Should Legal Funding Be Disclosed In Court?

Originally Published January 30, 2011

Commercial litigation financier Vinson Resolution Management this week released a study investigating the effects of legal funding on jury decision making. The survey, entitled Lawyers Need Not Worry, is the first empirical look into a long-contested issue: whether the disclosure of funding contracts would adversely affect outcomes of jury trials.

The findings, as findings tend to be, are complicated.

Though it appears knowledge of funding does not affect a jury's decision, it might affect a jury's predispositions; it does not, however, appear to affect perception of a case's merit.

Methods

The study was led by Dr. Katie Vinson, VRM's Vice President of Litigation Science, and made use of Vinson's innovative "proprietary surrogate jury panel." This refers to a group of "over two thousand jurors," according to Dr. Vinson, who "have all been vetted using a sort of digital fingerprinting system" to verify their identities.

"We have every demographic and characteristic you can think of," Dr. Vinson said.

This includes classifications by social and psychological characteristics, as well as attitudes toward various industries. VRM's primary use for this panel is in the assessment of cases for legal funding, but the research benefit is immense as well.

According to the publication, 732 surrogate jurors were shown videos portraying the plaintiff and defense arguments in a commercial case. Afterward,

"...surrogate jurors were asked numerous questions regarding each case, including which side they tended to favor and their desire for each party to prevail. Upon completing these questions, surrogate jurors were then told that an independent third party was funding the case for the plaintiff."

Results

The study's chief revelation should ease some common fears surrounding the legal funding debate: "Informing jurors that the plaintiff received funding did not affect verdict decisions." For Dr. Vinson, this is the most important takeaway, though the other results are equally noteworthy:

• Jurors who were in favor of the defendant before learning that the plaintiff received funding had an increase in their desire for the plaintiff to prevail after they learned that the plaintiff received funding.
• Jurors who were in favor of the defendant before learning that the plaintiff received funding had a decrease in their desire for the defendant to prevail after they learned that the plaintiff received funding.
• Informing jurors that the plaintiff received funding did not affect the perceived merits of a case.

There also appears to be a correlation between jurors' feelings about funding and their desire for the trial's outcome. Those who "believe third party funding is fair" without exception had a "greater desire for the plaintiff to prevail." Those who do not believe funding is fair overwhelmingly preferred the defendant.

Looking Forward

Whether funding contracts should be disclosed to juries is a hot-button issue in the funding industry; as a researcher, Dr. Vinson declined to comment on the debate itself. Most legal funders operate under the radar, and their presence is seldom revealed - a notable exception being 
for an Indiana roofer defamed by State Farm Insurance.
But some see a benefit to disclosure in court.  They write that this would bolster the "welfare-enhancing function" of legal funding by providing "...courts with a credible signal from the private market regarding the merits of the case because if the plaintiff loses the case, the funder gets nothing. Thus, funders will have incentives to invest in cases with the highest yield, and courts-and defendants-will infer that these cases have more merit. Not only will admitting these contracts in courts improve the accuracy of adjudication, it will also cause funders to charge lower interest rates in an effort to demonstrate to courts the strength of the plaintiff's claim."
It's too early to know the full implications of funding disclosure, but these two recent works paint a promising picture.  Just ask anyone fed up with our legal system - more meritorious cases, accurate adjudication, and low funding rates are the stuff dreams are made of.