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It’s no surprise that Big Law is welcoming, and perhaps incubating, the rise of investment in high-stakes lawsuits.  As Barry Ostrager,  whose standard rate is $1,000/hr, notes in today’s Wall Street Journal, litigation funding provides an “extra measure of security that the legal fees are going to be paid without incident.”

I’m all for lawyers getting paid.  But I imagine that these third-party litigation funders want something in return for their investment besides a potentially good outcome in the future. They want access to information about the case. They want to know how it is going. They want to be contacted about strategic decisions.  In other words, if they are paying bills, they want to be able to dictate how the money is spent.

But in the practice of law, the core of the client-attorney relationship is the concept of secrecy–no access for those other than the client and the attorney.  If third parties start to have access to attorney-client communications, there is a breakdown of the attorney-client privilege.  It’s easy to imagine a court finding that there is no privilege over any communications to which a third-party litigation funder is privy or—worse—over any of the subject matter that was discussed with the third-party litigation funder.

I am sure that the attorneys running the new litigation funding vehicles have thought about these ethical issues and have come up with ways to ensure that the sanctity of the attorney-client relationship is maintained.  I wonder, however, if a court will agree that the workaround is sufficient.