Financing of Litigation by Third-Party Investors: A Share of Justice?

Abstract

This article addresses the issue of the funding of civil litigation within the framework of access to justice and the normative goal of increasing access to the civil justice system. The author critically analyzes and cautiously advances the case for the recent development of the financing of litigation by third-party investors. The argument is that investor financing has the potential to increase access to the civil justice system by ameliorating the economic barriers to litigation. The author evaluates investor financing against existing public and private models of financing litigation such as legal aid plans, litigation subsidy funds, and contingent fee arrangements. The doctrines against maintenance and champerty, which prohibit third parties from providing financial assistance to litigants, are reviewed and analyzed in order to assess the enforceability of financing agreements between plaintiffs and investors. The author then examines the market that is likely to develop for the financing of litigation and analyzes regulation that may be required to protect investors and plaintiffs. The author evaluates policy concerns in relation to the wide-spread availability of investor financing and concludes that such concerns are either misguided or can be addressed by implementing appropriate regulatory safeguards.

Keywords: Financing litigation, third party, third parties, access to justice, civil litigation