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An attack on the influence of third-party financing in major litigation

In Fortune, June 13, 2011 at 69, Roger Parloff plunges deep into the secretive world of third-party litigation financing. Mostly he drills down on the Chevron case in Ecuador and one major financer. What he finds is not pretty and it is certainly far from transparent. Along the way he mentions two hedge funds that invest in big-ticket lawsuits: Reservoir Capital of New York and Eton Park of London. Parloff also states that “England and Australia have embraced litigation financing even more enthusiastically than America has.”

Parloff makes much of two points: (1) “whether the funder should get actively involved in legal strategy,” and (2) whether lawyers and funders, as they deal with each other repeatedly, might respond to pressures that are not what the plaintiff cares about. At the end, he concludes that “The confidentiality-secrecy that currently envelops investments in litigation is what’s so intolerable. Deals behind closed doors, conflicts of interest, undisclosed influences – those are circumstances that will lead to regulation” (See my post of May 21, 2009: lawsuit financing by groups with 8 references; and April 11, 2011: hedge funds and investors in litigation with 9 references.).