ABSTRACT
Third-party consumer legal funding, where financial companies advance money on a nonrecourse basis to assist individual plaintiffs with living expenses, is an increasingly popular and controversial part of American litigation. And consumers with mass tort claims pending in Multi-District Litigations (MDLs) constitute the fastest growing sector of those seeking assistance from this billion-dollar funding industry. Policy makers, mass tort plaintiffs’ lawyers, and scholars have increasingly raised concerns about exorbitant interest rates and have called for regulations to protect vulnerable consumers from ‘predatory lending’. To date, however, the policy debate has largely relied on anecdotes and speculation because funders have not been forthcoming with facts. This Article begins to fill that important informational void.
We were given unique, unrestricted access to the complete archive of 225,293 requests for funding from 2001 through 2016 from one of the largest consumer litigation financing firms in the US, and we are the first to explore the anatomy of litigant finance in mass tort cases. We find that the Funder systematically offers mass tort claimants larger advances and more favorable terms along multiple dimensions than it does for consumers with motor vehicle accident claims. Our data analyses involving both categories of claimants offer reassurance about numerous asserted abuses in the funding industry and lead us to recommend that restrictions not be imposed on the availability or cost to consumers of this funding. Rather, we propose that existing market competition be enhanced by the adoption of laws that would ensure greater simplicity, transparency, and consistency in the pre-funding disclosures made to consumers and by removing the prohibitions that most states’ Rules of Professional Responsibility currently impose on lawyers’ ability to provide financial assistance to their clients.
Baker, Lynn A and Avraham, Ronen and Sebok, Anthony J, The MDL Revolution and Consumer Legal Funding (June 2, 2021). Review of Litigation, volume 40, no 2, 2021.
First posted 2021-06-06 08:00:23
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