FundingSizable expenses

A big commercial case can cost millions in expenses — by which I mean out-of-pocket costs that the plaintiff or its counsel must pay net of attorneys’ fees. A portfolio of cases — for infringement of a patent or family of patents, say — can run many millions more. Who will bear that burden? And what will it cost?

Before my firm pioneered representing businesses in commercial cases on a contingent-fee basis in the 1980, clients with big but complex and risky claims had little choice but to fund 100 percent of the expense. That meant outlays of hourly attorneys’ fees (usually to a full-service law firm) as well as fees for experts, travel, deposition transcripts, trial graphics, and so on. Who but a big corporation could afford all that?

Enter the contingent fee

The advent of the Susman Godfrey model three decades ago and its spread to other firms since have made taking on major litigation affordable for those clients whose claims justify the risks. Extending the contingent-fee arrangement from personal injury cases into the commercial realm enabled clients to trade part of their future recoveries, if any, for the lawyers’ blood, sweat, and tears.

But who pays the litigation costs? The obligation in the first instance falls on clients, of course. They have traditionally had two ways to finance the obligation — either by self-funding or by granting the law firm a larger contingent-fee percentage. A fairly new alternative, third-party litigation funding (TPLF), provides yet another method. And having turned back multiple assaults on champerty, maintenance, and other grounds, see, e.g., Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711 (N.D. Ill. 2014) (surveying cases), it looks likely to endure.

Investment or loan?

A TPLF firm views its commitment to supply expense money in a commercial case or portfolio of commercial cases as an investment rather than a loan. If the claims fall short, the funding firm loses some or all of the costs it advanced, typically with no recourse to the client or the law firm.

In return, the funder generally receives the right to receive its money back (off the top) plus a percentage of the recovery or multiple of its investment. The TPLF firm also usually contracts for the right to information concerning the claims and prosecution of the litigation (or arbitration) and to play a consulting but not directing role in major decisions, including settlement strategy.

The cost of TPLF funding

What does the investment cost the client, whether directly with the funder or indirectly through her arrangement with the law firm?∗

TPLF firms’ websites and brochures as well as law review articles and Westlaw reports of cases do not provide a straightforward answer. As a recent article on TPLF in three countries notes, “[c]ommercial lenders rarely disclose their interest rates.” Jasminka Kalajdzic, Peter Cashman, and Alana Longmoore, Justice for Profit: A Comparative Analysis of Australian, Canadian and U.S. Third Party Litigation Funding, 61 Am. J. Comp. L. 93, 132 (2013). A brochure from one firm notes that “[t]hird-party financing agreements are individually negotiated deals that must be structured according to the unique facts of the case.” Another TPLF firm says on its website that “[o]ur capital is expensive, with [their] overall financial return expectations consistent with private equity and venture capital funds, not commercial banks.”

Framework for the opaque

In light of the opaqueness of the market, the best we can do is provide a general framework for understanding the cost of TPLF funding in a hypothetical commercial case. Much, if not all, typically depends on the value the contingent-fee lawyer and the funder ascribe to the case.

Say you estimate, in an antitrust lawsuit, a 90 percent chance of recovering $10 million on claim A for price-fixing and a 20 percent likelihood of a $100 million recovery on claim B for monopolization.∗∗ You thus expect to net a recovery of $29 million [(.9 x $10 million) + (.2 x $100 million)]. Each percentage point of the recovery that you you project has a value of $290,000 (.01 x $29 million). If the funder anticipates covering litigation expenses of $1 million, a funding fee equal to return of the investment plus five percent of the recovery would yield the TPLF firm $1 million plus either $1.45 million (on the gross recovery of $29 million) or $1.4 million (on the net recovery of $28 million). The return on investment in the example equals a 2.45 or 2.4 multiple.

The annual return will of course depend on how long the case lasts. Commercial cases can take anywhere from a couple of years to a decade. If the hypothetical case we just reviewed lasts five years and produces the $29 million we expected, the return will come to about 20 percent a year.


TPLF firms often specify minimum funding amounts. In the instances of Burford and Parabellum, the threshold hovers around $2 million; and Burford says that it averages an investment of $8 million per case or portfolio.

I have spoken with TPLF funders and gotten a sense for how they operate but so far have not worked out an arrangement with any of them or represented a client who obtained TPLF funding. I haven’t found the right case yet — presumably one that my firm would not take if we had to pay expenses but would accept if we didn’t. And my firm, which self-finances the expenses we advance for clients, isn’t a good candidate for TPLF across a portfolio of cases.

What to do?

Since commercial case funders generally will not even consider investing in a non-contingent fee case — the lawyers’ decision to invest his own resources providing some assurance of the case’s value — the TPLF firm will inevitably want to talk with the lawyer before making its decision. Because my firm favors cases in which the client pays expenses — a subject that I will return to — TPLF may prove a workable option for clients who would like to consider it. But clients should discuss it with their lawyers, to help assure that it does give them the best alternative for covering case expenses.


∗Law firms generally cannot mark up expenses without disclosing the mark up and securing client consent.

∗∗You will need, at the least, (a) a strong liability case, (b) large and provable damages, and (c) solvent source of collecting on an award or judgment.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.