“My team and I objectively evaluate the merits and the various known and unknown risks associated with cases. In essence, litigation funders succeed through their repeated success in underwriting lawsuits. In-house counsel should consider taking that same approach to litigation valuation. ”
GLS Capital’s Jeffery Lula was published in Today’s General Counsel, where he discussed how to value litigation and why GCs need to consider taking a similar approach to litigation funders.
In the article, Jeff advocates for GCs to adopt a methodical and analytical approach to litigation valuation, akin to that of litigation funders. He emphasizes that litigation funders meticulously assess cases by evaluating key components such as legal merits, damages, duration, and collectability. By adopting a similar framework, GCs can make more informed decisions regarding the pursuit or defense of litigation.
Lula suggests that GCs should break down the litigation process into critical milestones—such as motions to dismiss, summary judgments, trials, and appeals—and assign probabilities to each. This granular analysis helps in understanding the potential success at various stages and provides a clearer picture of the legal merits involved. In addition, accurately estimating potential damages is crucial. Lula points out that not all damages are equal; some, like future lost profits for a startup, can be highly speculative. Recognizing the certainty and reliability of different types of damages is essential in valuing a case effectively.
When looking at timing, predicting the timeline of litigation can be challenging due to unforeseen delays, such as court backlogs or extended motion reviews. Lula advises GCs to critically assess scheduling orders and remain aware that extensions are common, which can impact the overall valuation and strategy.
Finally, the ability to collect a judgment is a vital yet sometimes overlooked aspect. Lula reminds GCs to consider whether the defendant entity has the financial stability to satisfy a judgment or if it might dissolve to avoid payment, affecting the practical value of a legal victory.
By systematically evaluating these components, GCs can approach litigation with a more strategic and financially sound mindset, similar to that of experienced litigation funders.