Litigation Finance in Connecticut

Connecticut law is generally hospitable to litigation finance agreements.  Because Connecticut has never adopted the common-law doctrine of champerty, there is no common-law principle that would stand in the way of enforcing a litigation finance agreement.  Although Connecticut courts have not expressly addressed the question of whether litigation finance agreements are enforceable, there is every reason to think that they would be.

Even if they have not addressed the question whether litigation finance agreements are valid, Connecticut courths have considered whether a litigant may assign a portion of the recovery from his or her legal claim. See Mall v. LaBow, 33 Conn. App. 359; 635 A.2d 871 (1993).  According to that court, such assignment transactions are evaluated on a case-by-case basis and the only test for their enforceability is whether a particular transaction was against public policy.  Id.

But Connecticut’s public policy does not include the common-law doctrine of champerty.  As the Mall court pointed out, Connecticut has never adopted that doctrine.  In Mall, the court concluded that the assignment of the proceeds of a judgment was not champerty and was not against public policy. Id.

Connecticut case law has also considered whether a party to litigation may pay for litigation services by pledging a share of the proceeds of litigation.  In Robertson v. Town of Stonington, 750 A.2d 460, 463 (Conn. 2000), the court considered whether a property owner’s lost the right to bring a tax appeal because he relied on evidence from a property valuation expert who was compensated with a one-third share of any reduction in taxes.  The court did not address the validity of the agreement between the property owner and the valuation expert, but it did hold that there was no public policy against this kind of arrangement.

Connecticut law also includes a caution about drafting litigation finance agreements so that the funder has no control over the litigation.  In considering the factual circumstances that are relevant to whether a party may assign the proceeds of its claim, one trial court has held that the assignment of the proceeds of a legal claim is permissible as long as the assignee does not exert any control over the litigation. Kennedy v. Collins Law Firm, P.C., CV 980581592S, 1999 Conn. Super. LEXIS 841 (Mar. 5, 1999).  Thus, from the perspective of Connecticut law, it is essential that litigation funders abstain from any direct control over the litigation.

Works Cited: Mall v. LaBow, 33 Conn. App. 359; 635 A.2d 871 (1993)

Kennedy v. Collins Law Firm, P.C., CV 980581592S, 1999 Conn. Super. LEXIS 841 (Mar. 5, 1999)