The History And Evolution Of Litigation Finance
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Litigation Financing Develops in the U.S.
Prior to the mid-2000s, the U.S. litigation financing industry was largely limited to personal injury cases. Specialized commercial litigation funding originated in 2006, when Credit Suisse Securities founded a litigation risk strategies unit (which has since disbanded). In recent years, the commercial litigation finance market has grown significantly and is now used by companies and law firms alike as a means to finance legal claims, raise capital and eliminate risk from the balance sheet.
To date, the law of litigation finance has largely been left to the states; Congress took an interest in early 2015 when it sought information from certain litigation funders, but has not acted since. At the state level, the trend continues to move towards normalizing the use of litigation finance in commercial litigation and arbitration. In states where champerty and maintenance were once utilized doctrines, the trend continues towards limiting their application to commercial funding arrangements, for example, as Delaware did in December of 2015. Courts have also recognized protection from disclosure for communications between funders and litigants and their counsel, most often as an extension of the work product doctrine. For more on these types of ethical issues, see here.
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