Litigation funding—also known as litigation financing or third-party litigation funding (TPLF)—provides a person or entity with the money to pay attorney fees, expert witnesses, and other costs necessary for litigation. Litigation funding is essentially a loan, secured by the proceeds of the expected settlement or collection of judgment in a lawsuit, and is designed to allow persons or entities without the necessary resources to pursue valid claims in litigation.
In Texas, litigation funding, also known as third-party litigation funding (TPLF), is a practice where a third party provides financial assistance to a litigant to cover legal expenses such as attorney fees and expert witness costs. The funding is typically provided in exchange for a portion of the settlement or judgment proceeds. Texas does not have a specific regulatory framework dedicated to litigation funding; however, the practice is generally allowed and operates under the broader legal principles governing contracts and champerty (the prohibition of third parties from supporting litigation in exchange for a share of the proceeds). Litigation funding agreements must not violate public policy, and they must adhere to professional conduct rules that prevent interference with the attorney's independent judgment. Attorneys involved in such arrangements must ensure that they comply with ethical obligations, including confidentiality and the avoidance of conflicts of interest. It's important to note that while litigation funding can provide access to justice for those who might not otherwise afford to pursue their claims, the terms of such agreements can vary widely and should be carefully reviewed.
