Over the past decade, litigation funding has become an increasingly mainstream resource for attorneys and clients who have meritorious legal claims but lack the capital to adequately pursue them. Case in point: a September 2021 Bloomberg Law Litigation Finance Survey of attorneys and litigation finance providers showed that 88 percent of responding lawyers believe litigation finance enables better access to justice. University of Iowa College of Law professor Maya Steinitz, a legal scholar recognized as a leading authority on the industry, has described the emergence of litigation funding as “the most important civil justice development of this era.” Maya Steinitz, Follow the Money? A Proposed Approach for Disclosure of Litigation Finance Arrangements, 53 U.C. Davis Law Rev. 1073 (2019).
Thus, a basic working knowledge of this growing field can serve to benefit litigators of all backgrounds as well as the various clients they represent.
Litigation funding is generally defined as a “non-recourse civil litigation advance contract” making funds available to litigants or their attorneys during litigation. See, e.g., Ohio Rev. Code § 1349.55. The American Bar Association (ABA) has authored one paper and one resolution specifically addressing the advantages and challenges of litigation funding in the modern legal field. Informational Report to the House of Delegates (ABA Commission on Ethics 20/20) (Feb. 2012); Resolution 111A, ABA House of Delegates (Aug. 3–4, 2020). These documents, in conjunction with a growing body of state bar ethics opinions, make it clear that litigation funding is becoming more entrenched in the legal sector and that it is here to stay. Its treatment by courts is also becoming more consistent.
Despite growing interest in litigation funding, however, there are common misconceptions about the advantages and impact of obtaining such funding for litigants and their attorneys. These misunderstandings are explored in greater detail below.