Document Type
Working Paper
Publication Date
9-12-2025
Language
en-US
Abstract
Commercial third-party litigation funding (“TPLF”) is not centrally regulated in the United States. It is subject to the overlapping jurisdiction of state and federal courts, state and federal legislatures, regulatory agencies, and bar associations. Legislation, regulation, and oversight of TPLF is being undertaken at each of those levels – much of it centered around the questions of when and whether TPLF should be disclosed; how to mitigate conflicts of interest created by TPLF (including the potential for claimants to lose control over their case to funders); and the identification of any foreign individuals, entities, or countries that may be providing the funding. At least 12 state legislatures and the U.S. Congress have passed or considered TPLF legislation. Many federal and state courts have issued standing orders regarding litigation finance. In TPLF cases, courts have used their inherent powers to investigate potential abuse of process and to determine whether those appearing before the court are the real parties in interest.
TPLF is used in most types of civil litigation, perhaps most commonly in contract disputes, intellectual property, class and mass actions, and mass tort claims. There are many third-party litigation funders in the U.S., including specialized litigation funders as well as other institutional (and occasionally individual) investors. There are no countrywide disclosure or reporting requirements for TPLF; to the contrary, most deals are confidential and only become known if a dispute arises. Because of that, there is no comprehensive, reliable dataset regarding TPLF.
Several areas of law bear on the permissibility of TPLF generally and on the legality of any particular agreement. One is champerty, a common-law doctrine (at times codified by statute) forbidding a stranger to a lawsuit from funding or ‘officiously intermeddling’ in another’s lawsuit for a profit. Because champerty is a matter of state, not federal, law, the particulars vary considerably from state to state. Some have abolished the doctrine; others still enforce it. Still others have modified it in ways that permit many forms of TPLF and that regard regulation by other doctrines as a better approach. Because TPLF is created by contract, contract doctrines apply (also with considerable variation across states). Especially important in this context are the doctrines of unconscionability and public policy. Since TPLF implicates important principles underpinning the civil justice system, it is possible that a given agreement could be void for violating public policy, or be found to be unconscionable in other ways. Further, the rules of professional responsibility for attorneys (the rules of legal ethics) also impose duties on the lawyers and law firms representing the claimant in matters involving TPLF.
Responses to the stakeholder surveys and interviews confirm that there are multiple types of TPLF in the United States and that no comprehensive data exists about questions such as the number of cases funded; the returns obtained by funders versus recovery remaining in the hands of plaintiffs; and if funding increases meritorious litigation (access to justice) or non-meritorious litigation and if so, by how much.
Recommended Citation
Maya Steinitz,
Report of the National Expert for the United States in Mapping Third Party Litigation Funding In The European Union
,
Boston University School of Law Research Paper Series
(2025).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/4244
