Ethical Guidelines for Dispute Resolution Professionals when Parties are Backed by Third-Party Funders

Elayne E. Greenberg, Professor of Legal Practice, Assistant Dean of Dispute Resolution Programs, and Director of the Hugh L. Carey Center for Dispute Resolution at St. John’s University School of Law, has published “Hey, Big Spender: Ethical Guidelines for Dispute Resolution Professionals when Parties are Backed by Third-Party Funders,” Forthcoming in Arizona State Law Journal Spring 2019; St. John’s Legal Studies Research Paper No. 19-0002.  In her journal article, Professor Greenberg offers ethical guidance for dispute resolution professionals who oversee an arbitration or mediation in the United States where a litigation funder is providing financial resources to at least one of the parties.

The abstract states:

This first of its kind paper introduces ethical guidelines and suggested practices for dispute resolution providers and neutrals when third-party funders provide financial backing for parties in U.S. domestic arbitrations and mediations. Third party funding has become an economic necessity to fund the escalating costs of litigation and dispute resolution. Sophisticated third-party funders have realized that litigation and dispute resolution are fast-growing, unregulated, investment opportunities and are seizing these opportunities. Third-party funders are now making billions of dollars in profits through their strategic investments in domestic and global litigation and dispute resolution with few ethical rules or regulations to curtail their investment behavior. Preferring to be secretive about the terms of their funding contracts and invisible in their work, third-party funders are flourishing, in large part, by operating below the regulatory radar. Our global brethren have adopted legislative and regulatory initiatives that require greater transparency when funders are providing financial backing for parties in international arbitration and mediation.

In the U.S., however, the funders’ behavior has been allowed to proceed invisible and unchecked because domestic courts and dispute resolution providers and neutrals are too often unaware that a party is even receiving third-party funding. Such unawareness presents a potential ethical minefield, not just for judges and litigators, but also for dispute resolution providers and neutrals. Moreover, such unawareness deprives dispute resolution participants of the third party funder’s sophisticated case assessment that could be used to help shape settlement. This paper ignites the need for awareness, expands the evolving discussion about the ethics of third-party funding to U.S. dispute resolution and refocuses on providing comprehensive ethical guidance and practice strategies for dispute resolution providers and neutrals when litigation funders back parties in arbitration and mediation.

This and other scholarly works written by Professor Greenberg may be downloaded free of charge from the Social Science Research Network.

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