Litigation funding expert witnesses may opine on litigation financial options and settlements. In Third Party Financing of Litigation, Paul H. Rubin, Department of Economics Emory University, writes:
The common law has long forbidden third party investment in lawsuits based on “champerty” and related doctrines. More recently, these restrictions have been relaxed, although they may not have been entirely eliminated in the U.S. While it might appear efficient to allow such investment, in fact it is not. The effect of relaxing restrictions will be to increase litigation.
When there are benefits of litigation these are deterrence of harmful activities. However, the U.S. already goes much farther than any other country in allowing class actions and other group based litigation, and so any benefits of increased litigation are likely to be small or nonexistent.
There are two external costs from increasing litigation. First, the plaintiff must pay his own fees, but it also imposes costs – sometimes quite significant costs – on defendants when a lawsuit is filed. In many cases, the costs imposed on defendants are greater than costs borne by plaintiffs, especially when plaintiffs are individuals or class members and defendants are business firms.
Second, the type of lawsuits that would likely result from increased third party investment would probably move the legal system away from efficiency. Overall increasing third party financing of litigation is likely to be harmful.
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