We're not talking about your childhood cocker spaniel, or an inedible Scottish breakfast stew, we're talking about (per Black's Law Dictionary) "a bargain by a stranger with a party to a suit, by which such third person undertakes to carry on the litigation at his own cost and risk, inconsideration of receiving, if successful, a part of the proceeds or subject sought to be recovered." Despite a widespread common law doctrine against champerty, alternative litigation financing may be turning into a hot legal commodity globally. At Truth on the Market, Prof. Richard Painter has a few questions, and promises more to come:
Have plaintiffs’ lawyers captured the market for litigation financing and insurance and turned it to their own ends? Are providers of these products so dependent upon lawyers to recommend their services to clients that they will not compete with lawyers? Is the contingent fee a pricing mechanism for plaintiffs’ lawyers with advantages for clients (including incentivizing the lawyer) that may outweigh disadvantages from less than competitive pricing?
And what happened to the common law champerty doctrine which recently has stood in the way of litigation financing less often than I initially believed it would? Some litigation financing arrangements are characterized as high interest loans, perhaps to avoid the champerty doctrine, but this approach can run into difficulty under usury laws. In most instances, litigation financiers acknowledge that they are buying a share of the lawsuit and they are presumably confident they can get away with it. And perhaps they are right because American courts have been letting lawyers get away with the same thing for so long that strictly applying the doctrine of champerty against new market entrants is a hypocrisy that few judges are willing to accommodate.