Trinity Term · MMXXVI · 7 min
Non-Interference as Doctrine
Why the clause that says the funder will not run the case is the most consequential one in the agreement.
❦
By Joseph Villalba, Head of Commercial Strategy and Capital Solutions.
The single most consequential clause in any funding agreement we sign is the one that says we will not run the case. It is not a courtesy to counsel. It is not a marketing line for claimants. It is the doctrine on which the entire enterprise depends, and it is the clause that most often distinguishes a professional funder from an amateur one.
The Non-Interference Doctrine holds that once a matter is funded, the funder does not direct the litigation, does not select counsel post-deployment, does not approve or veto settlement, and does not participate in strategy calls beyond receiving the reporting the agreement requires. The claimant remains the client of the firm. The firm remains the strategist of the case. The funder remains, on the record and off it, a capital provider and nothing else.
Why the doctrine exists
Three reasons, in descending order of importance, and each one is sufficient on its own.
The first is ethical. In every jurisdiction in which we deploy, the professional conduct rules that bind the claimant’s counsel prohibit a third party from directing the representation. A funder that involves itself in strategy invites disqualification of counsel, invalidation of privilege, and, in the worst cases, a challenge to the funding arrangement itself. The clause is not decorative. It is the condition on which counsel can lawfully accept our capital at all.
The second is evidentiary. A funder that participates in strategy discussions becomes a potential witness. Materials that would otherwise be privileged become discoverable in the hands of a third party who directed their creation. Work product doctrine narrows sharply. The case, quite literally, gets worse. We have watched inexperienced funders lose privilege in this way, and the resulting damage to the matter is rarely recoverable.
The third is economic. A funder that runs the case is underwriting its own judgement rather than counsel’s. That is a category error. We are not, on our best day, a litigation firm; we are a capital provider that selects litigation firms. The premium a claimant pays us reflects our diligence at the top of the funnel, not our tactical contribution at the deposition table. Funders that forget this begin to price their own advice into the return expectation and, predictably, are disappointed.
What the doctrine does not prohibit
Non-interference is not passivity, and it is not blindness. The doctrine is compatible, and in fact requires, several things that are sometimes mistaken for interference.
- Reporting. The funding agreement specifies the reporting cadence and the categories of information the funder is entitled to receive. Reporting is not direction; it is the mechanism by which the funder verifies that its capital continues to sit behind a matter it would still underwrite today.
- Materiality consent. A narrow set of decisions, defined in the agreement, require the funder’s consent, typically a change of counsel, a settlement below a specified floor, or the abandonment of a core claim. These are protections against a matter becoming a different matter than the one that was underwritten. They are not vetoes over strategy.
- Diligence at inflection points. When a material event occurs, an adverse ruling, a change of forum, a substantial new pleading, the funder may re-underwrite. That re-underwriting is a private exercise; its output is a decision about further tranches, not a set of instructions to counsel.
- The right to decline further deployment.Where the agreement provides for staged funding, the funder retains the right to decline the next tranche. This is not interference; it is the ordinary exercise of a capital-allocation decision, and counsel are told at the outset that it exists.
How the doctrine is enforced internally
The Non-Interference Doctrine is easier to write into an agreement than to observe in practice. The pressure to intervene, particularly on a matter that is not proceeding as modelled, is real and constant. We manage it in three ways.
First, the Investment Committee sees reporting on a fixed cadence and does not take unscheduled calls with counsel about strategy. Any communication that would ordinarily be strategy-adjacent is routed through a single relationship officer and logged. Second, the funding agreement itself enumerates the specific consent items, and the Committee does not entertain requests to expand them mid-matter. Third, when a matter is genuinely deteriorating, the Committee’s options are the ones the agreement provides, decline the next tranche, invoke a materiality consent, exit through a secondary, and not a call to counsel offering unsolicited views on the pending motion.
The claim on counsel’s trust
Counsel who have worked with us more than once know that the clause means what it says. That knowledge is, over time, the most valuable asset the firm has. A funder that is trusted by counsel sees better matters earlier and on better terms; a funder that is not sees the matters other funders have already declined. The doctrine, honoured in practice rather than merely in the drafting, is what keeps us on the former side of that line.
We do not run cases. We fund the counsel who do. Everything else in the practice follows from that sentence.
❦
J. Villalba
Joseph Villalba, Head of Commercial Strategy and Capital Solutions.
The single most consequential clause in any funding agreement we sign is the one that says we will not run the case. It is not a courtesy to counsel. It is not a marketing line for claimants. It is the doctrine on which the entire enterprise depends, and it is the clause that most often distinguishes a professional funder from an amateur one.
The Non-Interference Doctrine holds that once a matter is funded, the funder does not direct the litigation, does not select counsel post-deployment, does not approve or veto settlement, and does not participate in strategy calls beyond receiving the reporting the agreement requires. The claimant remains the client of the firm. The firm remains the strategist of the case. The funder remains, on the record and off it, a capital provider and nothing else.
Why the doctrine exists
Three reasons, in descending order of importance, and each one is sufficient on its own.
The first is ethical. In every jurisdiction in which we deploy, the professional conduct rules that bind the claimant’s counsel prohibit a third party from directing the representation. A funder that involves itself in strategy invites disqualification of counsel, invalidation of privilege, and, in the worst cases, a challenge to the funding arrangement itself. The clause is not decorative. It is the condition on which counsel can lawfully accept our capital at all.
The second is evidentiary. A funder that participates in strategy discussions becomes a potential witness. Materials that would otherwise be privileged become discoverable in the hands of a third party who directed their creation. Work product doctrine narrows sharply. The case, quite literally, gets worse. We have watched inexperienced funders lose privilege in this way, and the resulting damage to the matter is rarely recoverable.
The third is economic. A funder that runs the case is underwriting its own judgement rather than counsel’s. That is a category error. We are not, on our best day, a litigation firm; we are a capital provider that selects litigation firms. The premium a claimant pays us reflects our diligence at the top of the funnel, not our tactical contribution at the deposition table. Funders that forget this begin to price their own advice into the return expectation and, predictably, are disappointed.
What the doctrine does not prohibit
Non-interference is not passivity, and it is not blindness. The doctrine is compatible, and in fact requires, several things that are sometimes mistaken for interference.
How the doctrine is enforced internally
The Non-Interference Doctrine is easier to write into an agreement than to observe in practice. The pressure to intervene, particularly on a matter that is not proceeding as modelled, is real and constant. We manage it in three ways.
First, the Investment Committee sees reporting on a fixed cadence and does not take unscheduled calls with counsel about strategy. Any communication that would ordinarily be strategy-adjacent is routed through a single relationship officer and logged. Second, the funding agreement itself enumerates the specific consent items, and the Committee does not entertain requests to expand them mid-matter. Third, when a matter is genuinely deteriorating, the Committee’s options are the ones the agreement provides, decline the next tranche, invoke a materiality consent, exit through a secondary, and not a call to counsel offering unsolicited views on the pending motion.
The claim on counsel’s trust
Counsel who have worked with us more than once know that the clause means what it says. That knowledge is, over time, the most valuable asset the firm has. A funder that is trusted by counsel sees better matters earlier and on better terms; a funder that is not sees the matters other funders have already declined. The doctrine, honoured in practice rather than merely in the drafting, is what keeps us on the former side of that line.
We do not run cases. We fund the counsel who do. Everything else in the practice follows from that sentence.