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Select Ethical Issues Present in Litigation Funding

October 14, 2021

Select Ethical Issues Present in Litigation Funding

The following article was contributed by John J. Hanley, Partner at Rimon Law.  Litigation financing is on the rise in the United States and provides some claimants a valuable means for paying the costs of pursuing a legal claim. Lawyer involvement in litigation financing transactions raises many ethical issues for a lawyer such as competence, duty of loyalty, the potential waiver of privilege and interference by a third party, to name a few. Competence The first rule for lawyers under the New York Rules of Professional Conduct (the “NY RPC”) is competence.[1]  Lawyers and law firms should tread carefully when considering undertaking client engagements in a subject area in which they do not have the requisite knowledge and skill to provide competent representation of their clients. Official Comment 1 to Rule 1.1 provides in part that factors relevant to determining whether a lawyer has the requisite knowledge and skill in a matter include the relative complexity and specialized nature of the matter, the lawyer’s general experience, the lawyer’s training and experience in the filed in question, and the preparation the lawyer is able to give the matter.[2] This does not mean that lawyers cannot deal with matters in which they are initially unfamiliar.  Indeed, the American Bar Association points out in comments to Rule 1.1 that “[a] lawyer need not necessarily have special training or prior experience to handle legal problems of a type with which the lawyer is unfamiliar. The analysis of precedent  . . . and legal drafting are required in all legal problems. Perhaps the most fundamental legal skill consists of determining what kind of legal problems a situation may involve, a skill that necessarily transcends any particular specialized knowledge. A lawyer can provide adequate representation in a wholly novel field through necessary study.”[3] According to the New York City Bar Report to the President by the New York City Bar Association Working Group on Litigation Funding: “[a] lawyer whose client seeks third party funding should determine at the outset whether he or she has the transactional experience and sophistication required to negotiate a beneficial agreement with the funder or whether a specialist in the field should be involved.”[4] Competence in litigation finance includes familiarity with various litigation financing structures and privileges against disclosure, among others.[5]  For example, the structure may involve different types of collateral, different means of financing legal fees and expenses, the manner in which funding is disbursed and the return structure of the financing.  A lawyer concentrating her or his practice on litigation funding may also be better able to determine “market” terms of the financing. Duty of Loyalty and the Lawyer’s Financial Interests Of course, the lawyer is the client’s fiduciary and agent who owes his or her client undivided loyalty and is forbidden from putting her interest above that of the client. The New York State Bar Association, Committee on Professional Ethics reminds lawyers that their financial interests must not interfere with the representation of the client.[6] Ordinarily, there is nothing adverse to a client about a lawyer getting paid for legal services[7] but in a litigation funding transaction the lawyer could have a personal interest in respect of the transaction. For example, the litigation funding agreement may facilitate payment of a portion of the lawyer’s fees or ensure certain expenses borne by the lawyer will be repaid.[8] The American Bar Association posits that if a lawyer has a relationship with a litigation funder that creates a financial interest for the lawyer . . . it may interfere with the lawyer’s obligation to provide impartial, unbiased advice to the client (the “ABA Report”)[9]. The ABA Report goes on to say that a lawyer with a long-term history of working with a particular funder may have an interest in keeping the funder content which would create a conflict even in the absence of an explicit agreement. The NY RPC, specifically Rule 1.7(a)(2), like the Model Rules of Professional Conduct, prohibits a lawyer from representing a client if “there is significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, property or other interest.” Additionally, Rule 5.4 of the NY RPC, and its analogous provisions in other jurisdictions, requires that a lawyer maintain independence[10].  Consequently, such lawyer, representing a client in a matter for which litigation funding is sought, in general may be able to represent the client with respect to the litigation funding agreement but should disclose the lawyer’s relationship with the funder and receive the client’s informed written consent. Communication and Confidentiality Rule 1.4 of the NYRP Conduct requires a lawyer to communicate promptly, and provide complete information, to the client regarding the matter, and to reasonably consult with the client about the means to achieve the client’s objectives.[11] Reputable litigation funders are usually careful to provide in the litigation finance documents that the funder will not be involved in discussions between the lawyer and client regarding the matter, and that the funder will not direct or control the litigation. In certain circumstances an inexperienced lawyer may consider involving the funder in discussions about case strategy, but caution is in order. If a party other than client and the attorney is involved in communications involving legal issues or the case, the attorney-client privilege and confidentiality of communications is likely breached and the attorney may be guilty of legal malpractice. Indeed, Rule 1.6 of the NYRPC requires that a lawyer not knowingly reveal confidential information, or use that information to the disadvantage of the client or advantage of the lawyer or a third person, subject to certain exceptions.[12] Conclusion An attorney who represents a client in a matter that is to be funded pursuant to a litigation funding agreement should consider the ethical implications discussed in this Insight, among others, before representing the client in the funding agreement. Counsel would avoid all of the ethical considerations that may arise by referring the client to an outside attorney experienced in litigation finance.
[1] N.Y. Rules of Prof’l Conduct R.1.1.  The California Rules of Professional conduct and the American Bar Association Model Rules of Professional Conduct (“MRPC”) also make this the number one rule.  Indeed, all fifty states and the District of Columbia have adopted legal ethics rules based at least in part on the MRPC. [2] N.Y. Rules of Prof’l Conduct R.1.1, Comment [1]. [3] Available here ABA Comment to Rule 1.1 [4] Report to the President by the New York City Bar Association Working Group on Litigation Funding (February 28, 2020). [5] Others includes, without limitation champerty, maintenance, barratry, usury and required disclosures. [6] N.Y. Comm. on Prof’l Ethics, Formal Op. 769 (November 4, 2003). [7] The State Bar of California Standing Committee on Professional Responsibility and Conduct Formal Opinion No. 2020-204. [8] Id. At 3. [9] American Bar Association, Informational Report to the House of Delegates Commission on Ethics 20/20. [10] N.Y. Rules of Prof’l Conduct R.5.4. [11] N.Y. Rules of Prof’l Conduct R.1.4(a). [12] N.Y. Rules of Prof’l Conduct R.1.6(a). See also the American Bar Association’s Model Rule 1.6.
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Commercial Legal Innovation

Getting Work Done: The Simpler, Smarter Way to Grow Your Firm

By Kris Altiere |

The following article was contributed by Kris Altiere, US Head of Marketing for Moneypenny.

Law firms are busier than ever. With new systems, dashboards, and automation tools launched in the name of efficiency, you’d think productivity would be soaring. Yet for many, the opposite is true. Complexity creeps in, admin increases, and clients still end up waiting for answers.

At Moneypenny, we’ve learned that true progress doesn’t come from doing more, it comes from doing what matters. Our philosophy is simple: Get work done, don’t just perform, don’t just present. Instead deliver, clearly, quickly, and with care.

Whether it’s a client seeking reassurance, a paralegal managing a mounting caseload, or a partner steering firm strategy through change, the goal should always be the same: solve the problem and move forward.

Efficiency might be driven by data, but in law, trust and momentum are still powered by people.

The Trust Factor

Clients don’t just want results; they want to know their matter is in good hands. The best partnerships, whether between a legal firm and its clients or between colleagues, are built on accountability and trust.

Getting work done isn’t about checking boxes or sending updates for the sake of optics. It’s about ownership. Doing what you say you’ll do, every single time. Following through with integrity. In short: treat people how you’d like to be treated. That’s how client confidence is built and why trust remains a competitive differentiator for firms now and in the future.

Focus on What Only You Can Do

Law firms today face growing operational pressures: administrative backlogs, client onboarding delays, endless meetings. Many assume the answer is to do more in-house, hire more people but the most successful firms know when to outsource to a trusted partner.

That doesn’t mean losing control, however. It means surrounding your firm with trusted partners who amplify your capabilities and free your team to do what only they can do, advise clients and win cases. When done right, it creates focus.

At Moneypenny, we see this daily. We handle client calls, live chats, and digital communications for thousands of businesses in the legal industry. We take care of the admin that slows teams down so they can accelerate the work that matters most: serving clients and growing their firm. It’s partnership in its purest form: freeing their people to deliver their best.

Pragmatism Over Perfection

Grand digital transformation projects often sound impressive, but the real progress comes from consistent, pragmatic improvement. The best firms are selective about innovation. They adopt technology not for the headlines, but for the results.

These are the firms that deliver, time and again, because they know progress isn’t about chasing every new idea, it’s about using the right ones well.

They ask simple, powerful questions:
• What’s the work that needs to be done?
• Who’s best to do it?
• How can we do it well?

It’s a balanced approach, blending smart innovation with everyday pragmatism and one that turns productivity from a KPI into a true competitive advantage.

Tech That Enables, Not Overcomplicates

Technology has enormous potential to streamline legal operations but only when used intentionally. Too often, new systems add friction instead of removing it.

The smartest firms blend automation with human oversight, letting technology enable people rather than replace them. For example, at Moneypenny, our AI Receptionist handles routine client inquiries with speed and accuracy. But when a conversation requires empathy, nuance, or reassurance, one of our experienced receptionists steps in seamlessly. 

The result is humans and AI together, each doing what they do best. Because in the end, emotional intelligence, the ability to listen, reassure, and build trust, remains a uniquely human strength, even as AI continues to evolve at a rapid rate.

Four Rules for Getting Work Done

This philosophy isn’t about going backwards or simplifying for the sake of it. It’s about cutting through the noise, building with intention, and putting resources where they’ll have the most impact.

It’s about following four simple objectives:

  1. Focus on what only you can do.
    Concentrate on the work that truly requires your expertise.
  2. Outsource with trust.
    Partner with people who treat your clients as their own.
  3. Use technology to enable, not to replace.
    Automation is a tool — not a solution in itself.
  4. Measure outcomes, not optics.
    Progress is about results, not noise.

Clarity Over Complexity

Getting work done isn’t flashy but it is how great firms grow. One resolved issue, one clear decision, one satisfied client at a time.

Because when brilliant legal teams are supported by smart technology and the distractions fall away, exceptional things happen. Clients feel the difference, teams perform at their best, and the firm builds a reputation for service and sustained excellence. 

For law firms navigating the fast-changing landscape, success will come from what matters most. Clarity over complexity. Trust over busyness. Action over appearance. And that is how law firms will truly move forward and stay ahead of the crowd.

Case Developments Commercial

Pogust Goodhead Defeats BHP Bid To Block Deposition Of Former Renova Chief

The High Court has rejected mining giant BHP’s application for an anti-suit injunction (ASI) that sought to prevent Pogust Goodhead from pursuing lawful evidence-gathering measures in the United States against the former president of the Brazilian redress scheme foundation set up after the Mariana dam collapse.

The Court found no basis to characterise Pogust Goodhead’s use of Section 1782 to seek a deposition of Mr André de Freitas, former CEO of the Renova Foundation[i] as vexatious, oppressive, or unconscionable, as argued by BHP.

In November 2024, Pogust Goodhead filed the §1782 application in the District Court of Arkansas seeking limited testimony from Mr de Freitas in relation to Pogust Goodhead’s claim arguing that BHP unlawfully interfered with Pogust Goodhead’s retainer rights and the compensation due to its Brazilian clients.  The U.S. court granted the subpoenas in January 2025.

Since then, BHP has sought to block the deposition by filing motions to quash the subpoenas in April 2025 and seeking an ASI in the High Court. A ruling from the Arkansas court is pending.

In Wednesday’s judgment, Mr Justice Waksman rejected BHP’s request for an injunction that would have halted the U.S. evidence-gathering process, finding no basis to prevent Pogust Goodhead from continuing with its §1782 discovery efforts.

Justice Waksman wrote in his decision: “I agree with PG that the depositions serve a distinct and legitimate purpose, being to better understand Renova’s role in relation to the various settlements and their form.”

Alicia Alinia, CEO at Pogust Goodhead commented: “We welcome the Court’s clear judgment. BHP has repeatedly attempted to obstruct legitimate investigations into its conduct. Mr de Freitas’s testimony is central to understanding how our clients’ rights may have been undermined. It is essential that he gives evidence. Only by hearing directly from those involved can our clients’ rights be properly safeguarded and the full truth established.”

Key Findings

  • The court held that English courts do not control how parties lawfully obtain evidence abroad, and that the U.S. court is the appropriate authority to decide the scope and propriety of discovery sought under Section 1782.
  • The Court also highlighted BHP’s significant delay in bringing the ASI application — nearly four months after learning of the U.S. subpoenas — which weighed against granting any injunctive relief.
  • Any concerns about the scope of the subpoenas, alleged misstatements, or burden on the witness are squarely matters for the U.S. District Court, which has already engaged with the issues in detailed hearings.

As a result, BHP cannot use the English courts to derail the ongoing U.S. process. The parties now await the District Court of Arkansas’s decision on whether BHP’s motions to quash the subpoenas will succeed.

Commercial Special Features

Third Party Funding 3.0: Exploring Litigation Funding’s Correlation with the Broader Economy

By Gian Marco Solas |

The following article was contributed by Dr. Avv. Gian Marco Solas[1], founder of Sustainab-Law and author of Third Party Funding, New Technologies and the Interdisciplinary Methodology as Global Competition Litigation Driving Forces (Global Competition Litigation Review, 1/25).  Dr. Solas is also the author of Third Party Funding, Law Economics an Policy (Cambridge Press).

There is an inaccurate and counterproductive belief in the litigation funding market, that the asset class would be uncorrelated from the global economy. That was in fact due to a much bigger scientific legal problem, that the law itself was not considered as physical factor of correlation, as instrument to measure and determine cause and effects of economic events in legal systems.

This problem has been solved, in both theoretical and mathematical terms, and in fact – thanks to technology available to date such as AI and blockchain – it looks much better for litig … ehm … legal third-party funders. 

Third Party Funding 3.0© opens three new lines of opportunities:

  1. AI allows to detect and file claims that would otherwise not have been viable / brought forward, such as unlocked competition law claims[2], which represent the largest chunk of the market for competition claims. See funding proposal.
  2. Human law as factor of correlation allows to calculate the unexpressed value of the global economy. Everything that, in fact, can be unlocked with litigation, allowing then a public-private IPO type of process to optimize legal systems[3].
  3. Physical modeling of the law also allows to transform debt / liabilities into new investments, thus allowing to settle litigation earlier and with less legal costs, leaving more room to creativity to optimize the investments[4].

While it may be true that the outcome of one single judgement does not depend on the fluctuations of the financial economy, legal reality certainly determines the ups and downs of the litigation funding (and any other) market. Otherwise, we could not explain the rise of litigation funding in the post-financial crisis for instance, or the shockwaves propagated by judgements like PACCAR.

The flip side is that understanding and measuring legal reality, as well as leveraging on modern technologies and innovative legal instruments, the market for legal claims and legal assets is much bigger and sizeable than with the standard litigation financial model.

In order to test Litigation Funding 3.0, I am presenting the following proposal:

10 MILLION EUR in the form of a series A venture capital type of investment to cover one test case's litigation costs, tech, book-building and expert costs aimed at targeting three already identified global or multi-jurisdictional mass anticompetitive claims in the scale of multi-billion dollars, whose details will be provided upon request.

Funder(s) get:

  • Percentage of claims' return as per agreement with parties involved;
  • Property of the AI / blockchain algorithm;
  • License of TPF 3.0.

The funding does not cover: additional legal / litigation / expert / etc. costs.

Below is the full proposal:

THIRD PARTY FUNDING 3.0© & COMPETITION LAW CLAIMS Dr2. Avv. Gian Marco Solas gmsolas@sustainab-law.eu ; gianmarcosolas@gmail.com ; +393400966871 
AI: Artificial Intelligence                  ML: Machine Learning                    TPF: Third Party Funding
GENERAL SCENARIO FOR COMPETITION LAW DAMAGE CLAIMS – IN SHORT
Competition authorities around the globe are rapidly developing AI / ML tools to scan markets / economy and prosecute anti-competitive practices. This suggests a steep increase in competition claims in the coming years, in both volume and scope.  AI also reduces the costs and time of litigation and ML allows to better assess its risks and merit, prompting for a re-modelling of the TPF economic model in competition claims considering empirical evidence of the first wave(s) of funded litigation.
CODIFICATION© IN PHENOGRAPHY© AND TPF 3.0©
New technology and ‘mathematical-legal language’, a combination of digital & quantum where the IT code is the applicable law modelled as - and interrelated with - the law(s) of nature (‘codification©’ in ‘phenography©’). On this basis, an ML / AI legal-tech algorithm has been built in prototype to learn, build and enforce anticompetitive claims in scale, to be guided by lawyers / experts / managers, with a process tracked with and certified in blockchain. New investment thesis (TPF 3.0©) for an asset class correlated to the global real economy, including the mathematical basis for the development of a complex sciences-based / empirical damage calculation to be built by experts. 
LEGAL / LITIGATION TECH INVESTMENT, COMMITMENT AND PROSPECT RETURN
10 MILLION EUR in the form of a series A venture capital type of investment with real assets as collateral for funding to any competition litigation filed with and through this algorithm, that becomes proprietary also of the funder(s). It aims at covering a first test case (already identified), full-time IT engineer, quantum experts and book-building costs. The funder(s) is(are) expected to provide also global litigation management expertise and own the algorithm. Three global or anyway multi-jurisdictional mass anticompetitive claims in the scale of multi-billion in value have already been identified. Details will be provided upon request. Funder(s) also gets license of the TPF 3.0© thesis.

Below is the abstract and table of contents from my research:

Abstract

This article aims at fostering competition litigation and market analysis by integrating concepts borrowed from physics science from an historical legal and evolutionary perspective, taking the third party funding (TPF) market as benchmark. To do so, it first combines historical legal data and trends related to the legal and litigation markets, discussing three macro historical trends or “states”: Industrial revolution(s) and globalisation; enlargement of the legal world; digital revolution and liberalisation of the legal profession. It then proposes the multidisciplinary methodology to assess the market for TPF: mainstream economic models, historical “cyclical” data and concepts borrowed from physics, particularly from mechanics of fluids and thermodynamics. On this basis, it discusses the potential implication of such methodology on the global competition litigation practice, for instance in market analysis and damage theory, also by considering the impact of modern technologies. The article concludes that physics models and the interdisciplinary methodology seem to add value to market assessment and considers whether there should be a case for a wider adoption in (competition) litigation and asset management practices.  

Table of Contents

Introduction. I. Evolution of the legal services, litigation and third party funding market(s) 1.1. Industrial revolution(s) and globalisation 1.2. Enlargement of the legal world and privatisation of justice 1.3. Digital revolution and liberalisation of the legal profession II. Modelling the market(s) with economics, historical and physics models. Third Party Funding as benchmark 2.1. Economic models for legal services, legal claims and third party funding markets 2.2. Does history repeat itself? Litigation finance cycles 2.3. Mechanics of fluids and thermodynamics to model legal markets? III. Impact on global competition litigation 3.1. Market analysis and damage theory 3.2. Economics of competition litigation and new technologies. Conclusions. Third Party Funding 3.0© and competitiveness.

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1. Italian / EU qualified lawyer and legal scientist. Leading Expert at BRICS Competition Law & Policy Centre (Higher School of Economics, Moscow). Ph.D.2 (Maastricht Law School, Economic Analysis of Law; University of Cagliari, Comparative Law) – LL.M. (College of Europe, EU competition Law). Visiting Fellow at Fordham Law School (US Antitrust), NYU (US Legal finance and civil procedure).

2. G. M. Solas, ‘Third Party Funding, new technologies and the interdisciplinary methodology as global competition litigation driving forces’ (2025) Global Competition Litigation Review, 1.

3. G. M. Solas, ‘Interrelation of Human Laws and Laws of Nature? Codification of Sustainable Legal Systems’ (2025) Journal of Law, Market & Innovation, 2.

4. ‘Law is Love’, at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5694423, par. 3.3.