New Burford Capital Research Highlights Companies Overlooking Class Action Recoveries

In a recent study, Burford Capital, a preeminent finance and asset management firm specializing in legal matters, disclosed alarming insights about American corporations missing out on lucrative commercial class action recoveries. The findings emphasize a persistent trend of hesitance among companies to opt out from collective litigations, thus forgoing potential substantial financial gains.

The independent research, conducted by GLG, surveyed 301 senior in-house legal professionals from US-based companies with revenues exceeding $50 million. Despite a staggering 54% of respondents indicating that their firms have missed out on potential recoveries amounting to over $50 million in class action cases over the past five years, 62% acknowledged that they typically preferred to remain part of the class. This decision often leads to lost opportunities for larger individual recoveries.

The reluctance to opt out stems mainly from apprehensions regarding expected litigation costs and uncertainty about potential outcomes. Approximately 73% of in-house lawyers cited the high costs of litigation as a significant barrier to opting out. This indicates a strong need for alternative solutions that could provide the necessary financial support to companies considering the opt-out route.

David Perla, Vice Chair of Burford Capital, elaborated on these findings by stating, "Corporate legal and finance teams are increasingly focused on value creation. Yet, many are not leveraging opt-out strategies that could deliver significantly better outcomes. Legal finance has the potential to eliminate financial barriers to opting out, empowering companies to pursue valuable individual claims by derisking their financial commitments."

The survey results also show that a significant 71% of in-house lawyers believe that opting out could potentially enhance their recoveries by more than 25%. Despite this, companies often remain paralyzed, unable to act due to fear of the associated costs and unpredictable outcomes. A staggering 86% of respondents indicated that maximizing recoveries from class actions is a priority for their business, which further complicates the issue of remaining inactive when potentially lucrative options are available.

Moreover, the research uncovered that while 73% of in-house lawyers recognized litigation costs as a deterrent to opting out, only 39% have utilized legal finance to pursue such strategies. This gap highlights an underutilization of available resources that can mitigate costs and ultimately maximize recoveries. 71% indicated that access to funding for monetization could encourage them to pursue opt-out actions, thus tackling the issue of immediate financial burdens.

Legal finance, particularly in terms of fees and expenses financing, offers a critical solution for these companies. It allows firms to manage upfront litigation costs effectively, which can often be a significant deterrent. Furthermore, monetization financing helps businesses convert potential recoveries from ongoing claims into immediate capital, enhancing liquidity while improving cash flow predictability.

As the corporate landscape becomes increasingly competitive, the importance of aggressive legal strategies cannot be overstated. Companies that remain passive and continue to be part of the collective class action narrative risk missing out on significant recoveries. The insights from this research are a wake-up call for corporate legal and finance teams to reevaluate their strategies concerning class action claims and explore the potential of legal financing as a means to safeguard and maximize their financial interests.

For a more in-depth analysis and access to the research report, interested parties can visit Burford's official website, where additional details about their findings and services are available.

Burford Capital continues to be a leading force in the legal finance sector, assisting firms worldwide in navigating complex legal landscapes while maximizing value and enhancing liquidity.

Resources and further information can be found at Burford Capital.