For almost 2 years the American Bar Association held hearings and fully researched the issue of Alternative Litigation Financing, also known as, Legal Funding.

At the conclusion of their exhaustive research into the issue they published a White Paper on the topic which can be found here.

Their conclusion was that there is a need for the product and that attorneys should fully inform their clients about the use of such products.

Here is the conclusion of the paper:

The market for alternative litigation finance involves suppliers and customers who demand this form of financing. Because of this demand, and because of the complexity of regulation in various states, the specific form of ALF transactions will undoubtedly continue to evolve. The Commission on Ethics 20/20 has accordingly set out to define general principles of professional responsibility that are applicable to lawyers representing clients and are involved in ALF funding. Lawyers must adhere to principles of professional independence, candor, competence, undivided loyalty, and confidentiality when representing clients in connection with ALF transactions. In the event that the lawyer’s involvement in the funding process significantly limits the lawyer’s capacity to carry out these professional obligations, the lawyer must fully disclose the nature of this limitation, explain the risks and benefits of the proposed course of action, and obtain the client’s informed consent.