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