• Subscribe
  • Log In
  • Sign up for email updates
  • Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The Texas Lawbook

Free Speech, Due Process and Trial by Jury

  • Appellate
  • Bankruptcy
  • Commercial Litigation
  • Corp. Deal Tracker/M&A
  • GCs/Corp. Legal Depts.
  • Firm Management
  • White-Collar/Regulatory
  • Pro Bono/Public Service/D&I

The Ethics of Litigation Funding in Texas

© 2018 The Texas Lawbook.

spnsredx1l

By Eric Chenoweth of Bentham IMF

(Feb. 28) – In Texas and elsewhere, law firms and commercial litigants gain access to the justice system by obtaining funding to pursue cases that would be cost prohibitive without financial assistance.

Though funding has become a more common tool for commercial litigants and their lawyers in recent years, many lawyers and litigants still have questions about basic ethical issues. One of the most fundamental is whether funding is even allowed under their state’s legal ethics rules.

The answer is an unequivocal yes. Texas, in particular, has a long history of alternative funding arrangements – Texas firms helped pioneer and popularize the use of contingency fees. Funding is a logical extension of that tradition. It is designed to help firms and litigants reduce the risks associated with a full-contingency arrangement. By providing fees in advance, a funder allows lawyers to focus squarely on their cases, rather than on how they will finance them. For litigants, funding ensures that they can afford to hire the most qualified counsel for their cases.

Texas, additionally, has no lingering impediments to funding from maintenance or champerty. As Cornell Law School Professor W. Bradley Wendel wrote in the Fall 2017 issue of The Advocate, lawyers are prohibited under the Texas Disciplinary Rules of Professional Conduct from obtaining a proprietary interest in the underlying subject of a litigation. Yet, “this does not mean that third parties are similarly prohibited from doing so,” Wendel wrote. “And in many states, including Texas, providing financial assistance to a litigant in exchange for a financial interest in the outcome is permitted.”

The courts have also weighed in. In his article, Wendel noted that in the leading Texas case on funding – Anglo Dutch Petroleum International Inc. v. Haskell, a 2006 case involving the use of funding in an oil-and-gas industry lawsuit – the First Court of Appeals showed that Texas “is not one of the states that continues the ancient common-law prohibition on champerty and maintenance.”

Wendel also remarked that the court found funders “purchase a contingent right to a portion of the plaintiff’s recovery. The funding agreement does not create an absolute obligation on the part of the plaintiff to repay the advance. As a result … these transactions are investments, not loans, and therefore not subject to state usury limitations.”

Litigation investments often lead to another common ethical question among attorneys and litigants: Does litigation financing entitle the funder to an element of control in the case? The answer is no.

Funders essentially act as silent partners, providing financial assistance and sharing in the proceeds from a successful recovery. They may receive updates about the progress of the case, but they neither dictate legal strategy nor control the terms of settlement.

While the ways in which third-party funders invest in commercial claims continue to grow and evolve, the ethical issues those investments may raise are well-settled in Texas. Duties of loyalty, competence and independence will continue to guide the lawyer’s conduct, and financial assistance from a funder can help both the claimant and its lawyers pursue meritorious claims and maximize recoveries.

© 2018 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.

If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.

Primary Sidebar

Features

  • McDermott Legal Department is ‘More than the Sum of its Parts’ - McDermott, a key contractor on the multibillion-dollar Freeport LNG facility, faced lawsuits seeking nearly $2 billion in damages. Freeport’s insurers sought over $1.3 billion in subrogation claims, while Freeport LNG itself alleged design defects. Both lawsuits were filed as adversary proceedings in the bankruptcy of McDermott’s joint venture partner, Zachry Construction. The cases involved complex engineering and contract issues among multiple partners. The cases involved complex engineering and contract issues among multiple partners. Ultimately, the insurers’ claims were dismissed as well as the consequential damages portion of the defect suit, though the insurers have appealed the dismissal. For navigating the complexities, McDermott's in-house legal team is one of two finalists for the 2025 Houston Corporate Counsel Award for Business Litigation of the Year. The award will be presented by the Association of Corporate Counsel’s Houston Chapter and The Texas Lawbook on Thursday at the Four Seasons in Houston.  May 21, 2025Michelle Casady
  • Shell US Lawyers Adam MacLuckie and Huyen Luong Have a ‘Need to be an Ally’ - Adam MacLuckie and Huyen Luong led the Shell US Legal DEI Council during a pivotal time, fostering open dialogue and community through their “Let’s Talk About It” campaign as the company returned to in-person work post-pandemic and amid a nationwide reckoning with racism. Drawing from their personal backgrounds – Luong’s journey from post-war Vietnam and MacLuckie’s lifelong path to allyship – they built inclusive, two-way engagement that increased participation and trust. Their efforts earned them the 2025 Houston Corporate Counsel Award for Diversity and Inclusion.  May 20, 2025Krista Torralva

GCs, Lawyers & Firms

  • Kim Bueno Among Kirkland’s Litigation Haul from King & Spalding - Kirkland & Ellis announced in a news release on Tuesday the hiring of 13 litigation partners nationwide from King & Spalding who specialize in "complex, multidistrict litigation and high-stakes trials" — including a handful in Texas, most notably veteran trial lawyer Kim Bueno in Austin.
  • O’Melveny Adds Experienced Trial Lawyer in Houston
  • Simpson Thacher Hires Project Finance Veteran
  • Womble Adds Veteran Biz Litigator in its Houston Office
  • Barnes & Thornburg Lands Veteran Louisiana Litigator for its Dallas Office
  • Condon Tobin Hires Team from Libby Sparks
  • Sorrels Law Launches Beaumont Office with Veteran Maritime Litigator David James
  • Sidley Strengthens Dallas Office by Hiring David Monteiro
  • SBSB Eastham Adds Veteran Trial Lawyer In Corpus Christi
  • Cheniere AGC Latest In-House Lawyer Going Back to Practice
More GCs, Lawyers & Firms

Lawyers in the News

Hover right to see full list

Reem Abdelrazik
Doug Bacon
Harry Beaudry
Jonathan Benloulou
Gene Besen
Doug Bland
Jacqui Bogucki
Vera De Brito de Gyarfas
David Buck
Nora Burke
T.J. Campbell
Wayne Chan
Michael Considine
Mogan Copher
James Cowen
Kevin Crews
Samantha Crispin
Dawud Crooms
Shamus Crosby
Clint Culpepper
Brock Degeyter
Nick Dhesi
William Eiland
Austin Elam
Miles Emery
Bill Finnegan
David Gail
Adam Garmezy
Sami Ghubril
Breen Haire
Kim Hicks
J. Dean Hinderliter
Nicole Islinger
James Johnston
Atma Kabad
John Kaercher
Erin Kaufman
Paul Kukish
Thomas Laughlin
Oscar Fernando Leija
Emily Lichtenheld
Rob Little
Ryan Logan
Bryan Loocke
Katy Lukaszewski
Ryan Lynch
Ryan Maierson
Benjamin J. Martin
Madeline McCune
Sean McFarlane
Richard McGee
Sarah McLean
Sameer Mohan
Andrew Monk
Charlie Ofner
Stephen Olson
Joe Orien
Zach Parker
John Pitts
Benjamin Potter
Brendan Quigley
Kevin Richardson
Alex Robertson
Jason Rocha
Julian Seiguer
Mark Sloan
Chad Smith
Lande Spottswood
John Stribling
Vanessa Sutherland
Tanner Sykes
Martha Todd
Michael Vardanian
Thomas Verity
Douglas Warner
Kyle Watson
Luke Weedon
John Wetwiska
Sean Wheeler
Debbie Yee

Firms in the News

Hover right to show full list

Akin
Baker Botts
Bracewell
Haynes Boone
Holland & Knight
Kirkland & Ellis
Latham & Watkins
Morgan Lewis
Pillsbury
Porter Hedges
Sheppard Mullin
Sidley
Simpson Thacher
V&E
Weil
White & Case
Willkie

Footer

Who We Are

  • About Us
  • Our Team
  • Contact Us
  • Submit a News Tip

Stay Connected

  • Sign up for email updates
  • Article Submission Guidelines
  • Premium Subscriber Editorial Calendar

Our Partners

  • The Dallas Morning News
The Texas Lawbook logo

1409 Botham Jean Blvd.
Unit 811
Dallas, TX 75215

214.232.6783

© Copyright 2025 The Texas Lawbook
The content on this website is protected under federal Copyright laws. Any use without the consent of The Texas Lawbook is prohibited.