Partners in Claim: Litigation Funding as Quasi-Partnerships

The third-party litigation funding (TPLF) industry is a rapidly growing phenomenon in the United States, making headlines in cases ranging from celebrity privacy scandals to multimillion-dollar NFL head-injury lawsuits. Proponents praise TPLF for increasing access to justice, particularly for underprivileged parties who may otherwise lack the resources to pursue their claims. Critics, however, warn that it fosters opacity, promotes frivolous lawsuits, inflates legal costs, and allows funders to exert undue influence over litigation strategies and settlement negotiations. To address these commonly held criticisms while preserving the advantages of the practice, this Article proposes a novel approach to TPLF, reconceptualizing these arrangements as a quasi-partnership. Based on the regulatory and theoretical principles governing limited partnerships, we develop a framework that specifies the roles, rights, and duties of claimants, funders, and their attorneys. The funders serve as “limited partners,” providing capital but being barred from directing litigation strategy or settlement decisions. Claimants are cast as “general partners,” retaining substantive control but bound by fiduciary duties to the “partnership,” including the funder’s interests. The claimant’s attorney, in turn, is redefined as owing duties to both the client and the partnership as a whole, balancing the interests of all parties involved. This framework clarifies why funders should have limited control over litigation decisions, delineates necessary disclosure obligations, and defines the permissible scope of funder access to case-related information. The proposed model is not only a more accurate account of how TPLF operates in practice but is also normatively superior to current arrangements, offering a principled and economically efficient model for integrating TPLF into modern litigation practices— The third-party litigation funding (TPLF) industry is a rapidly growing phenomenon in the United States, making headlines in cases ranging from celebrity privacy scandals to multimillion-dollar NFL head-injury lawsuits. Proponents praise TPLF for increasing access to justice, particularly for underprivileged parties who may otherwise lack the resources to pursue their claims. Critics, however, warn that it fosters opacity, promotes frivolous lawsuits, inflates legal costs, and allows funders to exert undue influence over litigation strategies and settlement negotiations. To address these commonly held criticisms while preserving the advantages of the practice, this Article proposes a novel approach to TPLF, reconceptualizing these arrangements as a quasi-partnership. Based on the regulatory and theoretical principles governing limited partnerships, we develop a framework that specifies the roles, rights, and duties of claimants, funders, and their attorneys. The funders serve as “limited partners,” providing capital but being barred from directing litigation strategy or settlement decisions. Claimants are cast as “general partners,” retaining substantive control but bound by fiduciary duties to the “partnership,” including the funder’s interests. The claimant’s attorney, in turn, is redefined as owing duties to both the client and the partnership as a whole, balancing the interests of all parties involved. This framework clarifies why funders should have limited control over litigation decisions, delineates necessary disclosure obligations, and defines the permissible scope of funder access to case-related information. The proposed model is not only a more accurate account of how TPLF operates in practice but is also normatively superior to current arrangements, offering a principled and economically efficient model for integrating TPLF into modern litigation practices— one that preserves its access-to-justice benefits and mitigates its potential risks.