Baker on Litigation Funding and Settlement Rights

Tom Baker has posted to SSRN What Litigation Funders Can Learn About Settlement Rights From the Law of Liability Insurance.  The abstract provides:

This essay describes a landmark dispute between Burford and Sysco over the enforcement of a settlement veto provision in their litigation financing agreement. The essay compares that veto right to settlement rights routinely exercised by liability insurers, who are the original commercial third-party litigation funders. The essay concludes that sophisticated commercial plaintiffs should have authority to assign similar rights to plaintiff-side litigation funders and the funders should be able enforce those rights through injunction. Courts routinely enforce defense-side funders’ right to require defendants to continue litigating even when both the defendant and the plaintiff would prefer to settle, indicating that neither the public policy in favor of settlement nor party control over litigation prohibit the exercise of that right. Over 100 years of experience demonstrates that assigning such rights on the defense side need not conflict with professional responsibility rules, and no one has identified a compelling reason to believe that conflicts will be more challenging for lawyers and courts to manage when sophisticated commercial entities contract with plaintiff side funders. Finally, courts regularly use preliminary injunctions and specific enforcement to preserve the value of defense-side litigation funding, demonstrating that such remedies are not unusual in the litigation funding context. The essay concludes by discussing why similar disputes have not arisen in the past and why, despite the logic of the position taken in this essay, plaintiff side litigation funders are unlikely to push for the full extent of control that liability insurers exercise on the defense side.