Litigation Funding

Lee S. Goldsmith, M.D., JD and Jordan Goldsmith, J.D.

As attorneys, we are prohibited from advancing money to a client to assist them in lasting through the long years of the litigation.  Were we to do so, we could be disbarred. 

However, some clients who are injured cannot survive on savings or SSI and often need assistance. CBS 60 Minutes ran a program on December 18, 2022 exploring Plaintiffs' need for what is called "litigation funding" and the pros and cons of that funding. 

In this blog piece, I hope to accurately share with you the information provided by that program and our own views of the subject. 

In our practice, a client has been injured as a result of the negligence of another individual and suffered debilitating injuries. Returning to work is not an option. Earning an income is not an option. How does a plaintiff survive during the course of the litigation? 

Usually there are sufficient funds from a spouse or from SSI or unemployment to assist them. With COVID and the pandemic and its effects on the Courts, that time has been extended, making it more difficult. Therefore, they wish assistance through litigation funding.

What it means is that the company will loan the plaintiff money. It is called non recourse funding. Non recourse funding means that the company will loan the plaintiff money at what is usually an exorbitant interest rate. Should the plaintiff win, the company will expect its money back plus the interest that has accrued to the date of repayment. If the plaintiff is unsuccessful with their case, then the company gets no money. As with other no recourse loans, the lender does not have the right to demand repayment from a borrower's other sources of funds or income. 

No company that has loaned funds to any one of our clients has ever lost money.

The companies that loan money are not regulated. The interest rates that they charge are very high and not regulated. The earlier that they fund a client and the longer that it takes to achieve a result, the more money these companies will make. Funding allows some plaintiffs to survive the litigation.

CBS 60 Minutes pointed out that the corporate entities are against all litigation funding. Of course, it enables plaintiffs to bring suit.  However, the program also pointed out the abuses in the excessive interest rates charged for the risk taken as well as some deceptive practices.

We try to advise our clients and keep them fully aware of all of the stages of the litigation. Our feeling is that if you can avoid litigation funders, do so. If not, we will do what is appropriate to assist in the process.