This blog is specifically targeted at concerns for the plaintiff’s lawyer to consider when their client is utilizing litigation funding. There are three main concerns to keep in mind when considering litigation finance and your client: loyalty & conflicts of interest, lawyer independence, and confidentiality/attorney-client privilege.
Duties of Loyalty and Conflict Free Representation: the Rules of Professional Conduct govern conflicts of interest. Therefore, it could be a problem if an attorney affirmatively advises a client to accept a third-party’s funding that will ultimately benefit the attorney and his/her firm in the end. However, that does not mean that attorney’s can never advise their clients on third party funding. Instead, the attorneys should just exercise complete disclosure of the various interests at stake when giving advice regarding alternative litigation funding.
Lawyer Independence: again, according to the Rules of Professional Conduct (particularly rules 1.2(a), 2.1, & 5.4), the plaintiff’s attorney must decide how to handle the case, not the litigation funder. There is particularly a risk that the funder will want the largest return possible and may not want to encourage a settlement if they believe a trial will result in more money in damages. This is why it is important to find a litigation funder that takes a hands off approach after agreeing to invest in the case.
Confidentiality and Protecting the Attorney-Client Privilege: generally, a litigation funder will require the client to authorize counsel to release information otherwise protected by attorney-client privilege as part of the underwriting process. There is a risk here that opposing counsel will argue that by sharing confidential litigation information with a funder the client has voluntarily waived any attorney-client protections. Different courts have handled this differently but it is best for the attorney to discuss this potential concern with their client upfront and to see how the jurisdiction may have handled this in the past.
These concerns are not meant to prohibit litigation funding but rather to just explain certain risks so that any potential problems can be avoided. Thus, helping the funder, client, and the attorney by hopefully getting the best outcome possible for the case.
Topics: litigation finance, alternative litigation finance, third-party funding, ethics, plaintiff attorneys, professional responsibility
Works Cited: David Atkins and Marcy Stovall, Litigation Funding: Ethical Considerations for the Plaintiff’s Lawyer, Connecticut Lawyer (February 2017) http://www.pullcom.com/news-publications-930.html