Third Party Litigation Funding and Lawyer Ethics

Abstract

This article considers the growth of third-party litigation funding (TPLF) in the United States and the ethical implications for lawyers who represent clients who want and/or need third party funding to pay for lawyers’ fees and the often prohibitive cost of litigation. Third party litigation funding, sometimes referred to as third party legal financing, involves financing or funding of litigation by a person or entity without any interest in the subject of litigation in return for a percentage of a successful outcome or a percentage of the amount of money provided. Third party funding takes various forms but, typically, involves a non-recourse loan or an investment of funds that entitles the investor to some percentage of a successful recovery of damages by the plaintiff. Typically, the funder receives anywhere from 15% to 50% of the recovery and on average one third. The funding can be obtained by a party to litigation or the attorney representing a plaintiff. TPLF has become a worldwide phenomenon. Its proponents contend it is a means to efficiently promote access to justice by enabling individuals and businesses to pay for lawyers and the costs of litigation including expert witness fees, depositions and living expenses of the client while the case is pending. The opponents of TPFL claim the practice presents, among other things, a risk to national security because it enables foreign adversaries, especially China and Russia, to secretly acquire intellectual property and to avoid economic sanctions that are barriers to doing business in the United States.