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Consumer Special Features

California Bar Issues Formal Opinion on Third-Party Litigation Funding

October 2, 2020

California Bar Issues Formal Opinion on Third-Party Litigation Funding

This article was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). On October 1, 2020 the California Bar Association published Formal Opinion NO. 2020-204 on Third-Party Litigation Funding. The bar’s opinion states that attorney and consumer must be fully informed as to the terms and conditions of the contract. Additionally, the lawyer must ensure competence in advising on any litigation funding agreement, and is obligated to obtain a client’s permission before discussing any confidential information with the funding company. During the comment period of this opinion, the Alliance For Responsible Consumer Legal Funding (ARC) weighed in on the issue by submitting a letter to the review committee. In the letter ARC stated: “The Proposed Formal Opinion properly establishes that a lawyer is under an ethical obligation to decline to represent a client in legal funding negotiations if the lawyer does not have sufficient knowledge and expertise to help the client avoid being exploited in the legal funding relationship.” In addition, it was stated that this opinion will give consumers additional confidence in the industry: ”By requiring adequate representation in the legal funding negotiation, bad actors will be less likely to survive. As those bad actors are driven out, consumer confidence in legal funding services will rise and the resulting increase in demand for legal funding services will draw even more reputable funders into the market. This, in turn, will create stronger incentives for funders to cater to the price and quality preferences of individual plaintiffs.” The California Bar Association and the American Bar Association have each released a recent opinion on Litigation Funding. In both opinions, the bars acknowledge a need for the product, and propose best practices for how consumers and attorneys should work with companies that offer financial assistance to consumers in their time of need. ARC and its member companies continue to ensure that both consumers and their attorneys are fully-informed on the terms and conditions of the contract, and that the only parties that have a say in the prosecution of the case are consumers and their attorneys. These are enforced in the most recent set of Best Practices that ARC and its companies have released. ARC is very pleased the California Bar Association, the largest State Bar Association in the United States with over 242,000 members, has taken this position on the issue and put forward these important guidelines.

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ARC Defends Consumer Legal Funding as Free Market Financial Tool

By John Freund |

A recent article in the National Law Review by Eric K. Schuller offers a strong endorsement of Consumer Legal Funding (CLF) as a market-driven solution to the financial challenges faced by individuals pursuing legal claims. Schuller, who serves as President of the Alliance for Responsible Consumer Legal Funding (ARC), presents CLF as a voluntary, non-coercive financial tool that allows consumers to maintain stability and independence while waiting for their legal cases to resolve.

In the article, Schuller argues that CLF enables consumers to access much-needed funds on their own terms, without government mandates or subsidies. The availability of CLF helps consumers avoid settling their claims prematurely out of financial desperation. Instead, it gives them the breathing room to hold out for fair outcomes. Schuller emphasizes that the funding process is entirely optional, typically involves attorney consultation, and occurs in a competitive marketplace that encourages innovation in pricing, transparency, and service.

Schuller outlines three key benefits of CLF. First, it helps individuals resist lowball settlement offers by reducing financial pressure. Second, it provides support for essential living expenses such as rent, groceries, and utilities while legal proceedings continue. Third, it preserves consumer autonomy by allowing recipients to use the funds as they see fit, unlike government programs that often come with use restrictions.

The article also makes the case that CLF is faster and more accessible than public assistance programs, which often involve delays and eligibility hurdles. Schuller notes that in states with existing CLF regulations, laws already prohibit funders from influencing legal strategy or interfering with the attorney-client relationship, reinforcing the consumer-focused nature of the product.

He pushes back against critics who claim that CLF inflates litigation costs or interferes with the legal process. Instead, Schuller frames CLF as a form of personal finance, not litigation financing, and stresses that it is provided at no cost to taxpayers.

Consumer

Legal Bay to Expand Focus on Wrongful Termination and Commercial Litigation in 2026

By John Freund |

Legal Bay LLC, a pre settlement funding firm, has announced plans to significantly expand its focus on wrongful termination and commercial litigation funding in 2026.

According to a recent press release, the company cited a sharp rise in workplace lawsuits tied to return to office mandates, including claims of retaliation, sexual harassment, whistleblower retaliation, and employment discrimination. While Legal Bay has a long track record of supporting plaintiffs in employment disputes, the firm stated that the growing volume and complexity of these cases has created an urgent need for increased resources and capital allocation.

Chris Janish, CEO of Legal Bay, stated that many litigation funders tend to shy away from large or complicated matters. Legal Bay, by contrast, plans to ramp up its funding support for claimants facing job loss due to alleged wrongful termination. Janish emphasized that the company will dedicate substantial resources in the year ahead to meet the needs of plaintiffs in protracted legal battles.

Legal Bay offers non recourse cash advances, often within 24 to 48 hours of documentation, to plaintiffs seeking back pay, lost benefits, or other damages in connection with workplace disputes. The company’s funding is structured so that plaintiffs owe nothing if their case does not result in a favorable outcome.

Consumer

Consumer Legal Funding Is a Lifeline for Americans Living Paycheck to Paycheck

By Eric Schuller |

The following was contributed by Eric K. Schuller, President, The Alliance for Responsible Consumer Legal Funding (ARC).

In today’s economy, far too many Americans are walking a financial tightrope. New data from the Bank of America Institute shows that 24 percent of U.S. households now spend more than 95 percent of their income on basic necessities such as rent, groceries, utilities and transportation. That number jumps to 29 percent among lower income households.

Even more surprising, this strain is not limited to those on the lower end of the income ladder. A recent report from Fortune found that 41 percent of workers earning between $300,000 and $500,000, and 40 percent of those earning more than $500,000, say they too are living paycheck to paycheck. Lifestyle costs, debt and high inflation have eroded financial resilience even at the upper end of the income scale.

When an unexpected injury occurs, these households do not simply experience inconvenience. They experience crisis. Income stops or drops. Medical bills rise. Transportation becomes a barrier. Childcare becomes more complicated. Daily life becomes harder and more expensive, just as a legal claim begins the long march through the justice system.

This is the reality facing millions of Americans. It is also why Consumer Legal Funding exists.

The Delay Between Injury and Justice Creates Hardship

After an accident, a consumer who has a valid legal claim. But that claim will take time to resolve. Insurance negotiations, medical assessments and legal reviews do not operate on the timeline of rent due on the first of the month. Consumers cannot tell the electric company to wait until their settlement arrives. They cannot tell the landlord that the case is moving slowly. Yet all of those bills continue to accumulate.

For people who already have no financial cushion, even a short interruption in income can be catastrophic. Families fall behind on rent. Utilities get disconnected. Cars fall into repossession. Groceries become unaffordable.

These pressures far too often push consumers into accepting low settlement offers simply to survive. That is not justice. That is coercion.

Consumer Legal Funding Helps Consumers Survive the Wait

Consumer Legal Funding provides consumers with access to a portion of the future proceeds of their legal claim. Those funds help pay for essential daily expenses, such as:

• Rent and utilities
• Groceries and basic household needs
• Car payments and repairs
• Childcare and family necessities
• Transportation to medical appointments

This support is not used to pay attorney fees or litigation expenses. It is used to keep food on the table and a roof over a family’s head. It is, quite literally, the difference between stability and crisis while consumers await a fair resolution.

Equally important, Consumer Legal Funding is non-recourse. If the consumer does not win or settle their case, they owe nothing. No debt is created. No financial penalty follows them. The risk is on the funding company, not the consumer.

In a financial landscape where payday loans, credit cards and title loans can trap people in cycles of debt, Consumer Legal Funding offers a safer alternative that respects their long term financial well being.

Leveling the Playing Field

Consumer Legal Funding gives consumers the ability to withstand delay tactics. It gives them the time they need for their attorney to negotiate properly. It allows the civil justice system to work on the merits of the case, not the desperation of the injured person.

In an economy where both low income and high-income earners are struggling to stay afloat, tools that protect fairness in the justice system have never been more important.

A Necessary Safety Net for a Fragile Economy

The numbers paint a clear picture. Whether someone earns $40,000 or $400,000, far too many Americans are living without a financial buffer. A single injury can create a domino effect that jeopardizes a family’s housing, transportation, health and financial future.

Consumer Legal Funding does not solve every challenge. But it solves one critical one: it keeps consumers stable during the long wait for justice. It prevents them from being forced into unfair settlements. And it protects them from predatory financial alternatives that create long term harm.

In short, it helps Americans in their moment of need.

Funding Lives, Not Litigation

Consumer Legal Funding exists for one purpose: to help people survive while their legal claim makes its way through the system. It allows injured consumers to focus on recovery, not crisis. It restores balance against powerful insurance companies. And it ensures fairness is not compromised because someone cannot afford to wait for what they are rightfully owed.

Consumer Legal Funding is about Funding Lives, Not Litigation. And in an economy where far too many Americans are living paycheck to paycheck, that mission has never been more essential.