Committee Reports

Report to the President by Litigation Funding Working Group

In July 2018, the Professional Ethics Committee of the New York City Bar Association (“City Bar”) issued Formal Ethics Opinion 2018-5: Litigation Funders’ Contingent Interest in Legal Fees (“Opinion 2018-5”).[1] That opinion generated a significant amount of attention and commentary.[2] In October 2018, the City Bar’s President, Roger Juan Maldonado, formed the Litigation Funding Working Group (the “Working Group”) to study third-party litigation funding and to provide a report on observations and recommendations regarding the practices utilized in connection with litigation funding.

The Working Group is comprised of a range of interested professionals, including private practitioners, ethics professors and specialists, litigation funding executives, a former federal judge, in-house counsel, ADR specialists, and representatives from several of the City Bar’s standing committees. The Working Group’s Mission Statement specifies in pertinent part:

The Litigation Funding Working Group is studying the issues and practices surrounding litigation funding. Specifically, the Working Group is addressing the following topics: (a) the ethics rules and framework relating to the City Bar’s Ethics Opinion 2018-5, (b) current practices in litigation funding and best practices for the future, (c) issues of disclosure regarding litigation funding, (d) litigation funding in the consumer and civil rights arenas and (e) recent litigation funding developments in New York and in certain jurisdictions outside New York. The Working Group will not be revisiting Opinion 2018-5, but is open to exploring potential revisions to the ethics rules and/or legislation.[3]

Over the course of the last year, the Working Group met as a whole ten times and convened numerous subcommittee meetings and teleconferences. During these meetings, the Working Group heard from a range of guest speakers, including practitioners, scholars, and experts in the fields of commercial and consumer finance.[4]

In addition, the Working Group for a five-month period sought and received comments from the public on the issues and practices surrounding litigation funding. We received eleven written submissions provided by private practitioners, retired judges, mediators, litigation funders, and lobbying groups. These commentators provided diverse views both supportive and critical of litigation funding and supplied additional resources for study. To obtain further comments, the Working Group released a draft of this Report in December 2019 to multiple City Bar committees and received comments through February 2020.

The Working Group formed four subcommittees to analyze particular issues surrounding litigation funding: (i) Ethics Rules, (ii) Best Practices, (iii) Disclosure, and (iv) Consumer Litigation. The Report that follows contains the findings and recommendations of each of these Subcommittees as reviewed and vetted by the Working Group.

In Section I, we provide a brief overview of the history of litigation funding in the United States and other countries; the current legal landscape with respect to case law on disclosure and discovery-related issues; and current legislative proposals in Congress and New York to regulate litigation funding.

In Section II, we address whether Rule 5.4 of the New York Rules of Professional Conduct, as interpreted in Opinion 2018-5, should be revised to reflect contemporary commercial and professional needs and realities. We conclude that lawyers and the clients they serve would benefit if lawyers have less restricted access to funding and offer two alternative proposals for a revised Rule 5.4.

In Section III, we present guidelines for representing a client seeking litigation funding, which encompass both the specific steps and the process to follow when obtaining and utilizing litigation funding to carry out clients’ objectives. We focus on the necessary steps a lawyer should take to best protect the client’s interest and to comply with his or her professional obligations.

In Section IV, we provide an overview of the policies, statutes, rules, regulations, and case law governing disclosure in federal and state courts; present arguments commonly made in support of and against disclosure in federal and state courts, including a discussion of the special considerations in the class action, multi-district litigation and arbitration contexts; and present the Working Group’s recommendations regarding disclosure. We conclude that there should not be a mandatory disclosure requirement in federal and state courts with respect to the funding of commercial litigation at this time, but that the details of funding arrangements may be discoverable in special circumstances. We recognize that different considerations may apply regarding disclosure in class and derivative actions and in arbitrations.

In Section V, we review the industry that provides to consumers funding secured by recoveries from civil litigation, and focus on the way in which the industry is regulated. In particular, we analyze the bill introduced in New York during the last legislative session and offer our views on changes that could be made to the current bill, including removal of the fee cap and changes in the annual reporting requirement designed to gather sufficient financial information to evaluate the industry.[5]



[1] See Appendix A (Formal Opinion 2018-5).

[2] See, e.g., Paul B. Haskel & James Q. Walker, New York City Bar Opinion Stuns the Litigation Finance Markets, LEXOLOGY (Aug. 31, 2018),

[3] Litigation Funding Working Group, NEW YORK CITY BAR, (last visited Oct. 28, 2019).

[4] Among those speakers were Ina C. Popova (Partner, Debevoise & Plimpton), Eric Schuller (President, Alliance for Responsible Consumer Legal Funding), Philippe Selendy (Partner, Selendy & Gay), Maya Steinitz (Professor, University of Iowa College of Law), and Aviva Will (Senior Managing Director, Burford), who offered a range of views on litigation funding grounded in their diverse experiences.

[5] The Working Group recognizes that its Mission Statement includes a reference to examining the role of litigation funding in the realm of civil rights. We found that there are funders who have dedicated a portion of their portfolio to funding civil rights litigation, such as Legalist, Inc. and USClaims. In addition, impact litigation has frequently been funded by third parties, such as public interest organizations (albeit with no pecuniary investment return). While we believe that litigation funding earmarked toward civil rights cases could have a salutary effect in vindicating unpursued civil rights violations, we did not study this subject further and invite additional exploration by others. This Report also does not specifically or separately address litigation funding directed at mass torts or matrimonial proceedings.