Whose claim is this anyway? third-party litigation funding
Imagine that a woman wants to bring a claim for sexual harassment against her powerful and wealthy former employer but can neither afford counsel nor find an attorney willing to take the case on contingency. A private funder provides the necessary financing for her to pursue her claim. Further suppose that the employer in question is a former governor, now the sitting President of the United States, and that the investor is a wealthy supporter of the President's political opposition, and that the case starts a chain reaction that could have brought an end to the President's term in office.
Now imagine a group of indigent villagers in Angola, whose village has been subject to a negligent and lethal chemical spill at the hands of the agents of a multinational corporation based in the United States. The cover-up involves spying on, intimidating, and even murdering locals. Unable to afford a suit on their own, an investment company funds their attempt to seek redress through an expensive, protracted, and complex Alien Tort Claims Act claim filed in a U.S. court.
Imagine also a corporation that is facing a bet-the-company class action lawsuit, which it is convinced is a strike-suit (i.e., a nonmeritorious but prohibitively expensive suit to defend).
Facing the risk of an uncertain jury verdict, it transfers that risk to a third party by paying a premium. Thus protected, it enables itself to continue its smooth operation generating profits for its shareholders and jobs for its employees. Contemplate, if you will, an oil company funding a developing country's claim in a boundary dispute. The dispute over territory rich with petroleum is being decided in an international arbitration-a confidential and, therefore, nontransparent process to which even the citizens of the countries whose boundaries are in dispute have no access. Further envision that the developing country has no funds of its own and would otherwise be unable to mount a competent defense of its claim to the territory.
Finally, suppose that the China Investment Corporation (CIC), China's Sovereign Wealth Fund, funds a suit against an American company in a sensitive industry such as military technology. In the process of conducting due diligence prior to its investment in the litigation, as well as in connection with its ongoing monitoring of the litigation in which it now has a legal stake, CIC obtains highly confidential documents containing proprietary information regarding sensitive technologies from the American defendant-corporation. What do all of these scenarios-some uplifting, some foreboding-have in common?
The answer is that they would all be made possible by a group of practices that are coming to be known as third-party litigation funding.
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