Originally from Handbook on Third-Party Funding in International Arbitration, Second Edition

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PART I.  THE THIRD-PARTY FUNDING LANDSCAPE

1.  The TPF market in California

1.1.  Please shortly describe the TPF market in your Jurisdiction.

In the United States (“U.S.”), California is considered one of the most attractive states in which to invest using TPF.  This is likely because the use of TPF in California is subject to fewer restrictions and California courts have historically looked favorably upon such arrangements. Most notably, California courts do not recognize the common law doctrines of champerty and maintenance (or its variants), which may pose obstacles to the use of TPF.  California courts also have confirmed that with respect to meritorious litigation, TPF is protected from tort liability claims.  As a unanimous California Supreme Court puts it, California has “no public policy against the funding of litigation by outsiders.”  The growth of TPF arrangements also has generated relevant analysis and guidance on its use. Most relevant to attorneys is the State Bar of California Standing Committee on Professional Responsibility and Conduct’s Formal Opinion 2020-204 (“California State Bar Opinion on TPF”), which concludes that “[o]pportunities exist to contract with litigation funders” and provides a comprehensive review of ethical considerations that arise in doing so.  Finally, California’s appeal as an international arbitration seat has increased since California’s legislature passed a legislation in 2018 expressly permitting non-California lawyers to appear in international arbitration in California without any registration or local counsel requirements.  As a consequence of this development, greater use of TPF in California-seated arbitrations is expected.

1.2.  Is it dominated by local or international Funders? Which Funders are active? Which cases typically get funded?

In California, both local and international Funders play active roles in the TPF market. Notable Funders based or with a presence in California include Omni Bridgeway, Parabellum Capital, Fortress Investment Group, Validity Finance, and Delta Capital. The two main categories of TPF are consumer litigation TPF and commercial litigation TPF.