Third party litigation funding (TPLF) is the practice of investors buying an interest in the outcome of a lawsuit. It has quickly become a multi-billion dollar industry. TPLF comes in several forms that present distinct issues and require different solutions, but they share three commonalities:
- The funder has a financial interest in the ultimate resolution of the lawsuit.
- The involvement of an outside funder raises ethical issues, such as who is driving or influencing the litigation, directly or indirectly.
- The presence of an outside funder, and its entitlement to a portion of a plaintiff’s recovery, can complicate the ability to fairly resolve disputes and drive up settlements and awards.
This paper focuses on three forms of TPLF:
- “Big-ticket” lawsuit lending;
- “Fast-cash” lawsuit lending; and,
- “Letters of protection.”
The paper further focuses on relevant ethics rules and laws as well as potential solutions.
