LexShares respects the legal issues and ethical considerations relating to investments in lawsuits. Notably, litigation finance intersects with the doctrines of maintenance, champerty, and barratry, as well as attorney-client privilege and work product immunity.
Maintenance, Champerty and Barratry
Maintenance involves an arrangement where a party supports another to enable him or her to further a legal claim. Champerty is a specific form of maintenance, where an unrelated party strikes a bargain with a litigant to financially support the litigation in return for a share of the proceeds from that claim. Finally, barratry entails the encouragement of another to bring or continue a claim.
In medieval England, maintenance and champerty were used by the powerful as a means of settling scores. Feudal lords and other privileged members of society would often support legal disputes of others against the supporter’s personal or political enemy. Most colonies that imported their laws from England – including many U.S. states – passed laws designed to protect litigants from “officious intermeddling” and profiteering from the sale of legal claims to third parties.
These three doctrines historically prohibited third-party litigation funding in the U.S. and most other common law countries. However, the modern view expressed by many courts is that maintenance, champerty and barratry are obsolete and do not reflect the realities of today’s legal industry -- particularly as other means of curtailing legal system abuses have been implemented. Widespread exceptions to these doctrines recognize that financial considerations often influence access to justice. Most states now permit litigation finance, champerty, maintenance, and barratry as they refuse to void contracts based on these outdated doctrines.
Attorney-Client Privilege and Attorney Work Product Immunity
The attorney-client privilege is a legal concept that protects certain communications between attorney and client from disclosure to the opposition. In addition, the work-product immunity protects materials prepared by attorneys and third parties in anticipation of litigation from discovery. The two concepts are separate legal doctrines but frequently cited together.
Recent cases support the view that litigation finance transactions preserve the protections afforded by both doctrines.
Notably, in Miller UK Ltd. v. Caterpillar, Inc.4
, the court determined that the presence of a litigation funder did not waive work-product protection because disclosure did not “substantially increase the likelihood that an adversary would obtain the materials where (the) claimant had oral and written confidentiality agreements with prospective and actual funders.”
In Devon IT, Inc., v. IBM Corp.5
, a court held that discussions with litigation investors are covered by the work-product doctrine. The judge in that case explained that since the investors and Devon shared a "common interest" in the outcome of the case and had entered into the confidentiality agreement, their communications were protected. Executing non-disclosure agreements is standard practice in most lawsuit financing transactions.
A litigation finance firm generally should not require privileged attorney-client communications to accurately assess most cases. In a practical sense, issues regarding the waiver of the privilege apply to only a small class of information. The client is free to tell a prospective funder anything other than what the client communicated to the attorney, without waiving the privilege. An investor can expect to receive substantial information from the plaintiff about the claim without ever creating waiver problems.
LexShares' managing member and broker-dealer, WealthForge, can evaluate the merits of cases without access to privileged information. The case evaluation process generally focuses on the legal team's assessment of the case as well as documents that are already subject to discovery.