Litigation finance firm Burford Capital Ltd. reported on Wednesday its best-ever year for recoveries from the lawsuits it invests in, but its profits dipped from 2019 as its largest case, a battle over an Argentina oil company, added nothing to the firm’s bottom line for the first time in five years.
The company reported a realization figure—proceeds from concluded litigation investments—of $608 million, up 72% from $354 million in 2019. Total income, though, dipped 1% from a year ago to $353 million, and an after-tax profit figure fell 19% to $172 million.
The company said the pandemic had less of an impact than it initially feared, despite new business having slipped early in the year and in-person court activities like trials remaining paused. It also reiterated a view frequently expressed by CEO Christopher Bogart that the pandemic will lead to a “substantial volume” of disputes in the coming years.
Burford also said the majority of its business development now comes from deals struck directly with companies, rather than the law firms they’ve hired to handle their cases. Last year, 57% of Burford’s commitments—money it earmarks for future investment—were made with corporations, the funder said.
It’s a significant departure from the earlier days of litigation finance, when funding companies often pointed to Big Law firms as the most likely source for future growth.
“Most firms have stopped experimenting,” David Perla, Burford’s co-chief operating officer said during a Wednesday conference call with reporters. “They’ve either decided they want to be in the affirmative litigation space as a strategy or they don’t, and they will take funding when a client needs it.”
Burford’s shares on the New York Stock Exchange were down about 5% in mid-morning trading.
Burford said the dip in income was largely attributable to it receiving no income last year from its investment in a lawsuit seeking damages from Argentina’s 2012 nationalization of state-run oil producer YPF SA. The company sold $100 million worth of its investment in the so-called “Petersen” case in 2019 after a promising U.S. Supreme Court ruling.
Perla characterized the firm’s 2020 results as successful, especially in light of Petersen contributing nothing to the bottom line.
“We think that’s evidence of what we’ve been saying: We know how to pick winning cases,” he said.
In total, the Petersen investment has brought in $236 million for the company so far, and it lists the ongoing value of its claims at $773 million.
As that case dragged on, another group of claims paid out in a major way for Burford last year. The company reported in October that a group of similar claims it invested in paid out $425 million.
Burford only described those cases as being in the insurance industry and involving “federal statutory” claims. Bloomberg Law in October reported that the Burford resolution timed up with payments starting to be made by the U.S. government related to a $12 billion loss it suffered to refund insurers for Obamacare payments it never made.
Perla also said he was not concerned with efforts to regulate the litigation finance industry, downplaying the re-introduction in Congress last week of a bill that has failed to garner support in previous sessions. The bill would require plaintiffs to disclose the presence of a funder in federal class-action or multi-district litigation.
“The ship has sailed on any attempt to regulate it,” he said. “There is some distraction on disclosure here in the U.S. and other jurisdictions, but that’s about it.”
Perla is a former president of Bloomberg Law.