Litigation Financing

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Sarah Abrams

Litigation funding as a topic has been around for years, but it recently has been back in the headlines of the business pages. In light of the recent renewed focus on litigation funding, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, explores the background regarding litigation finance and considers the implications for D&O insurers. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest for this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article. Continue Reading Guest Post: Litigation Finance (Litigation Funding)

It has been a while since I have had occasion to write about third-partly litigation financing. However, recent developments at the SEC, in which the agency has pursued enforcement actions alleging that various purported vehicles to finance litigation had defrauded prospective investors, have brought litigation funding back onto my radar screen. Once again, as in the past, various groups are sounding alarm bells about third-party litigation funding, as discussed below.Continue Reading Litigation Funding in the Spotlight

Acting in light of what the proposal calls the “exponential growth” in litigation financing, and taking its first action in the area since 2012, the American Bar Association’s House of Delegates has approved a proposal for the third-party litigation funding “best practices.” The proposal, which stays away from some of the higher-profile litigation funding issues (such as whether or not litigation funding should be disclosed), is built around principles of transparency and client control.

On August 3, 2020, the American Bar Association House of Delegates, meeting virtually due to the pandemic, voted 366-10 to approve the proposed “Best Practices for Third-Party Litigation Funding,” a copy of which can be found here. The Best Practices proposal updates the House of Delegate’s 2012 informational white paper on litigation funding. The ABA’s August 3, 2020 press release describing the House of Delegate’s approval of the litigation funding best practices proposal, as well as a number of other actions taken the same day by the House of Delegates, can be found here. The House of Delegates consists of 597 representatives of state, local, and specialty bar associations.
Continue Reading ABA Adopts Third-Party Litigation Funding “Best Practices” Proposal

The New Black?

Litigation financing is one of the most important recent developments in the global claims arena. There is a very simple reason why it has become an increasingly important phenomenon, and that is because it is so highly remunerative. An August 27, 2018 Bloomberg article entitled “For the World’s Super Rich, Litigation Funding is the New Black” (here) takes an interesting look at the recent growth in litigation funding, as well as the reasons for and consequences of the growth. According to the article, for many institutional investors and other sources of investment capital, litigation funding is now viewed as just another asset class, albeit one with superior returns (for now, at least). The question is whether all of the current litigation financing fund raising is shrinking the opportunities and possible future returns.
Continue Reading Is Litigation Financing “The New Black”?

One of the hot topics in the litigation arena these day is the question of whether or not litigants should be obliged to disclose their litigation funding arrangements to opposing parties. Indeed, as discussed here, last month three U.S. senators introduced a bill to require litigation funding arrangements to be disclosed in class action litigation and multidistrict litigation. One of the arguments raised in favor of this type of disclosure is that under the Federal Rules of Civil Procedure defendants are already required to disclose to opposing parties at the outset of the case their insurance coverage information.  In an interesting June 11, 2018 Law 360 article entitled “Claimants Shouldn’t Be Forced to Disclose Litigation Funding” (here), Matthew Harrison and John Harabadian of Bentham IMF litigation funding firm challenge the parallels that are usually drawn in this context between discovery of insurance and discovery of litigation funding arrangements, arguing that while this comparison is “superficially appealing,” the two types of disclosures “are far different by nature.”
Continue Reading Litigants Have to Disclose Insurance, Does That Mean Litigation Financing Should be Disclosed, Too?

Along with the recent rise in third-party litigation financing has come a widely-held perception that there is something vaguely shady about it. For example, a May 12, 2018 New York Times article, in what is nearly a compulsory formulation, described litigation funding as “unregulated and opaque.”  This common perception about litigation funding is one reason why I have long felt that eventually that some form of  litigation financing disclosure is going to be required – indeed, one state has already instituted rules requiring the disclosure. The possibility for more universal disclosure requirements moved one step closer last week, when three U.S. Senators introduced legislation that would make litigation financing disclosure mandatory in certain kinds of federal court lawsuits. The draft bill has predictably drawn praise and scorn from commentators with opposing viewpoints, but the key thing at this point is that the debate about litigation financing disclosure has moved from the fringes and has now taken center stage.
Continue Reading U.S. Senators Introduce Bill to Require Litigation Funding Disclosure

One of the many issues under discussion when the question of litigation financing regulation comes up is whether parties’ use of litigation financing must be disclosed. One federal district court has implemented provisions requiring the disclosure of litigation financing, and the state of Wisconsin recently adopted measures requiring litigation financing disclosure. The federal Advisory Committee on the Rules of Civil Procedure is separately studying measures that would require disclosure. In the meantime, other courts continue to struggle with the disclosure issue. The federal district court judge in Ohio presiding over the multidistrict opioid litigation has fashioned his own litigation financing disclosure approach; Northern District of Ohio Judge Dan Aaron Polster has ordered the litigants in the opioid litigation to provide litigation funding disclosure to the court itself, rather than to the parties. Interestingly, this approach has drawn praise from a leading third-party litigation funder, as discussed below. Judge Polster’s May 7, 2018 order can be found here.
Continue Reading Federal Judge Orders Litigation Funding Disclosure to the Court, Rather than to Opposing Parties

As the use of third-party litigation funding has become more widespread, one issue that has been debated is whether or not the existence and details of a funding arrangement must be disclosed to the adversarial parties. As I have noted in prior posts, courts have struggled with the question of whether or not funding arrangements must be disclosed under existing discovery rules. A number of proposals providing for mandatory disclosure of litigation funding arrangements have been proposed. Now, Wisconsin has become the first state to adopt a provision requiring the disclosure of litigation funding arrangements. The state’s action is just the latest step in what seems to be a general move toward requiring disclosure.
Continue Reading Wisconsin Become First State to Mandate Disclosure of Litigation Funding Arrangements

As I have previously noted (most recently here), third-party litigation financing is an increasingly important part of the litigation scene in the U.S. and around the world. In a series of articles in December, Law 360 took a comprehensive overview of litigation funding in the U.S. As discussed below, the Law 360 series provides an interesting perspective on an increasingly important part of the U.S. litigation environment.
Continue Reading The Latest on Third-Party Litigation Financing

Third-party litigation funding has its critics and detractors (refer, for example, here and here). The fact is that third-party litigation funding is now well-established and is here to stay. A recent survey by one of the leading funding firms, discussed below, confirms that the acceptance and use of litigation funding is growing rapidly. The more interesting question at this point is — what are the implications?
Continue Reading Thinking About the Growth of Third-Party Litigation Financing