Ethical Myths About Champerty and Third-Party Funding

Why Champerty Still Comes Up—Even Though Modern Funding Is Different

Champerty and maintenance are centuries-old doctrines developed to prevent powerful third parties from stirring up frivolous litigation or taking improper control over someone else's lawsuit. In their original form, these rules targeted behaviors common in feudal England: wealthy benefactors financing disputes in exchange for substantial control or the promise of large payouts.

Modern legal funding bears little resemblance to those practices. Funding companies do not direct litigation, choose strategies, influence settlement decisions, or communicate with opposing counsel. Instead, they provide non-recourse financial support that plaintiffs use for living expenses, medical treatment, or case-related needs—support that does not give the funder any authority over the legal process.

Yet many attorneys still carry misconceptions rooted in historical champerty concerns. Understanding what funding actually is—and what it strictly avoids—is essential for ethical clarity.

Modern Funding Avoids Control, Influence, and Interference

At its core, champerty forbids a third party from controlling a lawsuit. Non-recourse legal funding is expressly structured to avoid this. Plaintiffs and attorneys maintain full control over:

• Litigation strategy
• Settlement amounts
• Communication with insurers
• Trial preparation
• Expert decisions and discovery choices

Funding contracts specify that funders have zero involvement in case direction. The advance is simply an investment: if the plaintiff wins, the funder is repaid; if the plaintiff loses, they owe nothing.

These lines remain firm even in cases involving disputed fault. For example, when liability is unclear—as in the types of scenarios evaluated in comparative-fault vs. clear-negligence assessments—attorneys alone determine strategy, arguments, and settlement posture. Funding does not alter legal analysis.

Ethical Concern #1: "Does a funding advance pressure plaintiffs into settling high or low?"

This is one of the most persistent misconceptions. Attorneys worry funders may push plaintiffs toward higher settlements to increase the funder's return, or toward faster settlements to reduce case duration. But because funders have no authority over litigation, they cannot:

• Demand the plaintiff reject an offer
• Insist the plaintiff accept an offer
• Influence when settlement occurs
• Dictate negotiation positions

In fact, funding often reduces pressure on plaintiffs—empowering them not to accept unfair, lowball offers. This is especially important when plaintiffs would otherwise rely on high-interest financial products. Responsible funding protects plaintiffs from the compounding hardship associated with consumer debt, similar to the benefits outlined in comparisons to credit-based alternatives.

The goal is to prevent desperation, not create new pressure.

Ethical Concern #2: "Could funding influence mediation dynamics?"

Attorneys sometimes worry that having an existing advance may distort mediation strategy. But mediation decisions remain entirely between the plaintiff and legal counsel. Funders do not attend mediation, do not shape negotiation strategy, and do not approve or reject settlements.

The only funding-related need is transparency about lien amounts so attorneys can prepare accurate net-recovery projections. This same principle appears in best practices for navigating mediation while funded, similar to the coordination guidance in pre-mediation preparation.

Funders step back. Attorneys lead. Plaintiffs decide.

Ethical Concern #3: "Does funding create an unfair advantage against defendants?"

Defendants sometimes assume that legal funding distorts case value, but it actually does the opposite. Funding does not increase a case's legal merits; it simply removes economic desperation from the equation. Insurance companies can no longer rely on "starvation tactics," long delays, or mounting plaintiff financial stress to force low settlements.

When plaintiffs have the means to withstand prolonged litigation, defendants must evaluate cases more honestly, adopt more realistic settlement strategies, and prepare more thoroughly for trial. This shift aligns with the re-balanced negotiation environment explored in analysis of how funding changes defense behavior.

Ethically, more balanced negotiations benefit everyone—promoting fairer resolutions based on evidence, not exhaustion.

Ethical Concern #4: "If a funding contract is sold, do ethical issues arise?"

Some attorneys worry that assignment of contracts might introduce champerty risks. It does not. When a funding company assigns a contract to another entity, the underlying rights and restrictions remain unchanged:

• The plaintiff's protections stay intact
• Contract terms cannot change
• Non-recourse status remains
• No new control is granted

Assignments are administrative, not strategic, and the new funder must abide by all ethical prohibitions on litigation influence. This mirrors the administrative clarity explained in discussions about what happens when contracts are assigned.

Ethically, the plaintiff's position remains identical.

Why Funding Provides Protection—Not Pressure

Legal funding protects plaintiffs from financial hardship that could otherwise distort their litigation rights. Consider the alternative: plaintiffs forced to take out credit-card advances, payday loans, or emergency loans with compounding interest. These obligations can influence legal decision-making far more than a non-recourse advance ever could.

With funding:

• Plaintiffs owe nothing if they lose
• No personal assets are at risk
• No monthly payments are required
• No collection activity can occur
• No pressure is placed on case strategy

This relief empowers plaintiffs to make legal decisions based on the merits, not financial emergency. It is also why tools like pre settlement funding exist—to create breathing room, not obligations.

Where Ethics and Practicality Align

Modern ethics rules focus on three protections:

1. No control: Funders cannot direct the case.
2. No interference: Funders must respect attorney judgment and confidentiality.
3. No undue influence: Plaintiffs retain complete decision-making authority.

Responsible funding companies voluntarily adopt even stricter safeguards, including firewalling underwriting teams from case strategy discussions and maintaining limited-scope communication with firms.

Most ethical concerns persist not because of real risk, but because of outdated myths. Champerty was created to prevent meddling. Today's regulated funding practices are built to avoid it.

Final Thought: Funding Isn't a Threat to Ethics—Misunderstanding Is

Champerty myths persist because the term carries centuries of historical baggage. But modern third-party funding is designed with bright-line restrictions that protect plaintiffs, attorneys, and the integrity of litigation.

Funding companies do not control lawsuits. They do not influence strategy. They do not pressure settlements. Instead, they provide financial support that allows plaintiffs to pursue justice without sacrificing stability.

Ethics and funding are not in conflict—they coexist when funding is structured responsibly.