Litigation

Cal. Litig. 2023, Volume 35, Issue 3

DISCLOSURE OF LITIGATION FUNDING ARRANGEMENTS: MUCH ADO ABOUT NOTHING

Written by Matthew D. Harrison & Doug D. Geyser*

Commercial litigation finance has experienced a meteoric rise in the United States legal industry over the past decade. Yet it remains a fairly novel innovation in a field historically governed by tradition and precedent. It serves a panoply of legal risk-management purposes across law firms and companies of all sizes. In one typical scenario, the funder provides nonrecourse capital to support a litigant’s claims or defenses. The funder recoups its investment and a return only if the case resolves favorably.

Funding inquiries have become almost routine by those seeking to ameliorate the uncertainty and expense associated with complex litigation. As with any innovation that rattles the foundations of a deep-rooted institution, the litigation finance industry has its detractors. A handful of heavily bankrolled lobbyists, most notably the U.S. Chamber of Commerce, have made it a central goal to extinguish or limit the industry’s reach in the U.S. After onerous initial proposals gained no traction, industry opponents have focused their energy on the margins — namely, the call for blanket rules requiring the automatic disclosure of these arrangements in every civil case.

The parameters of the disclosure debate have been thoroughly documented elsewhere. This piece does not rehash them. Rather, it focuses on how these efforts have played out, and what lawyers should consider when advising clients about the current landscape.

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