Agency costs in third-party litigation finance reconsidered
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Brian Fitzpatrick
Abstract
A common criticism of third-party litigation finance is that it can increase agency costs for litigants. One reason critics give for this is their belief that financiers will do something they are prohibited from doing: meddle in the litigant-lawyer relationship. But we think this gets things backwards. Because financiers cannot meddle in the litigation, they try instead to align their interests with the lawyers and the litigants. As we show here, although financiers do this imperfectly, the happy side effect of their efforts is very often to better align the litigants with their own lawyers. They do this by introducing hybrid fee arrangements that prior scholarship has shown to be superior to the contingency or hourly fees that litigants would have otherwise paid their lawyers. For these reasons, we believe much of the concern in the third-party litigation finance literature over exacerbated agency costs and who controls the litigation has been unfounded.
© 2025 by Theoretical Inquiries in Law
Articles in the same Issue
- Frontmatter
- Third-Party Litigation Funding: Past, Present, and Future
- Introduction
- Agency costs in third-party litigation finance reconsidered
- What litigation funders can learn about settlement rights from the law of liability insurance
- Third-Party litigation funding: Panacea or more problems?
- Controlling the delegation of control
- Asking the right questions about legal finance in united states aggregate dispute resolution
- The WHAC-A-Mole game: An empirical analysis of the regulation of litigant third-party financing
- Consumer litigant finance and legal ethics: Empirical observations from texas
- Through a glass darkly: TPLF viewed through a procedural lens
- Third-Party litigation funding in the european union: Regulatory challenges
- Imagining how U.S. federalism would affect third-party funding regulation
- Winner pays: An alternative method of public funding
- The business ethics of litigation finance
- Concealed third-party litigation funding
Articles in the same Issue
- Frontmatter
- Third-Party Litigation Funding: Past, Present, and Future
- Introduction
- Agency costs in third-party litigation finance reconsidered
- What litigation funders can learn about settlement rights from the law of liability insurance
- Third-Party litigation funding: Panacea or more problems?
- Controlling the delegation of control
- Asking the right questions about legal finance in united states aggregate dispute resolution
- The WHAC-A-Mole game: An empirical analysis of the regulation of litigant third-party financing
- Consumer litigant finance and legal ethics: Empirical observations from texas
- Through a glass darkly: TPLF viewed through a procedural lens
- Third-Party litigation funding in the european union: Regulatory challenges
- Imagining how U.S. federalism would affect third-party funding regulation
- Winner pays: An alternative method of public funding
- The business ethics of litigation finance
- Concealed third-party litigation funding
