Optimizing the Litigation Funding Ecosystem

Abstract

Litigation finance has become increasingly prevalent in the United States, yet its regulation remains fragmented and contested. This Article challenges the conventional wisdom that uniform federal regulation is the solution to the issues posed by litigation funding. Instead, it argues that targeted improvements to the existing legal ecosystem can enhance predictability and fairness without requiring sweeping regulatory overhaul.

This Article makes three key contributions. First, it provides a comprehensive analysis of the growth and maturation of the U.S. litigation finance industry over the last decade and a half, distinguishing between commercial and consumer financing. Second, it explores the political and practical challenges to achieving uniform regulation, situating the debate over litigation funding within the broader context of procedural advantage in litigation. Third, it proposes two specific enhancements to existing legal frameworks: first, leveraging the protections of Article 9 of the Uniform Commercial Code to establish clearer priority in litigation proceeds, and second, adopting a broader interpretation of attorney-client privilege that treats litigation funders as agents enlisted to assist clients in obtaining legal advice.

By focusing on these ecosystem improvements rather than direct regulation, this Article aims to enhance the effectiveness and fairness of litigation finance in the American legal system. It argues that relatively modest changes can significantly improve the functioning of litigation finance, preserving the flexibility necessary to accommodate the political goals and regulatory landscapes of different jurisdictions while better serving the goals of fairness, efficiency, and access to justice.