Why more Canadian corporates are turning to Litigation Funding
Litigation is expensive and hugely time-consuming for both plaintiff and defendant alike. While Canada boasts a wide and deep range of legal expertise amongst its domestic law firms, rising legal costs and increasing litigation appear to be inextricably linked. Therein lies the tension between the noble concept of societal access to justice and the realities of funding an actual lawsuit.
It was against this backdrop that Canada’s first litigation funding arrangements were conceived in the class actions arena. From 2010 onwards, Canadian class actions have been funded through a combination of contingent legal fees (payable only on success) from boutique and specialist law firms coupled with non-recourse funding from the private sector. The net effect of this funding was to move the burden of legal and financial risk from the shoulders of a single class representative (often a regular citizen of limited means) onto the balance sheets of professional funders such as Augusta.
In the absence of relevant law, it was left to class action judges to determine the scope of the ancient doctrines of ‘champerty and maintenance’, which until then had severely restricted third-party participation in lawsuits. Successive and sensible jurisprudence has since paved the way for litigation funding to be both legal and acceptable in a much wider range of circumstances and to break out of the class actions arena.
Today the uses of litigation funding in Canada, go way beyond the class actions space and include insolvency, construction, general litigation, intellectual property defence, insurance, aboriginal and arbitration, to name a few. While mostly plaintiff focussed, Augusta is also exploring defendant side arrangements, particularly in a municipality setting. Augusta has been active in Canada since 2017 and opened our first office in January 2019. In our first year, the office received over 100 enquiries for funding across a range of cases.
At the core of litigation funding are the dual concepts of risk-sharing and non-recourse investment. For Canadian corporations, the idea of swapping some upside in their claim for a reduction in their legal outlay is appealing. In effect, the funder defrays relevant corporate legal expense, thereby increasing the corporations operating cashflow. Furthermore, the funder's investment is effectively off-balance-sheet for the corporation. This is particularly attractive for companies with relatively high net debt. Companies can redeploy their working capital tied up in the legal budget to other areas of the business where it is needed. This is of particular interest to corporations funded by private equity and venture capital investors.
Pricing of litigation is often in the range of X2 to X3 on a money multiple basis on a single case and lower for portfolios of cases. On average, funders lose about 20% to 25% of their cases which obviously reduces the net returns as these investments have no recoverability. Ironically, the aforementioned arcane concepts of champerty and maintenance ensure Canadian corporations keep control over their lawsuit, such that any funder remains a passive participant in the litigation. Given this, litigation funding offers companies a good opportunity to lower the risk of litigation, free up cash and maintain control over their business.
Marketing matters: from IBM to Kyndryl
Prior to joining Kyndryl as Chief Marketing Officer, Maria had a 25-year career at IBM, most recently as the tech giant’s CMO where she oversaw all marketing professionals and activities across North America, Canada and Latin America. She has held senior global marketing positions in a variety of disciplines and business units across IBM, most notably strategic initiatives in Smarter Cities and Watson Customer Engagement, as well as leading teams in services, business analytics, and mobile and industry solutions. She is known for her work with teams to leverage data, analytics and cloud technologies to build deeper engagements with customers and partners.
With a passion for marketing, business and people, and a recognized expert in data-driven marketing and brand engagement, Maria talks to Business Chief about her new role, her leadership style and what success means to her.
You've recently moved from IBM to Kyndryl, joining as CMO. Tell us about this exciting new role?
I’m Chief Marketing Officer for Kyndryl, the independent company that will be created following the separation from IBM of its Managed Infrastructure Services business, expected to occur by the end of 2021. My role is to plan, develop, and execute Kyndryl's marketing and advertising initiatives. This includes building a company culture and brand identity on which we base our marketing and advertising strategy.
We have an amazing opportunity ahead at Kyndryl to create a company brand that will stand apart in the market by leading with our people first. Once we are an independent company, each Kyndryl employee will advance the vital systems that power human progress. Our people are devoted, restless, empathetic, and anticipatory – key qualities needed as we build on existing customer relationships and cultivate new ones. Our people are at the heart of this business and I am deeply hopeful and excited for our future.
What experiences have helped prepare you for this new opportunity?
I’ve had a very rich and diverse career history at IBM that has lasted 25+ years. I started out in sales but landed explored opportunities at IBM in different roles, business units, geographies, and functions. Marketing and business are my passions and I landed on Marketing because it allowed me to utilize both my left and right brain, bringing together art and science. In college, I was no tonly a business major, but an art major. I love marketing because I can leverage my extensive knowledge of business, while also being able to think openly and creatively.
The opportunities I was given during my time at IBM and my natural curiosity have led me to the path I’m on now and there’s no better next career step than a once-in-a-lifetime-opportunity to help launch a company. The core of my role at Kyndryl is to create a culture centered on our people and growing up in my career at IBM has allowed me to see first-hand how to prioritize people and ensure they are at the heart of progress in everything Kyndryl will do.
How would you describe your leadership style?
I believe that people aren't your greatest assets, they are your only assets. My platform and background for leadership has always been grounded in authenticity to who I am and centered on diversity and inclusion. I immigrated to the US from Chile when I was 10 years old and so I know the power and beauty that comes from leaning into what makes you different from other people, and that's what I want every person in my marketing organization to feel – the value in bringing their most authentic self to work every day. The way our employees feel when they show up for themselves authentically is how they will also show up for our customers, and strong relationships drive growth.
I think this is especially true in light of a world forever changed by the pandemic. Living through such an unprecedented time has reinforced that we are all humans. We can't lead or care for one another without empathy and I think leaders everywhere have been reminded of this.
What’s the best leadership advice you’ve received?
When I was growing up as an immigrant in North Carolina, I often wanted to be just like everyone else. But my mother always told me: Be unique, be memorable – you have an authentic view and experience of the world that no one else will ever have, so don't try to be anyone else but you.
What does success look like to you?
I think the concept of success is multi-faceted. From a career perspective, being in a job where you're respected and appreciated, and where you can see how your contributions are providing value by motivating your teams to be better – that's success! From a personal perspective, there is no greater accomplishment than investing in the next generation. I love mentoring younger professionals – they are the future. I want my legacy as a leader to include providing value in work culture, but also in leaving a personal impact on the lives of professionals who will carry the workforce forward. Finding a position in life with a job and company that offers me a chance at all of that is what success looks like to me.
What advice would you give to your younger self just starting out in the industry?
I've always been a naturally curious person and it's easy for me to over-commit to projects that pique my interest. I've learned over years of practice how to manage that, so to my younger self I’d say… prioritize the things that are most important, and then become amazing at those things.