Creative Investing Through Alternative Litigation Funding

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As stated by the American Bar Association, “alternative litigation finance” (ALF) refers to the funding of litigation activities by entities other than the parties themselves, their counsel, or other entities with a preexisting contractual relationship with one of the parties, such as an indemnitor or a liability insurer.” The current United States ALF industry has three active segments: consumer legal funding to individuals, usually in conjunction with personal injury litigation; loans and lines of credit for plaintiff law firms; and investments in commercial lawsuits involving one corporation pursuing another. Notwithstanding these two types of ALF, the majority of controversy and debate involves consumer funding to individuals involved in personal injury litigation. Practitioners should review the ABA Commission’s draft white paper as guidance on how to balance ALF with what conduct is demanded of attorneys by the Rules of Professional Conduct before delving into a case where ALF is in use.

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