaintiffs, peers of yours, that are also doing that? The third thing is, sometimes, remember that depending on the agreements in place between you and these third parties, arbitration is the way to resolve claims. It will be done confidentially, and so there may not be a public fight anyway. You alluded to this earlier, Stacy. You can resolve issues without going to litigation, which will benefit the company in any number of ways. That’s always at play as well.

If I can add one additional point here, it’s important to recognize that, especially when you’re talking about a class action, as a corporate client or as a company, you are already part of the case. You’re there. If you opt out, you can message that with the defendant and say, “By opting out, we can resolve this more directly. Maybe you can have a better outcome talking to me, your business partner, your client, your customer, or whatever, rather than talking to the plaintiff’s class action counsel, who are going to be very adversarial. Also, maybe we can talk about a deal that involves a win-win business terms type resolution, rather than purely a money deal.”

That’s often a way to resolve a claim in a way that benefits both sides and reduces the exposure or the liability for the defendant in the class action afterwards. I find that messaging generally works pretty well when you’re talking to opposing counsel or the counsel in-house on the other side because they recognize the reality. Once you get a class action filed, you’re living with that. There’s nothing you can do about it. It’s about defending it, minimizing the downside to your client, and having a plaintiff opt out with whom you have a business relationship that offers maybe an opportunity to get something done that benefits both sides.

On that point, some of the warranty stuff or other business disputes that I’ve had, it was almost easier to get credits. We were never going to leave this vendor. This was the vendor in whatever space it was, and they wanted, but they perceived the relationship was a little rocky because of an issue that they had. Maybe they gave me a little cash, but they gave us a big credit, and the salespeople at the business partner want to close a deal.

You could time the resolution of that issue around the end of a quarter. You’re going to do business with them anyway, so you might as well get credit in a low-friction way for a service recovery. Another point I wanted to make. I’ve used this as well. When I’ve had litigation adverse to business partners and we were negotiating another agreement, it was a bargaining chip in the litigation in the negotiation. It was something that my business team could use to optimize their stance in negotiations. It’s a strategic lever is I guess the point I’m trying to make.

You’re absolutely correct, but that underscores why in-house departments need to be very mindful of this. If they’re not aware of these claims and the potential recoveries, then the business side is going to lose out on that leverage. That’s another reason to develop this affirmative recovery muscle so that you can arm your business clients to negotiate or obtain the best deals possible when dealing with their outside partners, customers, vendors, or whatever.

Creative Funding & Maximizing Returns

We’re in a little bit of a down economy. Prices are going higher because of tariffs and other things. I’m in healthcare. We’re going to get squeezed from some of the cuts that are coming. We have to look under the couch cushions and see if there are opportunities. As I said at the kickoff, I have my pom-poms up here. We did talk a little bit about fee arrangements and contingencies. I want to get some insights about that because many firms will offer you contingencies at a pretty healthy percentage, which de-risks the case. I wonder about other arrangements that you all have seen. Greg, I don’t know if it makes sense to kick off with you here.

On the fee arrangement, maybe I’ll share two or three points. One, as you said, Stacy, they can be very creative. Some firms will offer a fully contingent engagement and will even pick up a company’s expenses associated with asserting that claim. Not all firms can do that. There may be a hybrid arrangement. A firm may expect a company to pick up the expenses, which are the hard costs associated with asserting that claim. In that context, a funder can help defray that risk and pick up fees and expenses, funding.

Also, it could help corporate plaintiffs arrive at the right firm for the case, even if the firm doesn’t have the ability to be fully contingent. Firms will take partial hourly fees in exchange for a smaller contingency percentage of the recovery. As you said, Stacy, sometimes it’s fully contingent. That can be a large back-end piece to the law firm, one that may be too large for you to want to be comfortable giving up. You can calibrate that by agreeing to pay some amount of fees up front in exchange for a smaller back piece to the firm.

Many times, in some of these large cases, there are multiple firms that have different groups that are part of them. I’ve been able to negotiate contingency percentages because they wanted to add me to their group. That’s another strategy. Andrew, what about you? Any examples you want to share with that?

I’ve done the whole gamut. Especially when getting started, it’s probably easiest to go straight contingency fee because it’s no money out of pocket. You don’t have to justify the expense. Nobody is worried about it. It lets you pursue the claim without anybody questioning where the money is going. Especially over time, as you develop a portfolio of claims that you’re working on, our experience was that oftentimes, it made sense to retreat from pure contingency to more mixed arrangements or even paying out of pocket.

You have to make that call yourself, and unless you're actively managing your recovery portfolio, you won't even know if there's an opportunity or if that outreach makes sense. Share on X

Where we were often successful doing that was when we had antitrust claims, for example, where you were pursuing claims against multiple defendants. What we did was we would identify perhaps weaker defendants in the case, do settlements with them earlier or upfront, and then use the money from that to fund the continued litigation against the other defendants, the bigger, more vulnerable defendants. It wasn’t quite no money out of pocket, but we de-risked in a way that way, funding the litigation through settlements, and then went for the big payoff down the road. We got to keep all of it because we were paying counsel out of pocket.

What I like about what you’re sharing is that it is another strategic litigation. It’s not a set-it-and-forget-it. I guess I’m trying to make the point for folks that may not think this is worth their time, that it can be both a big benefit to your business. It can also be professionally fulfilling because you’re going to be using all of those skills that you use in defending litigation to maximize an actual return.

I know you and I have talked about this in the past, Stacy. I don’t think that any in-house team is going to maximize its affirmative recovery program unless they’re actively managing it. I’m not criticizing outside lawyers, whether they’re class action lawyers or lawyers from big firms, but their approach is going to be to litigate until they get to the end. Sometimes, that means maximum value. Sometimes, it doesn’t. Sometimes, it doesn’t mean what’s best for the company.

As an example, I’ve had situations in my career where we had a tough quarter or a tough year. We were getting to the end of the year. Everyone in the company was asked, “What can you do to help us finish the year strong or finish the quarter strong? Do you cut jobs? Do you cut expenses? Do you avoid travel?” It is all of those things that you see and live with in corporate life.

When you’re actively managing your recovery portfolio and you’ve got a schedule that looks out ahead, you can look at, “I’ve got these claims that are maybe closer to maturity. I should call up my counsel who’s running those claims and say, ‘Let’s have an outreach on settlement and see if we can realize some dollars now to benefit the company.’” You’re not going to get that call from outside counsel saying, “Do you want dollars to finish up the year?” You have to make that call yourself. Unless you’re actively managing your recovery portfolio, you’re not going to even know if there’s an opportunity there or if it makes sense to make that outreach.

Understanding Litigation Funding As Corporate Finance

This is an example of the ROI on the legal department. It is just textbook. Hopefully, everyone bookmarks this episode for that. Greg, as we’re rounding the bend here, I do want to give you an opportunity. I did an episode with Eva Shang of Legalist. We talked a little bit about her litigation finance firm there. I want to understand. I don’t know that the audience is super familiar with how litigation funding works.

The basic premise is that litigation funding in the corporate context is just another form of corporate finance. Preferred and commercial litigation funders recognize the value of these affirmative litigation claims, be it arbitrations or litigations in any of the areas that we talked about, IP, etc. Once you can get your head around the fact that these are valuable claims, valuable assets, then it’s not a difficult stretch to realize that there are companies like ours that will allow companies to access the capital markets to finance and monetize those legal assets. That’s the basic premise. With companies, we do three main things.

One, we help them identify these affirmative recovery opportunities. We talked about this earlier. We’re in the market. We’re hearing about lots of different cases from law firms and companies we work with. We bring ideas to them. It helps them because in their day-to-day, they’re often overwhelmed by being on the defense side and getting the job done. It could be difficult to identify the interesting opportunity. That’s one thing we do. The other is simply to finance the fees and expenses associated with bringing these affirmative claims. For those law firms that can’t take matters on contingency or firms that want some portion of their fees picked up by their clients or need expenses picked up by their clients, we at Burford can take on those fees on behalf of our corporate clients.

Many times, on a no-recourse basis, right?

Absolutely, on a no-recourse basis. If those claims fail for some reason, our corporate counterpart owes us nothing. We’ve taken on all the risks. As you guys said earlier, you can bring the claims without having to worry about how much you’re spending along the way. The third thing we do is for claims that are advanced enough and claims that we feel strongly about, we’ll monetize some portion of your expected recovery. That’s where a legal department can bring value to an organization. It is by bringing in dollars for that quarter or for that year in exchange for paying us that investment back and a return on that 3, 4, or 5 years hence when that settlement or that judgment comes in from the defendant. It is allowing you to access capital now, which is interesting to many companies.

I’ve known that Burford has been connected with them for 8 or 9 years. Although I’ve had discussions and I’ve come close a couple of times, I’ve never actually done a monetization deal with Burford. I still consider them one of the greatest resources that I have in my personal Rolodex. I’m going to date myself here with this reference.

Litigation funding in the corporate context is really just another form of corporate finance preferred. Share on X

You did when you said Rolodex, by the way.

I will further date myself. If anybody read that Malcolm Gladwell book a long time ago, Burford is the ultimate connector in this space. They have relationships with the law firms. They have relationships with the clients. They have relationships with the settlement and administrators. They’re a tremendous resource for any in-house department that is interested in affirmative recoveries, even if you’re not at the point where you want to do a monetization deal with them. They’re an essential resource for any in-house department that’s serious about recovery.

Greg has been a great partner to me. I appreciate it. I’ve learned a lot from you, Greg, and you, Andrew. Thank you both for being here. We’re going to end with the pump-up song. I told you I am pumped up about this topic. I’m trying to find the perfect song for affirmative recovery. Let’s start with you, Greg. What is your pump-up song?

As an Irish Puerto Rican from New York, some people don’t know that about me. My mother was born in Puerto Rico. It’s got to be NUEVAYoL by Bad Bunny.

Andrew?

If we’re talking about recoveries, my pump-up song is Eye of the Tiger because it definitely makes me feel lucky, bringing in eight figures to the company.

Arms outstretched above your head.

Yes, running up the stairs to the CEO’s office.

Thank you both for being here. It’s been great. I can’t wait to bring in the bacon with you another time.

Thanks very much.

Episode Resources

• Burford Capital
• Andrew Johnstone on SGR Law
• Greg McPolin on LinkedIn
• Lawyer Math, Truffle Sniffing And Other Lessons From Litigation Finance | Eva Shang, Co-founder & CEO, Legalist

About Andrew Johnstone

Andrew Johnstone has practiced law for nearly 30 years, first as a trial attorney with Kirkland & Ellis and Winston & Strawn and most recently as in-house counsel for Sears Holdings and US Foods.

Embracing his entrepreneurial, buccaneer heritage, Andrew has focused on the affirmative recovery space much of his career, including building in-house affirmative recovery programs at multiple companies that have yielded more than $1 billion for his clients. Also, he has more Champagne than you or anyone you know.