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New York City Bar Association on Fee-Sharing

Recently, the NYC Bar Association has issued an opinion about litigation funders fee-sharing. The question they posed was, “May a lawyer enter into a financing agreement with a litigation funder, a nonlawyer, under which the lawyer’s future payments to the funder are contingent on the lawyer’s receipt of legal fees or on the amount of legal fees received in one or more specific matters?”

The NYCBA wrote, “No New York ethics committee has yet addressed the rule’s application specifically to litigation funding arrangements. However, we see no meaningful difference between payments for financing, on the one hand, and payments for goods and services, on the other, that would call for a different interpretation of “fee sharing” when a lawyer’s payments to a provider of funding, rather than a provider of goods or services, are contingent on the lawyer’s receipt of fees in a particular matter.”

The Litigation Finance Journal points out, in a piece regarding the NYCBA’s formal opinion, that Rule 5.4 of the New York Rules of Professional Conduct ‘explains that the fee-sharing restriction is intended “to protect the lawyer’s professional independence of judgment.”’

What this means for litigation finance is unknown though some suspect it may impact litigation funding in New York state. With the news that the litigation finance industry is opening to private investors, whatever New York’s next move will be, won’t affect the soaring popularity of the litigation finance space. To learn more about how Elevant Finance Group LLC can provide financing or insight into the litigation finance industry, contact us today.

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