The Hidden Money Behind the Litigation: The Problematic Expansion of Third Party Litigation Funding

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Third party litigation funding (TPLF) is the practice of investors

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.

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