News
January 27, 2020

Selling More Lawsuits, Buying More Trouble: Third Party Litigation Funding A Decade Later

Authors: John H. Beisner, Jessica D. Miller, and Jordan M. Schwartz, Skadden, Arps, Slate, Meagher & Flom L.L.P.

When ILR documented the early development of third party litigation funding (TPLF) in the U.S., the industry barely existed. Now, according to a recent survey, U.S. funders alone have over $9.5 billion under management. ILR’s research looks at how exactly this explosive growth has happened, how the industry is fueling abusive litigation, how the few TPLF agreements that have been made public reveal deep ethical issues with the practice, and how lawmakers and rule makers can approach TPLF reform.

Among the solutions documented in the paper are proposals that:

  • TPLF agreements must be disclosed to all parties in litigation, to minimize conflicts of interest and ensure plaintiffs retain control of their case
  • Fee-sharing agreements between lawyers and non-lawyers should be banned (as several bar associations have already done) in order to preserve the independent professional judgment of attorneys
  • TPLF should not be permitted in the class action context, because funding creates a potential obstacle to class counsel and named plaintiffs satisfying their fiduciary duties to the class
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