Over the last decade, third-party litigation funding has been increasingly popular as a means of increasing access to justice. At its core, TPF is a way to put investor money toward meritorious legal cases (often, but not always, class actions) in exchange for a share of the award or settlement it generates. As the cost of litigation increases, the need for legal funding grows.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Over the last decade, third-party litigation funding has been increasingly popular as a means of increasing access to justice. At its core, TPF is a way to put investor money toward meritorious legal cases (often, but not always, class actions) in exchange for a share of the award or settlement it generates. As the cost of litigation increases, the need for legal funding grows.
Lexology explains that funders have adapted to the needs of clients since outdated concepts like champerty and maintenance were stricken from the law in 1967. It’s thanks to the popularity and acceptance of funding that countless potential claimants have been able to see their day in court—when they would not otherwise have been able to afford to do so.
Many funded cases are so-called “David v Goliath” situations involving well-monied defendants that average individuals or small companies are trying to hold accountable. Courts have become increasingly likely to approve funding in these situations, and some even encourage it.
Funders can enter into a case at any time, even after a verdict or settlement is reached. Typically though, funders tend to enter cases after the case is filed—so after the pre-action communication state.
The landmark Valetta decision of 2012 affirmed that, according to Jersey courts, funding improves access to justice under specific conditions. These include:
- Control of the case strategy and decisions be left to plaintiffs and lawyers—not funders.
- Claimants retain a significant share of the award (staving off concern that funders see the lion’s share of the eventual payout).
- The funding agreement contains provisions for potential adverse costs orders.
The Valetta decision has led to the widespread use of legal funding in Jersey, despite England having more permissive laws that also include DBAs and CFAs as options. Increasingly, the types of cases that can be funded is expanding to include family law cases like divorce, construction, and personal injury litigation.
