Update on the Debate Over Third Party Litigation Finance

Third Party Litigation Funding (TPLF) is an increasingly used mechanism for financing lawsuits that is similarly coming under increasing scrutiny. With TPLF, third part financiers “invest” in lawsuits with an expected return on their investment by getting a cut of any judgment award or settlement received by their funded plaintiff. Sophisticated funders develop diverse portfolios of litigation so that they can assess and spread risk based on the probabilities of winning or achieving favorable settlements. Some argue that this mechanism gives aggrieved parties access to court that they would otherwise lack because they would not have funds to bring litigation to recover for their losses against responsible defendants. Some worry that it leads to a flood of litigation that should never be brought in. the first place and may skew normal incentives to settle because of funder control. Indeed, one of the major points of controversy revolves around the appropriate level of funder control over litigation decision making which would traditionally be left to the lawyers and their clients. Does it change settlement dynamics because funders will want to press on beyond what the parties without them might have agreed was a good settlement point? And, a serious debate is occurring between commentators, in state legislatures and Congress, and in the courts over whether there should be requirements to disclose the existence and source of third party financing in particular cases. In most state and federal courts, disclosure is not yet required, clouding the ability to assess potential conflicts of interest and meaning courts are not operating on full information when deciding things like proportionality in discovery which is often based on a determination of the resources available to the parties. The experts on this webinar panel provided an update on developments in TPLF, including how the funding industry is developing, what effect TPLF is having on the litigation landscape, and what efforts are being made to better understand or regulate these activities. This webinar was held on June 16, 2023. Panelists: Dai Wai Chin Feman, Director of Commercial Litigation Strategies, Corporate Counsel, Parabellum Capital The Honorable Bob Goodlatte, Former Member of the United States Congress (1993-2019) and Chairman, House Judiciary Committee Jeremy Kidd, Professor of Law, Drake University Law School Jordan M. Schwartz, Counsel, Skadden, Arps, Slate, Meagher & Flom LLP Moderator: Donald J. Kochan, Professor of Law, Executive Director, Law & Economics Center, George Mason University Antonin Scalia Law School