The NYU School of Law recently hosted a day-long conference about lawsuit finance in the United States: Litigation Funding: The Basics and Beyond.  In Six Virtues of Litigation Finance, Above The Law’s Managing Editor David Lat reported on the conference. He concluded that “litigation finance is here to stay,” is expanding, and “is a good thing.”  Put on by the Center On Civil Justice at NYU School of Law and the NYU Journal of Law and Business, the conference featured panel discussions of leaders in law, finance, and policy, with an introduction to the topic from the esteemed litigator and professor Peter Zimroth, the Director of the Center On Civil Justice.

Litigation finance occurs in two general areas: lawsuits involving companies or business claims, or “commercial litigation finance,” and lawsuits involving individuals, usually personal injury plaintiffs or “consumer litigation finance.”  LawCash specializes in consumer litigation finance and personal injury lawsuit funding. This article will focus on consumer litigation finance; for a more complete discussion of the entire field, please view the conference papers or the entire Above The Law article.  Below is a summary of the top four benefits of personal injury plaintiff funding discussed at the litigation funding conference, based on the excellent  and thoughtful Above The Law reporting of the conference.

1. JUSTICE

Personal injury litigation finance promotes access to justice.

Litigation funding of personal injury lawsuit claims helps disadvantaged succeed in and use the American civil justice system. Mounting lawsuits costs a lot of money.  Most people cannot afford to outwait defendants and their insurance companies. Therefore, many plaintiffs cannot secure or receive justice without financial help, even when they have suffered catastrophic injuries through the negligence of others.

Funding of lawsuit plaintiffs gives them immediate financial assistance.  Lawsuit funding enables plaintiffs, especially those who have lost their jobs and have no health insurance, to pay for basic living costs or medical bills rather than having to settle their cases too early.  Without legal funding companies, many plaintiffs would never secure a just result as they wouldn’t be able to see their claims through to the end.

2. RISK MANAGEMENT

Litigation finance provides society with a collective way to manage and diversify the risks and costs of lawsuits, just as insurance helps society collectively manage and diversify risks and costs of healthcare or property damage.

Conference panelists pointed out that lawsuit claims carry real risks for those who fund them, risks which do not exist in other types of financial assets.  One gave the example of buying a bond. Or consider a traditional loan.  The differences between these traditional assets and lawsuit claims are striking.  For starters, there is no certainty that a claim will succeed, no fixed return, and no set time for maturation or repayment. Litigation finance transfers the risk and costs from those injured or harmed by larger companies or better capitalized lawsuit opponents, onto financial-legal professionals who can help society collectively manage the risk and costs of litigation.

LawCash believes this to be a critical point about litigation finance, whether in the commercial context or the consumer context. Lawsuit finance is a kind of insurance, then, for lawsuit plaintiffs going up against large companies who are repeat players in the litigation arena.  Litigation funding “levels the playing field” for those who seek to secure justice and compensation for negligence, wrongdoing, or business encroachments.  It’s not just about one case or one plaintiff– it’s about making the system work better and more fairly for those who use it.

3. PROTECTION OF THE GENERAL PUBLIC

Personal-injury litigation or lawsuit finance helps the “Average Joe or Jane,” secure justice from mammoth insurance companies fighting against “regular people’s” cases.

Conference participants pointed out that in contrast to commercial litigation finance, personal injury lawsuit funding advances essentially focuses on righting wrongs, or securing justice. Commercial litigation is more purely about money and the marketplace. Personal injury litigation finance involves the use of money to make the outcomes of legal proceedings involving wrongdoing and physical harm to others more just and fair. 

Thus, personal injury lawsuit funding changes the status quo for those living without a paycheck or from paycheck to paycheck when they must go to court to battle insurance companies, who are essentially professional defendants. Previously, those who had more money succeeded best in our legal system.  Money and delay and working the system can often prevent those with less money from receiving justice. In the past, those without money settled or lost their cases because they couldn’t afford to stay in a lawsuit. They needed money to pay their bills and have a place to live. Individual consumer litigation finance yields justice and enables the claims of the poorer and non-professional litigant to be heard in court.

4. EFFICIENCY

Litigation finance can reduce the time, delays, and costs of litigation.

When defendants learn that a plaintiff has secured litigation financing, conference panelists reported that many defendants become more inclined to settle.  Lawsuit financing changes the dynamic: defendants and insurance companies now know they won’t win (i.e. pay as little as possible) by delaying the process.  Indeed the US Chamber of Commerce agrees.  Made up of insurance companies and “big business” the Chamber has devoted a great deal of effort and expense to combating litigation finance companies, acknowledging that litigation funding costs them money.