Legal Policy Focus: Third Party Financing

Erin Hawley | Download The Legal Policy Focus | March 19, 2021

Executive Summary

Third party litigation financing is big business in the United States and possibly the most important civil justice development in recent times..
Third party litigation financing involves the financing of a lawsuit in exchange for a percentage of a damages award or settlement.
State law used to forbid the buying and selling of lawsuits.
With the relaxation of state laws prohibiting third party financing, the industry has exploded, but is still largely unregulated.
The insertion of a third party funder into a lawsuit can lead to all sorts of mischief from creating perverse incentives and conflicts of interest to increasing frivolous litigation and court backlog
Third party financing operates in the shadows, as the Federal Rules of Civil Procedure do not currently require disclosure of a financing agreement.

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