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Litigation: The ethical considerations of litigation financing

Lawyers be must mindful of the potential effect that working with third-party funders could have on attorney-client privilege

Attorneys have an ethical duty to protect confidential communications with their clients. But how is this observed when a third party provides the client with funding for the litigation? 

Litigation financing, or alternative litigation funding (ALF), has become more prevalent in the U.S. in recent years, especially in the corporate litigation context. In general, this phenomenon involves private investors funding a lawsuit or arbitration—usually on behalf of the plaintiff—in return for a portion of a judgment or settlement. The resulting business relationship between the plaintiff, plaintiff’s attorney and litigation funder introduces various ethical issues that corporate plaintiffs considering ALF must manage. One of the most common such issues involves potential waiver of the attorney-client privilege.

Contributing Author

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Michael Lynch

Michael C. Lynch is a partner and litigator in the New York office of Kelley Drye & Warren LLP. He has extensive experience in complex,...

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Contributing Author

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Lystra Batchoo

Lystra Batchoo is an associate in the New York office of Kelley Drye & Warren LLP. She focuses on civil litigation, including complex, commercial litigation, contract...

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