Third party litigation funding (TPLF) is the practice of investors buying an interest in the outcome of a lawsuit.
Why It’s a Problem
Proponents of lawsuit financing argue that TPLF provides access to justice for those who might not otherwise be able to afford it, but the reality is that it can create serious problems for the legal system as a whole.
Litigation financing raises several ethical concerns, such as a threat to a lawyer’s ability to exercise independent judgment in cases where the funder can influence litigation or settlement decisions.
The presence of an unknown third-party with a stake in the outcome of a lawsuit can change what is essentially a two-party negotiation into a multi-party process with a “behind-the-scenes” influencer.
As one litigation funding company executive has acknowledged, third-party litigation financing “make[s] it harder and more expensive to settle cases.”
What Can Be Done
Our legal system is intended to achieve fair and just resolution – not to generate profits for investors.
If third-party litigation financing continues to be allowed, there must be regulations in place to ensure that investors are held accountable for their actions and that the integrity of the legal system is preserved.
Regulations should include transparency surrounding TPLF agreements. Disclosure of such arrangements at the outset of litigation or upon entering a funding agreement would provide parties and courts with vital information to assess the influence of funders on the litigation.