Coerced into Debt? Lawsuit Claims King & Spalding Pushed Client into Unfair Litigation Funding Deal

The world of litigation can be a financial minefield, especially for plaintiffs facing deep-pocketed opponents. To navigate these challenges, some turn to litigation funding, a practice where third-party investors provide capital in exchange for a portion of any settlement or judgment. While it can be a lifeline, a recent lawsuit against King & Spalding, a prominent international law firm, raises serious questions about potential conflicts of interest and whether clients are being strong-armed into unfavorable funding arrangements.

King & Spalding Faces Lawsuit Over Litigation Funding Arrangement

In December 2025, news broke that King & Spalding is facing a lawsuit filed in Illinois state court by David Pisor, a Chicago-based entrepreneur and former client. Pisor alleges legal malpractice, breach of fiduciary duty, and violations of Illinois’ Consumer Legal Funding Act, claiming the firm steered him toward a predatory litigation funding deal with an entity affiliated with Statera Capital Funding (“Defendant SC220163”) and then massively overbilled him for legal services.

According to the complaint, King & Spalding inflated their hourly rates mid-stream and tied its fee structure to the funding, billing over 3,000 hours across 30 staff and attorneys within 11 months, resulting in more than $3.5 million in fees. Pisor claims many of these hours were duplicative, non-substantive, or billed at inflated rates, with non-lawyer work charged at partner-level fees. He argues that he was left with minimal control over his case and business due to the debt incurred, despite having a company valued at over $130 million at the time.

What is Litigation Funding?

Litigation funding, also known as third-party litigation funding (TPLF), involves an entity unrelated to a lawsuit providing funds to a litigant or law firm in exchange for a portion of the financial recovery. This funding can cover attorney fees, court costs, and other expenses. It’s a non-recourse arrangement, meaning the funder only gets paid if the case is successful. If the litigant loses, the funder loses its investment.

While TPLF can provide access to justice for those who can’t afford it, it also introduces ethical considerations. The core insight of litigation finance is that a legal claim is an asset just the same as any other asset, and that claimants and law firms should be able to secure financing against that asset the same way they can securing financing against any other asset.

Ethical Concerns and Conflicts of Interest

The lawsuit against King & Spalding highlights several ethical concerns surrounding litigation funding:

Duty of Loyalty: Attorneys have a duty of loyalty to their clients, meaning they must act in the client’s best interests, not their own or a third party’s. If a law firm benefits financially from steering a client toward a particular funding arrangement, it could create a conflict of interest.
Independent Professional Judgment: Attorneys must exercise independent professional judgment and cannot allow a third party to dictate the course of litigation. If a funding agreement gives the funder too much control over strategy or settlement decisions, it could compromise the attorney’s judgment.
Confidentiality: Attorneys have a duty to protect client confidentiality. Sharing privileged information with a funder without the client’s informed consent could waive attorney-client privilege.
Fair and Reasonable Fees: Attorneys must charge reasonable fees for their services. Inflating rates or billing for unnecessary work, especially after securing litigation funding, is unethical.

The American Bar Association (ABA) Model Rules of Professional Conduct Rule 1.6 enshrines the paramount duty of confidentiality, a cornerstone at the heart of the attorney-client relationship.

The Lawyer’s Role in Litigation Funding

When a client seeks advice on third-party funding, the lawyer should disclose the various interests at stake, including how the loan repayment structure may favor the firm’s interest in getting paid over the client’s interest in the recovery. The lawyer should also disclose the risks and benefits of the funding proposal.

State bar ethics opinions emphasize that attorneys must prioritize loyalty and client control. Best practices begin with comprehensive informed consent: attorneys have a duty to thoroughly explain all funding agreement terms, especially those that could impact independence, strategy control, or settlement. This explanation, including risks and benefits, should be documented in writing to ensure the client’s full understanding.

Risks of Litigation Funding

While litigation funding can be helpful, it’s essential to be aware of the risks:

Loss of Control: Funders may try to exert influence over litigation strategy or settlement decisions.
High Costs: Litigation funding can be expensive, with funders taking a significant percentage of any recovery. Personal injury cases often see rates between 25-35%. Complex commercial litigation might justify rates up to 40%. Patent cases, given their higher risk profiles, sometimes reach 45%.
Conflicts of Interest: The funder’s interests may not always align with the client’s interests.
Confidentiality Concerns: Sharing case information with a funder could waive attorney-client privilege.

Advice for Clients Considering Litigation Funding

If you’re considering litigation funding, here’s some advice:

Seek Independent Legal Advice: Before entering into any funding agreement, consult with an attorney who is independent of the law firm handling your case. They can review the agreement and advise you on your rights and obligations.
Understand the Terms: Make sure you fully understand the terms of the funding agreement, including the funder’s share of any recovery, the funder’s control over the litigation, and any potential conflicts of interest.
Negotiate the Agreement: Don’t be afraid to negotiate the terms of the funding agreement. You may be able to get a better deal by shopping around and comparing offers from different funders.
Maintain Control: Retain control over your litigation strategy and settlement decisions. Don’t allow the funder to dictate how your case is handled.
Protect Confidentiality: Be careful about sharing confidential information with the funder. Make sure there is a strong non-disclosure agreement in place.

The Future of Litigation Funding

The lawsuit against King & Spalding underscores the need for greater transparency and regulation in the litigation funding industry. As TPLF becomes more prevalent, it’s crucial to ensure that clients are protected from predatory lending practices and that attorneys uphold their ethical obligations. Increased scrutiny and clearer guidelines can help strike a balance between providing access to justice and safeguarding the interests of vulnerable litigants.

Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. If you have any questions about litigation funding or a similar situation, consult with a qualified attorney.