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.