The Economics of Law Firm Ownership: Should There be Limits on Who Can Own Law Firms?

Investment in litigation by third parties - i.e., when neither the litigants nor lawyers on contingency are the primary funders for a case (often labelled “Third Party Litigation Financing” (TPLF)) - is increasing in frequency and scrutiny. Indeed, because current disclosure rules rarely work to reveal TPLF’s existence in a case, much of TPLF is occurring under the radar of the public and even without the knowledge or consideration of the judges in cases. While prior Civil Justice Academy webinars have focused on TPLF generally - see, for example here and here - this program will focus on a special subset of funding with its own special concerns: when third parties make investments in law firms in return for an ownership stake or cut from litigation attorneys fees generated in the cases the firms handle.
Should there be limits on who can own law firms? How does third party investment in law firms change law firm structure or decision-making? What effect does the ownership structure have on selection of clients, selection of cases, and management of particular pieces of litigation? What level of control should funders be allowed to exert over law firm governance? Why have ethics rules traditionally limited non-lawyer investment in law firms and how have those, or should those, rules change? What impact does funding have on case filings and the already over-burdened caseloads in the state and federal courts? What kinds of cases get prioritized when returns on investment drive firm decisions? A panel of experts with diverse perspectives on these issues joined us for an interesting discussion on one important driver in the evolution of the market for legal services and its impact on the civil justice system.