Advisory Opinions - The World of Commercial Legal Finance

Episode Date: March 18, 2021

On today’s podcast, Sarah and David discuss a lawsuit in which a high school student sues his Nevada charter school “for repeatedly compelling his speech involving intimate matters of race, gender, sexuality and religion.” Our hosts explain why the critical race theory curriculum in question is unlikely to be deemed unlawful by the court. Per David: “You don’t have an inherent right, once your kid is in public school, to direct and control the curriculum that they see.” Stay tuned to hear special guest Chris Bogart chat about his career in commercial litigation finance. Show Notes: -Clark et al v. State Public Charter School Authority et al. -Brown v. Hot, Sexy and Safer Productions, Inc. Learn more about your ad choices. Visit megaphone.fm/adchoices

DQ presents how to officially start your summer. Step one, head to DQ. Step two, try the new summer blizzard menu. And step three, dig into new peanut butter cookie dough party, new picnic peach cobbler, and more. Make it official, only at DQ. Happy tastes good. Maple syrup, we love you, but Canada is way more.

It's poutine mixed with kimchi maple syrup on halo halo montreal style bagels eaten in brandon manitoba here we take the best from one side of the world and mix it with the other and you can shop that whole world right here in our aisles find it all here with more ways to save at real canadian superstore you ready i was born ready all here with more ways to save at Real Canadian Superstore. You ready? I was born ready. Happy Snyder Cut Day, Advisory Opinions listeners. I'm still not totally sure I know what that is. Seriously?

After all this time we've spent together, Sarah? Oh, my goodness. It is March 18th, 2021, the culmination of a years-long crusade to bring to the silver screen what may be the most ultimate superhero film other than the Dark Knight trilogy. I mean, this is a major world event today, and it's happening on HBO Max. It's a four-hour movie. We have a dispatch live tonight, everyone, starting at 8.30 p.m. Eastern, going for about an hour. And I think I might set a land speed record, Sarah, in the nine-yard dash, which is about the

distance from my dispatch live chair to the couch in front of my television to watch the Snyder Cut. the couch in front of my television to watch the Snyder Cut. Okay. Well, speaking of other big things that happened this week, on Tuesday, the day after we taped our last podcast, there was huge breaking news out of the DC circuit. Can I read you the press release? I'm on pins and needles. I'm not aware of this. It's not actually a press release. It's a notice. Okay. And it is titled Preferred Typefaces for Briefs. Federal Rule of Appellate Procedure 32A5 requires courts of appeals to accept briefs in any proportional typeface, so long as the typeface has serifs and is at least 14 point in size. However, the court has determined that certain typefaces, such as Century and Times New Roman, are more legible than others, particularly Garamond, which appears smaller than the other two typefaces.

Today, the court announces a revision to the circuit's handbook of practice and internal procedures to encourage the use of typefaces that are easier to read and to discourage use of Garamond. that are easier to read and to discourage use of Garamond. It was a straight attack on the Garamond font. And what is most hilarious about this notice, David, it is in a non-serif font. So have we heard a response from the Garamond camp? We have not. But I just like look at the balance.

It says to encourage the use of typefaces that are easier to read and to discourage. And it should be use of typefaces that are harder to read. But no, it's encourage the use of typefaces that are easier to read and to discourage use of Garamond. Amazing. That is huge news, Sarah. It was huge. Yeah. Incredible. And I appreciate all of the listeners who immediately flagged it for me. Well, we're not just going to talk about fonts today. We have a special guest. We have Chris Bogart, who is how to describe a guy with a one of the more fascinating legal careers that you'll hear a career so fascinating that he makes my case for me about the possibilities inherent in going to law school. And he makes the case for me on what actually practicing commercial litigation is like. This guy became the general counsel of Time Warner at 32 years old, which is bunkers. And if you were an associate out there and you imagine yourself as general counsel at 32 years

old, let me disabuse you of that notion. 1998 was a wild time. Yeah, it was a wild time. But you know what you if you don't do this, you can't be general counsel of Time Warner. If you don't go to law school, Sarah, it wouldn't be in the conversation about litigation funding, It wouldn't be in the cards. This is a conversation about litigation funding, which is fascinating. It is really, I mean, it is booming in the commercial litigation world right now for plaintiff side cases instead of contingency fee work. So we're going to get into all of that, what all of that means when we talk to Chris later in this episode. But before we do that, we're going to talk about a case that is burning up conservative media that a number of you guys have emailed us and asked us to specifically talk about

it. And it's a case that is called Gabrielle Clark versus the State Public Charter School Prep Authority, Democracy Prep Public Schools, Democracy Prep at the Agassiz Company, Agassiz Campus at Owl. It is a case about critical race theory in secondary education. And a number of readers sent us the complaint. Thank you for that. This is a great point. If you're a reader and you want us to discuss a particular case and you've got a PDF of the complaint, please put it in the email. It makes it a lot easier. And so both Sarah and I have read this complaint and it's an interesting case. And it's an interesting case to actually circle back to some earlier discussions that we had. And the general facts are that a plaintiff, William Clark, is a student at a charter school. And this charter school had a curriculum for graduating seniors that was,

I would say, steeped in critical race theory components, had an academic exercise as part of it where there was an optional disclosure of race, gender, and different kinds of identity categories. An awful lot of this was sort of what you would call, I would say fairly, you would say it's kind of a far left, not all of it, but some of it, a kind of a far left argument about race and identity and oppression and privilege in the United States. And he challenged that he refused to participate in all aspects of

this particular academic program. It's really actually hard to trace exactly what happened and how he ended up failing the class, but he was not given credit for the course or was warned that he wasn't going to receive credit for the course, and he filed a lawsuit about this. And so, Sarah, we talked about this a little bit offline. First, what were your top line impressions when you read this case?

It was heavy on the I don't like it and light on the because it's unlawful. Right. I had a very hard time finding the actual legal claims. And when I did, very little law involved. This violates my First Amendment right. Well, do you have case law to back that up? I mean, in a real case where you actually expect to win and it's not a PR front, where you actually expect to win and it's not a PR front, most of your brief should be the law and why this is unlawful. Very, very little of this complaint was on the law. Now, they have

dozens of pages of examples of the curriculum, which I think some people are going to find, you know, kind of a lot, I guess is the best way to say it. Yeah. That's why I said kind of far left some elements of it. Yeah. It's, you know, the four eyes of oppression, ideological, institutional, individual, and internalized. You know, he has one white parent and one black parent, and he says that he was basically told repeatedly to acknowledge his oppressor status, uh, as from having a white parent. And he refused to do that. There's another problem with the complaint though, which is like, yes, they included all of these slides from the class. That I believe is all accurate. But of course, we also are, you know,

the vast majority of this complaint, as I said, is a lot of, I don't like it. And so we're having to take the student's word forward of what actually happened in class, things that were said to him, which I assume the school would, uh, you know, have a different theory of what was said to him at times. There's a lot, you mentioned that him disclosing his race and religion and disability and gender and all of that was optional. It's presented in the complaint, that story several times. And it feels a little like catch 22, like the novel catch 22, not the catchphrase Catch-22, where you tell the same story over and over again.

And each time the story is a little bit different. Except in Catch-22, the story gets darker and less funny. In this version, it just goes from at the beginning, it looked like it wasn't optional. And by the end, you're like, oh no, this isn't part of his graded assignment at all. Why are we telling this story? Because again, from an I don't like it standpoint, I understand. But from a lawfulness standpoint, this was not a graded assignment. It was optional.

This shouldn't be included in the complaint at all. Yeah. So in fact, when you go to the exhibits of the complaint, they have a lot of the curriculum. And as you said, a lot of it's kind of a lot. I mean, you know, you've got SpongeBob sort of declaring there is no such thing as reverse racism. You have a whole discussion about how, for example, people of color cannot be racist. They can be prejudiced, but they cannot, it is not possible for them to be racist because racism is the application of prejudice plus power equals racism. And if you don't have power, you can't be racist. All of these things are conceptual here, especially in some quarters of American higher education.

say to an average American that an Asian person or a black person or Hispanic person cannot be possibly be racist leaves a lot of people scratching their heads. So this is obviously a curriculum with a very strong point of view. There is no question about that. It is a curriculum with a very strong point of view that is pretty far outside what you would call the mainstream of American ideology. But guess what, Sarah? That's not unlawful. That's not unlawful. I'm going to use three words that you don't often hear on this podcast,

but you've heard before. Hot, sexy, and safer. Ah, yes. This is the, well, between based and cringe, David, this is cringe. This is cringe. This is your cringe case that you've talked about before about the sex ed course and the lawsuit about the sex ed course. Correct. That lawsuit lost. Yes. Yeah. This was a case that I, the very first case in my entire life I ever volunteered on. And this was when I believe, goodness, was I 2L? And a external, a public interest law firm solicited the help of some lawyers at the law school to do some research for them for a brief in a case that where basically the facts were that without parental consent, some students were, there was an assembly held in a Massachusetts school and the assembly

was the folks who ran the assembly were called Hot, Sexy, and Safer Productions, where they did a very vivid sex education presentation. And we won't go through all the facts because we've already done that. And they're pretty over the top. But these students were forced to watch this incredibly over the top sex ed presentation. How over the top? It kind of makes these PowerPoint slides and the complaint, and we'll put the complaint in the show notes, seem boring. Very boring by comparison to this case in Massachusetts. And according to the plaintiffs, they were physically forced to be there. They were prohibited from leaving. They had to see this really, really over-the-top presentation. And they filed suit. They lost at the district

court, appealed to the First Circuit, and the First Circuit, nope, you lose. Why do you lose? Well, the bottom line is, cutting to the chase, is that you as a parent don't have control over the curriculum that the school presents your child. That yes, you absolutely have control over the curriculum if you're homeschooling your child for sure, because you're the teacher, you're the owner of the school, you're the educator. But when you hand your child off to a public school, and a charter school is a public school, the curriculum is in the hands of the public school.

And your influence over the curriculum is really limited to persuasion. What can you persuade the school to do? What can you persuade the school board to do? But you don't have an inherent right once your kid is in public school to direct and control the curriculum that they see that's the core of this case is a as a objection to curriculum that's that's what the core of this case is yep so this is going to bounce around conservative twitterverse i fear quite a bit and it's going to be a lot of i I can't believe they did this, accepting all of the allegations is true, which is what we would do with a complaint regardless.

But I don't think there's going to be nearly enough discussion on where the unlawfulness is because I'm struggling to see it. Now, there is an interesting question about compelled speech in classrooms. This is something that I think is worth a little bit of a discussion, and it essentially goes like this. As a normal matter, the government cannot compel us to say something we don't like. As a normal matter, the government can't compel me to advocate for or against a particular political cause. The government can't compel me to salute the flag, for example. It's

one of the most famous cases in American constitutional history. The government can't compel school kids to salute the flag. But do you know where there's kind of an exception to this general rule that you can't compel speech? An academic exercise. Yeah, I was just going to say, imagine all of the, imagine every student who, the student, the teacher's like,

why don't you read the part of Hamlet today? And they're like, no, that's compelled speech. Or, you know, we often would have debates, I remember in junior high,, um, one of our debate topics with youth euthanasia and you were assigned which side you were on for obvious

reasons. And I was on, uh, actually I don't remember which side I was on. Um, but regardless me and Travis, who I had a big crush on at the time, by the way, we were known as like the two most argumentative students. And so, of course, she paired us against one another and we argued about euthanasia. That would be compelled speech in a theory, but it was an academic exercise not to teach us about euthanasia, but to teach us how to argue with one another because we seem to like it so much. with one another because we seem to like it so much. Yeah. When I was in law school, when I was teaching law school, I had an advocacy exercise and half the class was going to be for, was going to be plaintiff and half the class was going to be defendant. And I said, you're going to get to choose, but if it's unbalanced, I'm going to rebalance you. And so tell me which side you'd want and then tell me. And then what I did is I

say, tell me if you have an absolute, if you have a real conscientious objection to arguing the opposite, I will try to make sure I don't rebalance you. But if you don't, I might rebalance you. And I had to rebalance a few people. That's just totally normal stuff. Now, an interesting kind of gray area is under what circumstances could you be required to disclose intimate personal information, which that's getting more real-worldish than an academic exercise. But I'm looking at a slide here that says you, in all caps, do not have to share your identities. You do not. do not have to share your identities. You do not. Now, in the complaint, they said that, well,

there was social pressure to do so anyway, and that that wasn't really an option. But if the, you know, and discovery will bear out how real that was, but if you do not have to do it, then it's not compelled speech. Also, did you, so I'll tell you the slide that I was most uncomfortable with, which was the teacher filled out that slide. Yeah.

Okay. First of all, she's 22 years old teaching this course. Yeah. Which made me deeply uncomfortable that a 22-year-old is teaching students who are four years younger than her these topics just because it is difficult and it deserves a lot of maturity being brought to it. And I wonder how much maturity there was. But she's sharing her sexual orientation with her students. Yeah. And then saying that she has a mental health disability with her students.

Yeah. You know, if I were the school, I would have some questions about that pedagogy. But again, from a lawfulness standpoint, I don't see it. Yeah, that's the thing is, you know, we have to sort of take off the hat that says, is this good curriculum or bad curriculum? I look at this curriculum and there's a lot of it that's really cringe. And I agree with you, Sarah, that really stood out to me how open this teacher was, this young teacher was, about her sexual orientation, mental health struggles, socioeconomic background. I mean, there's a lot here, and there's a lot in the curriculum that, to put it charitably, is highly debatable. Yes, but that's why curriculum school board seats

matter. Curriculum at the state education level matters. Go run for those positions. They are accountable. They are elected. That's why it's not unlawful to have a curriculum you don't like because it's not made by the president of the United States. This is all under local control. And I know people find that very frustrating.

And they're like, yeah, but when I go complain to my school board, they don't listen to me. Well, then get elected to the school board. It is popularly elected position. Right. And that's the world, which is, which is very difficult to do. I mean, it's not a simple thing to do, but the bottom line is that's why these curricular fights are so intense. They're so intense politically. This is why a California textbook reads different from a Texas textbook. We talked about this before. That's why some of the really draconian laws that are being considered around education, around class and race and diversity, some state laws are being considered that seem extremely strict and perhaps even punitive, but might be lawful

at the secondary school level, there's just an enormous amount of top-down control over curriculum. For better or worse, that's where the law is. And what this lawsuit is doing as a practical matter is challenging that top-down control. Now, there are circumstances where you file a lawsuit like this, even if your legal chances are not great, in the hopes to generate enough public pressure, because the facts are bad. The law might not be on your side, but the facts are particularly, and we'll use the same word again, cringe, that you can generate some public pressure. And the lawyers have been very successful at generating some public outcry And the lawyers have been very successful at generating some public outcry, maybe not necessarily in the media spaces that will

matter much to a more progressive charter school, but have certainly generated an outcry and is a reason why some people file complaints. And there's a GoFundMe account. And there's that as well. There's that as well. Yeah, the law here is rough. The law here is really, really rough if you're making a curricular challenge. And there's nothing new about this, guys. I can point you back into the 1980s where there was a major litigation effort to challenge curriculum in public schools on establishment clause grounds, Sarah, on the grounds that American curriculum was establishing the religion of secular humanism.

Do you know how those cases came out? They lost. They did, in fact, lose. They did, in fact, lose. Some things are meant to be shared, like sunsets over the Pacific, picnics in Central Park, or aeroplane points. Up to eight family members can share aeroplane points together. With the TD Aeroplane Visa Infinite Card, earn up to 50,000 aeroplane points. Aeroplane family sharing is a feature of the Aeroplane Program.

Conditions apply. Offer ends June 3, 2024. Visit tdaeropl program. Conditions apply. Offer ends June 3rd, 2024. Visit tdaeroplan.com for details. Okay, Sarah, we have a guest, a guest who can talk about a issue that in the green room you said we were wildly unqualified to talk about, but it's important to know. Yes. And so who is it? and what's he talking about? So today our special guest is Chris Bogart. He is the chief executive officer, director, and co-founder of Burford Capital. This is a litigation finance firm. And you know what? We're not even going to talk about what that means. We're going to put a little time out on that. We're going to let him even explain that. Just a little bit of background.

He was the general counsel at Time Warner, which is an incredibly large company for those who are not sure. And before that, he was at Cravath, which is also known as the Death Star of white shoe law firms. So, you know, incredibly well-trained lawyer who then goes into this whole field that I think most of our listeners have never heard of that I think is, well, at least right now, the future of commercial litigation. So, Chris, okay, let's start with a very simple explainer. What do you do? Okay, let's start with a very simple explainer. What do you do? Well, thanks, Sarah and David. What I do is work in the field of commercial litigation finance. And there are a couple of different pieces of litigation finance that we should come back and talk about. But commercial litigation finance is basically providing capital to companies

or to their law firms against the underlying value of their litigation claims. So why are people doing that? Well, companies, as litigation costs keep rising and as litigation volumes keep rising, companies are not so excited about having all of those costs running through their P&Ls, through their income statements, and negatively affecting their profits. But at the same time, there's a lot of valuable litigation that companies do. And so we'll come in and pay the costs associated with a piece of litigation, thereby removing those costs from the company's income statement.

And in exchange for that, we'll take a share of the outcome. Basically, what we're doing is creating effectively a corporate contingency fee model that lets companies hire hourly fee lawyers. Before litigation and finance, you had a pretty stark choice. When I was in my time-warner job 20 years ago, if I wanted to bring a piece of litigation, I either had to pay for it myself out of my budget, or I had to go and find a plaintiff's side contingency fee lawyer. And mostly those lawyers like to sue me instead of being on my side. And so I wasn't all that keen on the second choice. And so it really was down to the budget. And companies run out of budgets. And so

now this is a way for companies to go and hire the Cravats and the hourly fee law firms of the world for their cases without having to break their budgets. Okay. So how does this work in terms of the contract? Presumably, there's all these ethical rules on lawyers. The client is still the company, but you're here providing the money. How does that affect the contract? How does that affect pressure to settle sometimes? Walk us through what sort of some of the little sticky issues are. Yeah, the client is still the client.

The lawyer is still the client's lawyer. All that is happening here, it's no different than if the company goes off to a bank and borrows money. The client uses the money from the bank to pay the lawyer or the client uses the money from me to pay the lawyer. The difference between me and the bank is that you have to pay the bank back if you win, whereas we operate more like a contingency fee lawyer where you don't have to pay us back if you lose. So, you know, one thing I think it's important for people to understand, because we've got a wide range of listeners here, some folks who are law firm lawyers who

are quite familiar with litigation costs. If you could kind of give us sort of a scale of the kinds of costs you're talking about, if you're talking about, say, a corporation hiring not even the top, top-end law firm, but a leading law firm, what's an hourly rate for a senior partner at a law firm in a good-sized American city these days? Well, I'll give you, first of all, the shocking number, which is that we have just, in the wonderful legal profession, managed to break through the $2,000 an hour sound barrier for some high-end litigators. for some high-end litigators. That's not the average rate for a good partner at a good law firm somewhere else, but you'd be hard-pressed not to be paying $1,000 an hour and more.

And it's not just the $1,000 an hour. It's also the fact that litigation, you know, done these days is an army of people, including lots of young lawyers, and those young lawyers cost a lot of money too, hundreds of dollars an hour. So what that means is that in the average piece of litigation that we would finance, you're looking just to bring a case, a normal case through trial, you're looking at $8 to $12 million. Whoa. Okay. So you're not going to win them all. You need to make smart bets though. You obviously are going to take cases that you think are going to win. What percentage do you... At the end of the year, you're like, okay, this percentage of our cases that we picked hit and we won and we got money versus the percentage you know we're going to lose? 90% of our cases get money.

So you're engaging in a pretty rigorous front-end evaluation, I would presume. Yeah, so Burford's basically its own law firm. We've got 60 or 65 lawyers that have come out of those very same law firms. And we spend a lot of our time looking at cases and exactly trying to figure out which cases we think are meritorious and which cases will produce some realistic damages and can be collected on as well. And those lawyers are doing that work. They are not doing any of the legal work that's all being done within a law firm. That's correct.

Wow. Interesting. So what's your typical sort of corporate client profile? I mean, you know, you think of, say, a corporation with very, very, very deep pockets like Disney or an Apple. I mean, they can fund as much litigation as they want. But when I, in my commercial litigation days, when I, especially when I was not in Manhattan and I moved into, moved to Kentucky, a lot of the litigation costs for medium-sized firms, and this is back in the 90s, early 2000s, it was a real burden to the bottom line unless you began to scale up

considerably. So are you working with the large corporations to medium to small size, or is there a particular kind of profile size range, corporate size range that's like your sweet spot? Well, for what we do, it's more about the cases than the size of the business. So we're at the complex case end of the market, as you can see from the numbers that we were just talking about a minute ago. And so what that means is that lots of these clients are big companies, but they also include small companies, for example, that have innovative technology that they believe has been stolen by somebody else. The key for us is more the lawyers. So our client base, if you will, are the big law firms, the Amlaw 200 law firms,

and also the boutiques, the litigation boutiques that have spun out of them. But as a matter of economics, we don't tend to do what I'll call middle market legal cases. The numbers just don't work that well. But I'll try this out here for you guys because I've listened to this podcast for a long time and I love it and I know that you have some tolerance for getting into the weeds. So let me just give you... That's a lot of tolerance. Let me just give you the

45 second version because you talked a minute ago about a common misconception about the Disneys and the Time Warners of the world being large enough that this doesn't matter to them. Here's financially what's going on and why this is happening. Assume you've got a case that's going to generate $100 million in profit, $100 million in an ultimate settlement or a trial outcome, and it's going to cost you $20 million in legal fees to litigate that case. That seems

like a pretty good cost return on cash for the company. But companies don't think about it that way because that $20 million flows through their income statement. It touches their operating expense line and it reduces their earnings. And so if you're trading, let's say,

at 15 times EBITDA in the market. EBITDA, you have to translate EBITDA. Sorry, EBITDA is earnings. Earnings before interest and taxes and so on. So a common measurement of corporate earnings. If you're trading at 20 times earnings, 15 times earnings, and you've just spent $20 million, that basically removes $300 million of market value from you. Now, businesses do this all the time when they incur costs because the market also gives

them that same multiple on their revenue. But the market doesn't give you a multiple on your litigation outcomes. Even though you're winning $100 million, you're taking a $300 million market value hit. And so it's actually destructive to shareholder value, even for big companies, to self-fund their own litigation. Whereas if I pay the $20 million instead, that leaves the income statement, you don't have the hit to market value, and they just get the benefit of whatever the net proceeds are. And that's why this is popular with companies of all sizes and shapes. You mentioned intellectual property as an area that works really well for this model. What are the other main areas that you would say you see most often?

It's really anything, any complex case that companies find themselves involved in. So antitrust cases, big and complex contract cases, fraud, intellectual property, and those kinds. What it tends not to be is, it's not sort of non-competes and employment law and sort of workplace injury and things like that. What about bankruptcy? So we certainly do do bankruptcy work. And generally speaking,

we're appointed by a bankruptcy court or a trustee to provide capital to pursue claims that the bankruptcy estate has. You know, what often happens in bankruptcy is, you know, the company goes bust. There's not very much cash left. The creditors want all the cash, so they take it out and you're left with a bankrupt estate that doesn't have any cash left in it, but does have other valuable and viable claims. We'll go and put capital against those claims. We've been talking a bunch about the corporate side of this. There are two other flavors of litigation funding going on in the world. And we have on this podcast another litigation funder, in fact, whose name is David French. It's a side business, Sarah. It's a side business. And what do I mean by that?

Well, litigation funding is really the application of somebody other than the client's money into a case. And so there's a long history of that happening in public policy and related litigation. So when interest groups litigate over issues, they are effectively engaging in a form of litigation funding. They're not doing it for profit, but they're nevertheless raising external capital and putting it to work in litigation. So that's another species of litigation funding. And the third species, which we don't do at all,

is there is a consumer litigation funding market in the United States as well, where plaintiffs in individual actions, injury actions, basically, will go and seek litigation funding to meet their living expenses while their case is progressing through the courts. Fascinating. So then let's also back up and talk about the history of this complex litigation funding, basically the history of Burford Capital largely. How did this come about and how much time did you have to spend figuring out whether this was legal? Well, the embarrassing answer, you know, I'd love to say this was the product of a brilliant business planning exercise with McKinsey-style consultants or something. But, in fact, the truth is far from that.

The reality of this came about just about 20 years ago now when a university friend of mine had become a partner at one of the big law firms that was very reluctant to do any deals with its clients. It just wanted to be paid by the hour. And he had a pool of international clients who had the mindset that they really wanted their lawyers to have some skin in the game. And he was having trouble bridging that divide. And I was having dinner with him one night and he was complaining to me about his lot in life as partners in large law firms often do. And he said to me, look, you've become sort of this money guy now. Can't you figure out something for this? So in fact, he and I and another partner's firm figured out a path

to just raise a little bit of capital to finance his cases when the need arose. And I did that as a hobby with candidly no intention of turning it into a business or an industry. But what happened in the chatty world of lawyers is other people found out that he was doing that and they were intrigued by it. And so I started to get phone calls saying, gee, you're doing that for Latham & Watkins. Can you do that for our firm as well? And, you know, the demand kept on growing to the point where John Malone and I, my co-founder of Burford, decided that we would institutionalize this concept and raise real capital for it and take it on the road. That was in 2009. We started with $130 million. And today, we've got a portfolio that is more than $4.5 billion of litigation assets.

So you may not know this, you may not know this, but I just say that story right there makes you a chief weapon, a key weapon in my ongoing war against Sarah in the battle over, is it good to go to law school? No, not everyone is Chris Bogart. No, I would love it if, Chris, you could kind of walk us through your legal career. You started at Cravath and then you didn't go from Cravath to multiple, you know, working with multiple billions of dollars. What was the path here? Well, I don't really want to get in the middle of the two of you on this topic. It has spanned many podcast debates. But, you know, I probably do.

My history probably does fall more on the David side of the line here. I actually, when I came out of undergrad, I'm Canadian, as you can probably tell from a drop about here and there. you can probably tell from a dropped about here and there. I came out of undergrad in Canada, and I worked as a banker for a couple of years for what is now JPMorgan Chase. And I decided that while that was interesting, I preferred advocacy to banking. And so I went back to law school in Canada. And I went to law school and I clerked for the chief justice of Ontario. And wait, time out. Your bio says that you were the gold medalist in law school, and we don't know what that means. Did you have to run a race, jump hurdles? 100 meters, Sarah. 100 meters.

There's no physical exertion involved whatsoever. The Canadian gold medalist in Canada simply means, you know, number one ranked in the class. So I clerked for the court. And then I was actually planning to stay in Toronto and practice law. But here I'm going to sort of feed into Sarah's narrative too. I was also getting married at the time. And my wife was coming out of business school in Canada as well. And way back when Canada wasn't all that friendly to women in finance. And so she was getting job offers in New York and getting turned down for the same kinds of jobs in Toronto. So we decided, what the heck, we'll move to New York for a couple of years. And I fortuitously managed to land a job at couple of years. And I fortuitously managed

to land a job at Cravath. And so I started being a baby lawyer. And I did the Cravath litigation thing for a number of years. I had had the benefit in Canada, a big distinction is that you're not entitled to a legal aid lawyer in Canada, unless you're likely to go to jail for quite a long time. to a legal aid lawyer in Canada, unless you're likely to go to jail for quite a long time. If you're only up for a short amount of jail time, you get the particular gift of a first or second year law student to defend you in court. And unlike the American practice where you're carefully supervised doing that, you're just thrown into the court here and the judges are supposed to watch over you. And so I had the benefit while in law school of doing a whole bunch of trial work, which made me sort of unusual when I came to New York among my colleagues. So anyway,

I spent time at Cravath. I got great experience there. I did a lot of work along the way for Time Warner, doing some fascinating First Amendment litigation. And when Time Warner's general counsel was retiring, they asked me if I would come from Kravath to take his place. So I did that. I spent some time at Time Warner, and then I migrated onto the business side. And I ran Time Warner's advanced technology business and really left the law altogether for a few years and became a technology investor. really left the law altogether for a few years and became a technology investor. But as a sideline, I was doing this litigation finance thing. And then basically, the demand for that picked up and I flipped into what I'm doing now. I rest my case, Sarah.

Yeah, no, your case is not rested. Is Canadian law school, how similar is it to American law school? And then how hard was that transition graduating from Canadian law school and then being expected to take the New York Bar and practice there? So Canadian law school is pretty similar in organization to American law schools. And in fact, Canadian law schools are ABA accredited. There are three years you take the same sort of first year contract toward property approach I think the largest difference between Canadian law school and American law school is that there is less statutory law in Canada and more common law and so law school education is a little bit more case law in writing and a little bit less statutory interpretation than there is in the U.S.

And so, but it doesn't equip you very well to take the New York bar. Nothing does, though, in America either, in fairness. It was a trick question. It's true. Learning riparian rights was a charm, but I got through that and we went. That's really weird. I had a dream that someone was arguing with me about riparian water rights last night. That is what happens in my dreams. Don't know about you guys. Is that not fair? That's your true story.

You actually dreamed about riparian water rights. Yeah. I wasn't going to share it because it's, I mean, now you know. Yeah, it's disturbing. All right. I have some future of this industry questions. One, you talked about how this really started, which was the billable hour model didn't work

for all clients and it didn't even really work for all law firms. You are one answer to that. But for a variety of reasons, a lot of law firms are moving away from the pure billable hour as the only option they offer clients. And there's a lot more flat fee options coming. How does that affect litigation funding one way or the other? I think they're parallel, but not overlapping paths. The fundamental challenge for law firms is that they don't have balance sheets. In other words, law firms are not businesses that go and access the capital markets and, you know, sell public equity to investors and issue public debt and so on the way the companies do.

And that's how Burford finances itself. And so until law firms, if ever, reach that point, the law firms are going to be inherently capital constrained. And the money that they're playing with is effectively their partner's own personal capital. And that really means that they don't have the financial flexibility to do everything that their clients want them to do. Now, you're seeing some interesting things in Arizona and other states right now about pushing the envelope in terms of what's going to happen with non-lawyer ownership of law firms. England's already gone down that road. That was my next question, the British model. How would the British model affect you here? Well, it's an opportunity for us because what you can start to do is provide different kinds of financing to law firms. Let me give you an

example of that, of a deal that we've actually done in England where we're allowed to do this. You've got a law firm that's interested in taking some risk but doesn't want to take all the risk on the cases that it does. It still wants to operate on a cash-based model. And so this law firm has come to us and said, will you share risk with us on these cases? And we said, yes, that's something we're happy to do. And we do that in the United States as well. But this law firm didn't love the price of the capital just for the risk sharing. And so instead of us charging a fairly high price for the capital just that we were giving them, think of that as the loan part of the equation. They said, well, what about a lower price for the capital and we'll give you part ownership in the firm so that if the firm does well, you do well, too.

And that's in any other industry, a pretty un-extraordinary transaction. It's not at all unusual to attach some warrants or some equity to a financing transaction, but it's very unusual in the legal industry. And that was the first time it had ever been done. And we couldn't do that in the United States. And you mentioned that a couple of states are playing around with changing their laws on that. Do you see much of a future? Is that going to sweep the nation? I think that it's going to be a long and slow road, but I do think that the end result at some point, maybe not even in my professional career, will be a transformation of the way that law firms

are owned and managed. You know, just as you saw with investment banks, investment banks used to be structured like law firms. Goldman Sachs used to be a partnership just like Cravap is. And today, it's a publicly traded, shareholder-owned debt finance company. And I wouldn't be surprised if law firms follow along that road slowly. Well, real quick on that, is that going to be a good thing just for the practice of law? Will it be a good thing for lawyers? Will it be a good thing for clients? Who benefits from something like that? Because I think the law firm model is pretty broken right now. Well, I agree with you about that. Whether it's a good thing or a bad thing, I think it is an inevitable thing, given the current size and structure of big law firms. You know, the concept of the law firm, it seems to me, works pretty well when you've got a small, manageable group of people in actual partnership with each other who are collaborating on the law and their clients' needs. The Abraham Lincoln model.

The Abraham Lincoln model, or frankly, the model of a British barrister's chambers. I like that model too. When you now move to law firms that are global businesses with thousands of employees and billions of dollars of revenue. You don't have any longer a genuine law firm partnership where people are collaborating. You have a big business. And it seems to me that a little- Run by people who generally don't do business for a living. That's the part that always blows my mind, is that law firms are run by lawyers. And I can't emphasize that enough. Law school teaches you nothing about running a law firm.

It teaches you nothing about being a law partner for the most part. And so what you end up having are people who were good law students, who then become good associates, and those good associates become partners, and those partners then start running a global multi-billion dollar business. And their training for that

is having been an associate, basically. Now, Sarah, you know that if you're smart in one area of life, that means you're smart in every area of life. And I see law firm partners making insane bad business decisions. Well, there is some of that, but I will come to the defense

of the people running law firms a little bit. You know, the reality of big law firms is they also, especially on the corporate side of those businesses, do a lot of big, complicated deals. And if you're a deal lawyer at a big law firm for your career, you're just as business savvy and sophisticated as your client is. I agree that transactional lawyers are smarter than the rest of us. Or wily-er. Something. All right, disclosure side. That's why I asked about bankruptcy a little bit. In bankruptcy, of course, your involvement is fully disclosed to the court and all of the parties, I would imagine.

How does that play in an IP litigation case? Do folks know you're there at all? Probably not, in much the same way that folks don't know anybody who is involved in a non-bankrupt, non-class action context. You know, again, it's,. Again, we have a set of disclosure rules in this country that are pretty narrow. We ask for the disclosure of public equity interests. That's a conscious choice by the court system about how broadly they want interests disclosed. Really, what are we getting at when we talk about disclosure? The principal rationale for disclosure behind litigation cases has been for judges to be able to test for conflicts. And so we've decided not to cast that net too widely so that judges can live their lives and not be conflicted out of every single case. So if you're a judge and you also have Verizon telephone service, that doesn't mean that you

can't sit on a case that's involved in Verizon. You just can't sit on a case involving Verizon if you own a bunch of their shares. This is a little bit like speech regulation to sort of bring David back to one of his true loves. You know, this is a little bit of sort of time, place, manner restrictions. We can write whatever disclosure rules we want about the economic and political interests behind litigation as long as they are dispassionate. So if we want to say, as courts or as court systems, we want to know every single economic interest and every single political interest behind a case. We want to know, you know, if there's money, we want to know if there's been money donated to an organization that has brought on this case. We want really to know all the tentacles. There's no reason that we can't write a rule like that, but it has to be a rule that is of

general application. There's not space for a rule that says, oh, we only want this kind of disclosure or this other kind of disclosure. Well, Congress surely could pass a law similar to the campaign finance side that says litigation funding has to be disclosed to the court. But I haven't heard a whole lot of appetite for that. Have you? Well, I agree that there's not a lot of appetite for it because I don't even know how you would define it exactly. So what is litigation funding in the context of a statute that would survive your rigorous analysis? You know, is a contingency fee litigation funding? Is a bank loan?

Is a private equity interest? Is a donor to David's public interest organization? There's not really a viable definition, which is why I think you'd have to say, you know, we want these kinds of economic interests disclosed, whatever they happen to be and wherever they came from. But then you have to ask yourself, why? When I was litigating on occasion, when I would sue, say, a university or other governmental entity attorneys, whether it's an AG's office or more often they would hire out to

a big firm they would they would seek in discovery the identities of donors to ADF or you know whoever I was working with and we would always resist that request yeah it on occasion it would be made an issue at some point in the litigation that the plaintiff in the case was using lawyers funded by somebody else. Right. And why were they asking? What's the legitimate purpose in asking? And the answer is there isn't one. It's harassment and it's a frolic and detour. It's trying to stay away from the merits of the case.

It's a frolic and detour. It's trying to stay away from the merits of the case. Right. They were trying to say that the plaintiff was a tool of some nefarious bad people that a jury would want to know about or would be relevant for a jury. Not not really. Not not really. Well, that's why I come back to the why, like other than letting judges establish conflicts, um, and judges are presumably not buying stock and litigation finance companies, um, other than establishing conflicts, what is the legitimate purpose? Right.

And that was, uh, a version of the argument that we made, which is more just sort of none of your business. So the, the legal version thereof. All right. Last question, Chris.

There is some first-year associate sitting at Cravath who hasn't seen sunlight in several months. And they're hoping one day to be you. That's their dream. What is the most fun job you've had in all of this? I think my current job is the most fun. Why is it the most fun? Because it combines an incredibly rich intellectual litigation environment. So we look at, you know, around 1,500 cases a year. And these are hard, complex, interesting cases.

So I get to see many more cases in this job than I ever would as a law firm partner, for example. But at the same time, I don't have to do, you know, a fair bit of the drudgery that comes with pretrial litigation. Now, the downside is you lose the adrenaline rush of standing up in a courtroom. And that is a big thing to give up for a litigator. But the intellectual challenge of this is extraordinary. And then just the sheer fun of growing a new business that is, you know, going down a path that hasn't really gone down before. That's just a fascinating way to spend time. That's pretty fun. I hope you guys have enjoyed this conversation because I find the whole thing fascinating. You know, David and I talk a lot about these appellate constitutional

yada yada cases, but the vast majority of legal work in the country from a financial standpoint is happening in commercial litigation. And this is a new frontier that I think people don't give enough time and thought to. That was my job for the first chunk of my career was commercial litigation. I was one of those people who didn't see the sun working in a Manhattan office building. And I will never forget the sensation when we first moved to Manhattan, first year of our marriage, just married. My wife is living her best life. She's a student at NYU after classes are over at like two or three in the afternoon. She's heading down to Central Park and reading books in the park

and surrounded by these majestic apartment buildings in the greatest city in the world. And I'm just looking at it out a window. Hey, at least you had a window. Honestly, I had a good friend who worked at Cravath and I just remember him consoling himself with like a new Ferragamo tie every few months. Like, at least I can buy a Ferragamo tie. And I'm like, I hope it keeps you company. Oh, yeah. Pre-dawn hours. So it would be like this.

I would leave before Nancy would wake up. I would arrive back at the apartment after Nancy was asleep. Good marriage. So, yeah, it was great. It was a great way to spend your first year of marriage with somebody you married and you barely knew. So yeah, it was fantastic. Well, I'll see that and raise you.

I arrived at Cravath. I arrived at Cravath, as I told you before, newly married. And the next day, they put me on a plane to California. And I worked on a trial in California for a year and did not set foot again in the New York office for my first year of work at Gravatt while my wife worked in Manhattan. Well, you just beat me that yeah i i bow to you sir that is to return to the argument of whether you should go to law school if that sounds fun to you guys by all means but not everyone gets to grow up and be chris or david for that matter all right well chris you should have stopped because i was winning i was winning the argument until that anecdote.

That, oh gosh, it's always a back and forth. Always a back and forth. Thank you so much for joining us, Chris. Well, thanks for having me on. You guys have a fantastic podcast and I really enjoy listening to it. And we'll take a quick break to hear from our sponsor today, Aura. Ready to win Mother's Day and cement your reputation as the best gift giver in the family? Give the moms in your life an Aura digital picture frame preloaded with decades of family photos.

She'll love looking back on your childhood memories and seeing what you're up to today. Even better, with unlimited storage and an easy to use app, you can keep updating mom's frame with new photos. So it's the gift that keeps on giving. And to be clear, every mom in my life has this frame. Every mom I've ever heard of has this frame. This is my go-to gift.

My parents love it. I upload photos all the time. I'm just like bored watching TV at the end of the night. I'll hop on the app and put up the photos from the day. It's really easy. Right now, Aura has a great deal for Mother's Day. Listeners can save on the perfect gift by visiting auraframes.com to get $30 off, plus free shipping on their best-selling

frame. That's A-U-R-A-Frames.com. Use code ADVISORY at checkout to save. Terms and conditions apply.