Litigation Funders Set to Prosper in Proposed NY Rule Change

A New York City bar committee is pushing to change state rules to allow law firms to assign or pledge fees in exchange for outside financing.

Funding to law firms tied to the results of specific cases should be permitted, the New York City Bar Association’s Professional Responsibility Committee proposed last week in two amendments to Rule 5.4(a). The rule bans lawyers and law firms from sharing fees with nonlawyers.

If adopted, the amendments would resolve uncertainty over litigation funding deals in New York. Litigation finance has grown to a $13.5 billion industry in which investors fund lawsuits and take ...