Litigation funding is not just for lawyers and law firms. There is a growing industry of plaintiff litigation funding which help individuals cover legal fees, living expenses, and other costs associated with pursuing a lawsuit. However, recently this industry has faced scrutiny for predatory practices and the fairness of these deals has been called into question and even barred by courts.
What is Plaintiff Litigation Funding?
A plaintiff litigation lender is a financial entity that provides funding to individuals involved in a lawsuit, typically the plaintiff. Litigation can be a lengthy and expensive process, and plaintiffs may face financial challenges as they pursue their legal claims. In such situations, a plaintiff litigation lender steps in to offer financial assistance.
Plaintiff Funding Under Fire
There have been a series of actions aiming to block plaintiff litigation funding or invalidate previous agreements. Stakeholders aiming to shut down these deals claim that the practices of some firms are unconscionable, taking advantage of vulnerable plaintiffs and charging them as much as 250% in interest.
National Football League
In 2019, retired NFL players sued the league for damages resulting from neurological injuries. The presiding Judge, U.S. District Judge Anita Brody, was so disturbed by allegedly exploitive funding deals that she tried, after the fact, to invalidate agreements between litigation finance companies and retired players. Ultimately, an appeals court held that she did not have the power to stop funders from bringing actions to demand repayment after players received their settlement money.
CFPB Settlement
In 2022, RD Legal Funding, LLC reached an agreement with the Consumer Financial Protection Bureau regarding their predatory funding practices. The firm was accused of
charging 9/11 first responders 250% interest on loans. The lawsuit alleged the advances RD Legal offered to individuals expecting money from the fund established by Congress to aid paramedics and other first responders were actually high-interest loans that violated New York state law.
3M Class Action Lawsuit
In September 2023, a federal judge overseeing the proposed $6 billion settlement of claims against 3M by hundreds of thousands of U.S. military veterans and service members issued an order prohibiting plaintiff funding. In the order, the judge ruled that plaintiffs’ lawyers with cases in the 3M multidistrict litigation may not approve or participate in any deal between their clients and outside funders offering high-interest cash advances in anticipation of payouts from the proposed settlement.
While plaintiff litigation funding is perfectly legal, the practice is increasingly coming under fire. Some states have even proposed legislation cracking down on funders.
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