January 17, 2019 Top Story

Cold Water Thrown on Certain Litigation Funding

Litigation funding tied to specific future legal fees violates fee sharing rule

By Onika K. Williams

A lawyer may not enter into a financing agreement with a nonlawyer litigation funder when the lawyer’s future payments to the funder are contingent on the lawyer’s receipt of legal fees or the amount of legal fees received in a specific case or portfolio of cases.

The committee’s opinion focused on funding arrangements between a funder and a lawyer or a lawyer’s firm

The committee’s opinion focused on funding arrangements between a funder and a lawyer or a lawyer’s firm

iStockphoto by Getty Images

Under the New York City Bar Association’s Committee on Professional Ethics Formal Opinion 2018-5, litigation funding arrangements that are tied to specific future legal fees violate New York’s Professional Code of Conduct Rule 5.4’s prohibition on fee sharing with nonlawyers.

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