Subject: Third-Party Litigation Funding

Minnesota Supreme Court’s Abolishment of Century-Old Common-Law Prohibition Against Champerty Paves Way for Third-Party Litigation Financing

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In a unanimous decision, the Minnesota Supreme Court abolished Minnesota’s common-law prohibition against champerty and maintenance, opening Minnesota to third-party litigation financing. Maslowski v. Prospect Funding Partners LLC, et al., A18-1906, 2020 WL 2893376 (Minn. June 3, 2020).

For the less practiced in Middle English, champerty is “an agreement to divide litigation proceeds between the owner of the litigated claim and a party unrelated to the lawsuit who supports or helps enforce the claim” and maintenance is “improper assistance in prosecuting or defending a lawsuit given to a litigant by someone who has no bona fide interest in the case, meddling in someone else’s litigation.” Black’s Law Dictionary (11th ed. 2019). Today, champerty and maintenance are often associated with third-party litigation financing.

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Third Circuit Tackles Third-Party Funding Issues in In Re: National Football League Players’ Concussion Injury Litigation

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Third-party litigation funding has received increased scrutiny over the past several years, particularly in the context of mass torts, class actions, and multidistrict litigation. Most of this scrutiny has focused on pre-litigation or pre-resolution commercial loans to fund the litigation, and particularly whether parties are required to disclose such funding during the course of the litigation.

For example, in February 2019, several U.S. senators reintroduced S.471, the Litigation Funding Transparency Act of 2019, which would require plaintiffs to disclose third-party litigation funding for class actions and multidistrict litigation. This came on the heels of a January 2019 letter from more than 25 major U.S. companies to the Committee on Rules of Practice and Procedure requesting an amendment to Federal Rule of Civil Procedure 26(a)(1)(A) “to require in civil actions the disclosure of agreements giving a non-party or non-counsel the contingent right to receive compensation from proceeds of the litigation.”

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