Initially finding a foothold in Australian and British litigation, third-party litigation funding has made its way to the U.S. Investors have started staking claim in large, corporate lawsuits. The reason? According to this article, investors are “on the lookout for U.S. litigants who would allow them to finance their cases in return for a portion of any settlement or judgment.” Burford Capital Ltd. and Juridica Investments Limited have both invested millions in cases over the last three years. From the looks of it, returns are good. From one lawsuit, Burford “stands to receive 35 percent to 67 percent of any recovery.” A partner at Patton Boggs, James Tyrrell Jr., believes that in the down economy, “sophisticated investors [are] hunting for a new source to generate huge returns.”

However, not all are proponents of outside investors. In October, the U.S. Chamber of Commerce “called for the prohibition of third-party litigation financing at all levels.” The Chamber believes that “outside funding will increase the number of lawsuits…and could impact attorney-client privilege through the disclosure of confidential material to outside parties.” In its nascent state, many are reluctant to trust this new trend; partially because “the acquiring of an interest in a lawsuit’s recovery” has been prohibited in the past.

These reasons aren’t solid enough to discount the possible benefits such investors can provide. The Chamber’s claim that investments are directly proportional to the number of cases seems a non sequitur. Also, although it was once prohibited, “28 states permit champetry, including New York.” With over half of the U.S. allowing outside parties to invest in lawsuits, it seems unreasonable for firms to feel reluctant to do the same. Investors assume a portion of the case fees, allowing clients to hire firms with higher fees than they would have been able to afford without the outside investment. Regardless of the skeptics, as more large firms like Cadwalader and Proskauer Rose are looking to outside investors for funding support, the face of litigation in the U.S. may look very different in the coming years.