Settlement Authority

Settlement authority refers to who holds the power to accept or reject a settlement offer in a funded case — a critical governance issue because the claimant's and funder's economic interests may diverge at specific settlement amounts. In properly structured funding agreements, the claimant retains ultimate settlement authority consistent with the attorney's ethical obligations, but the funder may negotiate consent rights or floor protections that prevent the claimant from accepting a settlement that would not return the funder's minimum required amount. Courts and ethics authorities in multiple jurisdictions have scrutinized arrangements where funder consent rights are broad enough to effectively give the funder veto power over settlement, which can create conflicts between funder economics and the claimant's best interests. The design of settlement authority provisions is one of the most negotiated aspects of a funding agreement.

Because the claimant's and funder's economic interests can diverge sharply at specific settlement values — particularly near the funder's minimum required return — settlement authority provisions are where funding agreements most directly confront the tension between funder protection and claimant autonomy. Funders typically negotiate floor protections rather than outright consent rights specifically to avoid the ethics scrutiny that comes with anything resembling funder veto power over a claimant's own settlement decision.