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ABA Best Practices for Third-Party Litigation Funding Paper

The American Bar Association has adopted a paper describing best practices for third-party litigation funding.

The paper does “not take a position on a number of litigation funding issues – for example, whether litigation funding should be permitted, as a matter of law or legal ethics, in any particular jurisdiction or in any particular context; or whether, when and in
how much detail a funding arrangement need be disclosed”   or on underwriting practices of the funder.   Instead, the paper focus on the lawyer / client relationship and ” is written to assist lawyers considering litigation funding – whether to provide legal fees for sophisticated, cross-border arbitration and litigation, to assist an individual plaintiff or claimant in a personal injury lawsuit or worker’s compensation claim, or any other litigation or arbitration context.”

The 33-page paper can be summarized by these words:

First, any litigation funding arrangement should be in writing. Second, the litigation funding arrangement should assure that the client remains in control of the case. Third, the written document should address what happens to the funding arrangement if, down the road, the client and the funder disagree on litigation strategy or goals. Finally,
because the propriety and the discoverability of litigation funding arrangements are unsettled questions in many jurisdictions (and may differ across contexts within those jurisdictions), the Best Practices advise that attorneys negotiating funding agreements do so with an eye to the likelihood that the “deal documents” for the funding arrangement will be examined by readers whose interests are not fully congruent with those of the lawyer
and client.

The paper includes citation to case law around the nation on a variety of litigation funding topics, including the discoverability of the funding arrangement.

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