Is Third-Party Funding Too Secretive?
It’s no secret that litigation funding has its share of detractors. Some are still suspicious of the increasingly regulated practice, despite evidence that it’s a net gain for clients, legal teams, investors, and those who have been harmed by a well-monied entity. Transport Topics News asserts that funding is “mostly” done in secret. In reality, disclosure requirements are becoming increasingly common for funders. Accusations that investors are turning courts into profit centers are exaggerated to say the least. According to the American Property Casualty Insurance Association, the US funding market has more than $13 billion in capital currently deployed. While some call this cause for concern, others refer to the success of legal funding as a sign that the practice is useful, welcome, and increasing in acceptance. Calls for transparency in litigation funding are increasing. Federal courts in New Jersey now require disclosure of third-party funders, along with a summary of the funder’s interests in the case. Other stated concerns regarding third-party funding include the worry that funders will exercise undue control over decision-making. While that is possible, professional funding organizations are adamant that funders should not seek to control strategy or settlement decisions in the cases they fund. Similarly, it’s been suggested that lawyers, when paid by funders, could place the interests of funders ahead of those of clients. To put it another way, funders might be blamed for the actions of unscrupulous attorneys. According to the ABA Best Practices for Third-Party Litigation Funding, the industry remains largely self-regulated—which is often presented as inherently suspicious. This creates legal uncertainty and a lack of uniformity between jurisdictions. Nationwide laws governing the practice might be a good idea—provided the new legislation is written with input from professional organizations with deep knowledge of how funding works.
