Will the ABA’s Litigation Funding Guidelines Do More Harm Than Good?

This week, the ABA’s House of Delegates approved new best practices guidelines for litigation funders. The ABA’s inclusion of third-party funding in their guidelines is a necessary step, given the increasing popularity of the practice. Some say, however, that these new guidelines are not an accurate reflection of how Litigation Finance works.  

Burford Capital details proposed revisions to the policy, which they claim will add clarity and context. Still, it’s important to keep in mind that ABA guidelines are merely that – a set of guidelines. They aren’t meant to be the basis for disciplining firms or individual attorneys.

According to Burford, context should be added. It should be noted that third-party funding is widely accepted and endorsed by legal communities all over the world.

Next, commercial litigation and consumer litigation should be addressed separately. It’s not logical to apply the same guidelines to two such different practices. The same applies to lawyer-directed funding versus that directed by the client. The ABA guidelines do begin by pointing out that these are separate practices with their own issues, yet they don’t seem to recognize common exceptions to this—such as what occurs when an entire portfolio of cases is funded.

There’s also a suggestion that paragraphs should be devoted to the NYCBA Committee on Professional Ethics. This is a non-binding opinion from 2018, which was released without an opportunity for public comment. It has widely criticized by legal professionals, and is best left out of new guidelines.

Finally, Burford suggests removing or editing any recommendations that do not practically serve clients or attorneys. In particular, amending the idea that funders having oversight of litigation is tantamount to undue influence.