Third-Party Financing of Class Actions: Recent Judicial Decisions, Ethical and Practical Considerations

Description

Third-party financing of class actions has become increasingly popular in recent years. It allows lawyers to fund class action cases on a non-recourse basis under which the funder only need be paid if the class prevails on the merits or is able to secure an advantageous settlement. Not surprisingly, lawyers for class action plaintiffs often prefer this kind of funding to having to finance cases out of their own pockets or to traditional recourse financing under which the lawyers must repay the funder even if the case fails. Counsel for class action plaintiffs also describe this as an access to justice issue because it allows worthwhile cases to be brought that might otherwise have been too expensive to bring.

Opponents of class action litigation funding assert that it stirs up baseless litigation and that it creates unacceptable risks of interference with the exercise of independent professional judgment by lawyers. Opponents also assert that it can give rise to conflicts of interest between counsel and their class action clients, that it can put attorney-client confidentiality at risk, and that it can result in an impermissible sharing of fees with the non-lawyer funders. Recent court decisions and legislation (passed and pending) have addressed disclosure requirements in funded class action cases and the impact of funding on the costs recoverable in such cases.

Listen as our distinguished panel discusses the practice of third-party financing of class action claims, recent judicial decisions regarding the disclosure obligations of class counsel and funders, and the ethical and practical implications of litigation finance itself.