Controlling the delegation of control

How much control may a third-party litigation funder exercise over the conduct of litigation by the funded party? The conventional answer is “none whatsoever,” and that litigation funders must be purely passive investors. From the point of view of the ethics of the lawyer-client relationship, however, I do not see a problem with the client having contractual relationships with third parties that have an impact on the client’s litigation strategy or otherwise on the instructions the client gives to the lawyer about its interests. Legal ethics similarly is not responsive to any duties of care—call them tort, fiduciary, or nonfiduciary norms of good faith and fair dealing—existing between the claim owner and a third-party funder. Lawyers should not second-guess these instructions and do not have duties of loyalty or independence to inquire into the reasons the client may have for encumbering its decision-making authority in one way or another. It is also an analytical mistake to import the protections for the lawyer-client fiduciary relationship into the relationship between the claim and a litigation funder. This is true whether the source of regulatory authority is principles of legal ethics or a common-law doctrine like champerty and maintenance. Following on a 2013 article co-authored with Professor Anthony Sebok, this Article contends that contract principles, including implied terms of good faith and fair dealing, are adequate to address the risks to both parties arising from litigation investment agreements