On January 27, 2021, the Litigation Funding Working Group of the New York City Bar Association presented its report on the history and current legal landscape of litigation funding.

The City Bar established the Working Group in October 2018to study the issues and practices surrounding litigation funding in the wake of Formal Ethics Opinion 2018-5, issued by the City Bar’s Professional Ethics Committee, which concluded that funding arrangements between law firms and funders may violateNew York Rule of Professional Conduct 5.4’s prohibition on fee sharing with non-lawyers. (The Working Group was not tasked with revisiting Opinion 2018-5, but could explore potential revisions to the Rules to address litigation funding.)

In February 2020, the Working Group published the result of its work, a report (1) addressingthe history and current legal landscape of litigation funding, (2) proposing amendments to Rule 5.4 to allow for and address litigation funding, (2) setting out best practices for New York lawyers dealing with litigation funding, (3) addressing disclosure of commercial litigation funding, and (4) reviewing litigation funding for consumers.

During the presentation of its report, members of the Working Group and theCity Bar’s Professional Responsibility Committeeset out three different proposals for amendments to Rule 5.4, each of which would allow litigation funding arrangements between law firms and funders, while ensuring that a lawyer’s professional judgment is not impacted by such an arrangement.

While any change to the language of Rule 5.4 will have to move through the appropriate channels, Erso Capital is encouraged that the Working Group concluded that lawyers and their clients would benefit from loosening restrictions on lawyers’ access to litigation funding and we will monitor any developments in this area with interest.

The Working Group report is available here: https://s3.amazonaws.com/documents.nycbar.org/files/Report_to_the_President_by_Litigation_Funding_Working_Group.pdf and a recording of the presentation is available here https://www.nycbar.org/media-listing/media/detail/presentation-of-report-by-the-litigation-funding-

Caroline Parker-Beaudrias
Investment Counsel