New York City Bar releases ethics opinion on litigation funding

June 21, 2011 The New York City Bar has issued a new ethics opinion about private investors who provide funding to parties in lawsuits to help them cover litigation costs. The ethics decision calls litigation funding “a valuable means for paying the costs of pursuing a legal claim, or even sustaining basic living expenses until a settlement or judgment is obtained.”

But the opinion does warn of some ethical risks associated with litigation funding by players outside the dispute - such as banks, hedge funds, and other firms. One particular concern is the release of privileged information to lenders without client consent. “Providing financing companies access to client information not only raises concerns regarding a lawyer’s ethical obligation to preserve client confidences, it also may interfere with the unfettered discharge of the duty to avoid third party interference with the exercise of independent professional judgment,” the opinion says.


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