What can happen when a third party pays legal fees in a civil case

Earlier, we discussed the problems that can occur when a third party pays the fees of a defendant in a criminal case.  Mike Cavendish, who writes an interesting blog by the way, is a civil litigator in Florida who has experience in both federal and state courts. He provides an interesting example of the problems that can occur for both the court and opposing counsel when a civil litigant is not paying for that party’s lawyer. The last sentence of his thoughtful comment is particularly worth remembering.

Mike writes:

I had a case wrap up last year, a dispute between two neighboring rural landowners.
We learned that the larger landowner–the alleged tortfeasor, whom I’ll call Elmer Fludd–was getting his fees paid by two different third-party payors, an insurer, and a REIT that’d invested in his land.
The identity of the fee payors became more interesting once Elmer Fludd adopted a lit strategy that a cynic would say was designed to drive the fee expenses of both sides through the roof.
Fludd’s opponents figured that because he’d found a way to not pay his own fees, American rule-style, as the suit progressed, and would likely not himself pay any adverse awards of fees against him, he’d found an asymmetry. An asymmetry from which he could create great financial attrition against his co-parties, while the lit strategy took up loads of the court’s resources.
For me the question was, is this situation where two third-party payors are absorbing all of a litigant’s legal expense going to lead to activities that are outside of the reasonable, necessary, prudent types of legal work that fee calculations and awards ought to be limited to?
A related question I had was, for the other guy, who was paying his own fees, how much of his legal expense was going to be caused by tasks of pure reaction, his lawyer would say the necessary reactions, to the free rider’s initiatives, and shouldn’t that be of concern to the factfinder when a fee award for or against him is considered?
There was a third question. I asked myself, if I am the judge, and I am considering yet another motion by Elmer Fludd, to compel, or for protective order, would I find it relevant if I knew all the expensive legal work leading up to the latest request for relief was costing everyone involved except for him?
In a civil case where neither side is the government, the asymmetry a third-party fee funder can create is something, having lived it, I will always pay close attention to, and bring to the court’s attention, if I think it is threatening due process, or if it trifles with the court’s resources.

(Emphasis added by Kopf)

Thank you, Mike, for your thoughtful comment.  For what it is worth, your concerns mirror mine.


4 responses

  1. That last sentence is, I agree, particularly important – not because it makes your point but because it makes much of mine.

    There are particular circumstances in which it may become necessary for the court to know who’s paying the freight. But they are particular circumstances (and different in criminal cases than in civil ones such as in Mike’s example), and should be distinguished from the general rule.

  2. An excellent example of does can happen is Vaccine Court. An attorney knows that he is going to get paid, no matter how indolent he is; in essence, he is no longer the attorney for the petitioner. Cases are tanked due to a lack of proper investigation, and the government that is supposed to be policing the Bar assiduously gazes the other way, as the only people injured are the victims of vaccine reactions.

    I’ve been involved in scorched-earth litigation. Judges always look the other way, even when the attorney suborns perjury. There’s a great case here in Colorado where a sole practitioner beat a billionaire and his national law firm; when they couldn’t do her in court, they did her in what is the most corrupt state bar in the country, bar none. I covered the kangaroo court proceeding for our blog, KnowYourCOurts, and will be happy to elaborate and document if anyone is interested.

  3. Jeff,

    I am just about convinced that you (and others like SHG) are right. As a judge, I should not inquire who is paying the fee unless something really stinks to the high heavens.

    All the best.


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