Trending Now
Consumer Special Features

Litigation Financing is an Investment in Democracy

May 19, 2022

Litigation Financing is an Investment in Democracy

The following is a contributed piece from Rory Donadio, CEO of www.tribecalawsuitloans.com There are many ways to look at what those of us in litigation funding do. Is it a pre-settlement cash advance or a non-recourse loan? Is it truly lending, or is it an investment? But far more important than what we call our work, is what we actually do. According to a September 2021 Bloomberg Law Litigation Finance Survey, 88% of the responding attorneys believe that litigation finance enables better access to justice. Without justice for all, democracy fails. So, I submit that litigation financing is an investment in democracy. Since the inception of this industry, back when it was ripe for opportunity and unregulated like the wild west, I have been excited and driven to help real people in their search for justice. We help level the playing field between large, powerful companies and financially damaged individuals who have been harmed. A pre-settlement loan robs the insurance company of the plaintiff’s economic desperation they are so eager to weaponize as they strive to protect their clients from accountability. With the litigation funding we provide, ordinary Americans can do the extraordinary — hold the most powerful entities in our society accountable for their actions. What could be more fundamental to democracy than this? We are investing in democracy. Believe it, and never let it go.

Advice to Others in Litigation Financing

When Tribeca advises newcomers to the industry, I tell them to diversify their portfolios to invest in a wide range of cases. I encourage them to prioritize relationships with everyone — with clients, lawyers, the mailman, the person checking your groceries at your local store, that stranger who looks like they need a friend, and of course, other funders and brokers. Most importantly, I advise them never to lose sight of the genuine good you can do with litigation funding. Never forget that we are helping real people in need — that we are investing in democracy. Let me share a story of one of our clients, who I am now proud to call my friend. Derrick Hamilton’s case is one — of many — that clarified how litigation financing is indeed investing in democracy.

When Democracy Falters

In 2011, Derrick Hamilton was released from prison after serving 21 years for a murder he did not commit. He was fully exonerated in 2015. In this country, we say it is better to let ten guilty men go free rather than convict a single innocent man. Yet our judicial system snatched more than two decades of this man’s life. Our legal system failed him. As bad as his wrongful imprisonment was, the way he was treated after his release was almost worse. He was released from prison into poverty with no support structure. And when he sued the state for compensation for the wrongful imprisonment — you know what happened next — the state’s attorneys stalled. Despite knowing the state wrongfully locked this man away from his family, his friends, and his life, knowing the state owed him compensation for this vast injustice, the attorneys representing New York and Connecticut still dragged out his compensation negotiations for six years. Think about that for a moment. There were no complex issues to analyze or painstaking research required. Nevertheless, more than two decades of this man’s life were stolen — a fact recognized by all sides. They delayed his compensation — for six entire years — because they could. They hoped that his financial straits would force him to accept far less money than he was owed, just to make the pain stop. It nearly worked. Fortunately, we were able to help fund his wrongful incarceration lawsuit. I gained so much more than a business deal from the experience.

All Money is Alike

If you are desperate and cannot scrape the funds together to keep a roof over your family’s heads, or provide necessary medical care, then every dollar is precious. But when you have enough money to cover all your needs and wants, then every dollar is just like any other. Forever chasing money simply adds up to bigger stacks of paper. But when we invest in people, we create opportunities to flourish. Unfortunately, sometimes these opportunities are squandered. But through passion, hard work, and faith in God, some people turn their chance to thrive into a way to lift up those around them. When this happens, you know your investment has paid rich dividends.

Investing in People Reaps Enormous Dividends

Supporting cases like Derrick’s crystallized my sense of the work we do. I recognized that, in a small way, I was investing in him and our democracy by helping him continue his fight for justice. I initially helped one man. Then, with the pre-settlement funding we provided, Derrick opened a business of his own, and invested in someone else’s restaurant. He netted the money he needed to hire other exonorees to work with him, pursuing justice for others still behind bars. He did this all while continuing to fight for the compensation he deserved. When I look at all Derrick accomplished with the lawsuit loan I provided — just a cash advance on the money he was owed — I am both humbled and in awe. I helped Derrick Hamilton, but he, in turn, helped his family start a business and another company grow. He has employed other men in his very same circumstance, others unjustly imprisoned, and together, they help even more people. Every dollar is a duplicate of another, but a single life that is improved reaches far and wide, bettering the lives of others. Whether someone we help plants a garden, raises a child, or creates opportunities for others our society has left behind, it is a beautiful thing. And each of these lives is singular, unrepeatable, and utterly unique. Calculating the way one life can enhance so many others, strengthening our society and making our democracy work just a little bit better is much messier than standard accounting, and more challenging. The math is harder, but it’s so much more rewarding!

Building a Team and Moving Forward

More advice for others starting out in litigation financing — surround yourself with quality people who share your vision. After 28 years in the industry, I now have an incredible staff that does just that. They are open-minded, caring, and hardworking. They dig into the ways legal funding invests in people and strengthens our democracy. They never shy away from the messy accounting involved. What’s different for me today, is that I am not afraid of admitting that I have made a mistake, I can own it, and I can learn from it. When I was one of the litigation financing industry’s pioneers back in the 90s, there were no guardrails or guidelines. In many ways, we were inventing the industry as we worked. Together we helped a lot of people, but I also made plenty of mistakes. I lost deals and made loans I should have walked away from, but these mistakes helped to form the man and the investor I have become today. My faith has allowed me the comfort of knowing there is enough for my storehouse. I don’t have to have every deal. I credit self-reflection, passion, work ethic, and my relationship with God as the secrets to my success. In addition, the willingness to make mistakes and to learn from them — to grow — is as essential to success in this field as in any other. Each case is so different from the next; there’s plenty of trial and error involved. So when mistakes happen, the truth is better revealed because you see the problem more clearly. The goal should not be to avoid failure but to learn from it and move on. My mantra has become, “Yesterday’s denials are today’s approvals.” I find my passion for litigation financing redoubled. I feel honored to be in a position to invest in our democracy’s justice system.

Where is the Litigation Financing Industry Headed?

As long as we have positive regulation in the market, the litigation financing industry will continue to grow. We must be proactive with legislation to keep companies honest and keep the industry available to those who need it. I see legal funding as a genuinely noble business, where we use our money to help vulnerable people in distress meet their needs and secure the compensation they deserve. Sadly, some see nothing but an opportunity to victimize these people further and take quick profits with no regard to the damage they inflict. Our industry needs sensible regulations that do the following:
  • Rein in predatory lending practices
  • Allow consumers to get the help they need
  • Protect the litigation funder’s investment in the case
Currently, there are bills in Kentucky, North Carolina, New Jersey, Colorado, and New York that we are watching closely. At this time, most appear to be positive legislation that can benefit our industry and our clients. Too often, legislators don’t understand our industry, or they paint the good and bad actors with the same brush, so it’s vital to be proactive as legislation is written and debated. Litigation financing can serve a diversity of clients and needs. Sometimes, it helps individuals pay their rent while settlement negotiations drag on. Other times, it can provide a litigator with the funds they need to hire an expert witness or get an expensive analysis completed that can make their case. It can also be used for operating capital for commercial entities during litigation to cover their costs. Get creative in the way you look at legal funding, and you’ll always find people who will benefit from your support. I am the CEO of Tribeca Lawsuit Loans. We fund a wide diversity of personal injury and mass tort litigation. The cases I am closely watching in 2022 include: Lastly, wrongful imprisonment cases will forever be near and dear to my heart. Accordingly, I’ll be fascinated to see how the class action lawsuit against Hertz — for its disgraceful practice of falsely accusing customers of rental vehicle theft—shakes out. The author of this article is Rory Donadio. Rory can be reached by email: rory.donadio@tribecacapllc.com  

Consumer

View All
Consumer

ARC Releases New Consumer Survey: Three Years Apart, Consumers Tell the Same Story

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

The Numbers Haven't Changed, and That's the Story. Three Years Apart, Consumers Report the Same Financial Need and the Same Value in Consumer Legal Funding.

The Alliance for Responsible Consumer Legal Funding (ARC) has released its 2026 Consumer Survey, providing a new look at how consumers use Consumer Legal Funding and why access to the funds remains important while legal claims are pending.

Hundreds of consumers from across the country reported turning to the product for help paying rent or a mortgage, utilities, food, transportation, and other essential household expenses that cannot wait for the legal system to run its course.

ARC's second major consumer survey in three years reinforces the findings from 2023. Across both surveys, consumers describe a real need for funds to support everyday life, and more than nine out of ten say they would use Consumer Legal Funding again if needed.

The Need Has Remained Remarkably Consistent

Consumer Legal Funding is sometimes confused with financing the costs of litigation. The survey data tells a very different story.

Consumers reported needing financial assistance for the ordinary expenses of everyday life while waiting for their legal claims to be resolved. Housing, utilities, food, transportation, and other household obligations do not stop because someone has been injured or has a pending legal claim.

Perhaps the most striking finding from the comparison involves housing.

In 2023, 73.00% of respondents reported difficulty paying their rent or mortgage. In 2026, the number was 73.03%.

That consistency is significant. Two separate groups of consumers, three years apart, identified essentially the exact same financial pressure as the leading reason they needed assistance.

The same pattern appears with other basic necessities. Difficulty paying utilities increased from 58.35% in 2023 to 61.30% in 2026, while difficulty paying for food increased from 54.00% to 60.07%.

These consumers are not describing litigation expenses. They are describing household expenses.

They are trying to keep a roof over their heads, keep the lights on, put food on the table, make car payments, and maintain financial stability while their legal claims move through the system.

That is the real-world function of Consumer Legal Funding: Funding Lives, Not Litigation.

An Accident Can Create an Immediate Financial Crisis

The circumstances surrounding the need for funding are equally important.

In 2023, 70.64% of respondents were not employed when they received Consumer Legal Funding. In 2026, that number was 72.08%. Even more telling, the percentage reporting that their lack of employment resulted from the circumstances creating their need for funding, such as a car accident, increased from 58.94% in 2023 to 65.72% in 2026. Personal injury and automobile claims remained the dominant claim type, representing 76.83% of respondents in 2023 and 78.45% in 2026.

"Since my injury, I've had to retire from work. My funding company has checked in while waiting on my settlement to see if I need additional help through the process. This has been positive for me."

The practical sequence is easy to understand.

A consumer is injured. That injury may interfere with the person's ability to work. Household bills continue arriving. Meanwhile, the legal claim may take months or longer to resolve.

The legal system operates on one timeline. A family's financial obligations operate on another.

Consumer Legal Funding can help bridge that gap by providing financial resources while ordinary household expenses continue and the consumer's legal claim remains unresolved.

"I received money early in the process when I was very stressed, in a lot of pain, and overwhelmed because of my head injury. They made it easy for me to understand and receive."

That distinction is essential to understanding the product. Consumer Legal Funding is not about paying attorneys' fees, experts, discovery costs, or other litigation expenses. The surveys repeatedly identify rent or mortgage payments, utilities, food, transportation, and other household obligations as the financial pressures consumers are facing.

For Many Consumers, There Are Few Alternatives

One of the clearest findings from the ARC surveys is that many consumers appear to have very limited financial alternatives when they turn to Consumer Legal Funding.

In 2023, 39.13% of respondents selected "None" when asked which listed financial alternatives they had used before obtaining Consumer Legal Funding. By 2026, that number had increased to 43.19%. Reliance on family and friends was also significant, although it declined from 38.22% in 2023 to 34.51% in 2026. By comparison, credit cards were used by 19.68% of respondents in 2023 and 21.42% in 2026, while personal loans were used by only 11.90% and 13.45%, respectively.

Taken together, these findings paint an important picture. For a substantial number of consumers, Consumer Legal Funding is not simply one financial option among many. More than four in ten respondents in the 2026 survey reported using none of the listed alternatives before turning to Consumer Legal Funding, while many others had relied on family or friends rather than traditional financial products.

That makes access to Consumer Legal Funding particularly important. When someone has been injured, is unable to work, and is struggling to pay rent, utilities, food, or transportation expenses, there may be very few realistic places to turn for financial assistance while a legal claim remains pending.

"Thank you for helping me when everyone else turned me away."

This is an important consideration for policymakers. Restrictions that significantly reduce access to Consumer Legal Funding do not create new financial alternatives for these consumers. They simply risk removing an option that many consumers are using at a time when their other choices appear limited.

The underlying financial need remains. The question is whether consumers will continue to have access to a product that can help them meet that need while they wait for their legal claim to be resolved.

Consumers Continue to Say They Would Use It Again

Perhaps the clearest measure of consumer satisfaction and the value consumers place on the product is what they say they would do if faced with the same need again.

The results are significant not simply because they are high, but because they are remarkably consistent.

In 2023, 91.08% of respondents said they would use Consumer Legal Funding again if needed.

Three years later, 90.70% said the same thing.

That is a difference of only 0.38 percentage points between two separate surveys. Recommendation rates were similarly strong, with 89.43% in 2023 and 87.35% in 2026 saying they would recommend their funding company.

Those numbers deserve a prominent place in the public discussion about Consumer Legal Funding.

A single survey showing that more than nine out of ten consumers would use the product again would be noteworthy. Two separate surveys, conducted three years apart among different groups of consumers, producing virtually identical results, are even more compelling.

91.08% in 2023. 90.70% in 2026.

More than nine out of ten consumers in both surveys said they would choose Consumer Legal Funding again if they needed it.

And nearly nine out of ten in both surveys said they would recommend their funding company.

These are not opinions from people observing the product from the outside. These are responses from consumers who actually used Consumer Legal Funding during a period of financial need.

"The process was easy, and the money was helpful. I would recommend this company to everyone who is in a situation like mine."

Their experiences deserve to be part of the policy discussion.

Hundreds of Consumers Across the Country Are Telling a Consistent Story

The strength of the ARC surveys is not based on a single percentage or a single group of respondents.

Hundreds of consumers participated in each survey, with respondents coming from across the country.

About 73% in both surveys struggled with rent or mortgage payments. Basic household necessities remained the dominant reason consumers needed financial assistance. A substantial percentage reported using none of the listed financial alternatives before obtaining Consumer Legal Funding. And more than 90% in both surveys said they would use the product again if needed.

That is not simply one survey producing a favorable statistic. It is a repeated consumer story.

Two Surveys, One Clear Message

One survey provides a snapshot. Two surveys conducted three years apart provide something more meaningful: the ability to determine whether the same basic patterns appear again.

ARC's 2023 and 2026 surveys independently tell essentially the same story. Consumers experience accidents, injuries, or other events that can disrupt employment. Their household expenses continue while their legal claims remain unresolved. Housing is consistently the leading financial pressure, with utilities and food also affecting significant majorities of respondents.

And after experiencing Consumer Legal Funding firsthand, more than 90% in both surveys said they would use it again if they needed it.

That repeated consumer response should matter to policymakers.

Consumer Legal Funding should be responsibly regulated, and strong consumer protections and meaningful industry standards are entirely compatible with preserving access. But regulation should begin with an understanding of why consumers need the product and what consumers themselves say about its value.

When policymakers consider laws or regulations that could significantly restrict Consumer Legal Funding, they should also consider what happens to the consumer afterward.

The accident has not disappeared. The pending legal claim has not suddenly been resolved. The rent has not gone away. Neither have the utility bill, grocery bill, car payment, or other everyday household obligations.

The most important voices in this debate should include the people who have actually faced that difficult period and used the product.

Across two surveys, three years, and hundreds of consumers from across the country, the message is remarkably consistent:

The need is real. The product serves an important purpose. And overwhelmingly, consumers say they would use it again.

A version of this commentary first appeared in The National Law Review.

Consumer

ARC’s Schuller Argues Consumer Legal Funding Safeguards Have Become a Bipartisan Settlement

The president of the Alliance for Responsible Consumer Legal Funding has argued that consumer protection and access to legal funding are not competing goals, pointing to near-identical safeguards enacted in states at opposite ends of the political spectrum.

Writing in the National Law Review, Eric Schuller compares the frameworks adopted in Kansas, Utah, California and New York and finds the same core provisions recurring regardless of which party controls the legislature. The starting point is the product itself: consumer legal funding is non-recourse, so repayment depends solely on the proceeds of the claim and a consumer who recovers nothing owes nothing.

From there, the statutes converge on disclosure. Kansas HB 2518 requires agreements to use "common, everyday language" and to state all charges and the maximum amount the consumer could owe; New York requires "common, understandable language" alongside a repayment schedule. Cancellation rights follow a similar pattern, with Kansas and New York providing ten business days, Utah HB 280 extending its window from five days to ten, and California allowing five business days to rescind.

Each state also builds in the claimant's attorney. Kansas requires an attorney acknowledgment confirming the disclosures were reviewed and that no referral fee was paid, without which the contract is null and void. All four bar funding companies from influencing the conduct, settlement or resolution of the claim, leaving those decisions with the consumer and counsel.

On enforcement, Kansas permits penalties of up to $10,000 per willful violation, California provides statutory damages and attorney's fees, and New York allows a company to forfeit its right to recovery.

Consumer

New York Times Investigation Examines Securitization of Consumer Legal Funding Advances

A New York Times investigation published Wednesday reports that some of the largest consumer legal funding companies are bundling cash advances made to personal injury plaintiffs into asset-backed securities sold to investors, and examines how that financing cycle interacts with a sharp rise in personal injury litigation.

As reported by The New York Times, reporters Ellen Gabler, Robert Gebeloff and Julie Tate identified six major funders that securitize their advances, accounting for more than 90% of advances nationwide according to industry trade group figures. The Times found more than two dozen securitization deals since 2020, representing hundreds of thousands of cases and raising $2.8 billion from investors. Advances carry fees and interest averaging 35% to 45% a year, and in one cited example a New York plaintiff who received $76,500 in advances owed at least $1.4 million by the time her case settled.

The article situates this alongside a 70% increase in personal injury filings in state courts over the past decade, and notes that since 2023 companies including Geico, Allstate, Uber and FedEx have brought at least 60 civil racketeering suits accusing lawyers and medical providers of inflating claims. Funders quoted in the piece dispute that fraud is widespread, with the American Legal Finance Association's Jack Kelly arguing that cutting off securitization would cut off the supply of money to victims. The Times also reports that more than a dozen states have restricted third-party litigation funding, with West Virginia the first to explicitly limit securitization.

The Alliance for Responsible Consumer Legal Funding responded to the report by calling for regulation rather than restriction.

"Some of the conduct described in The New York Times article is exactly the type of conduct responsible regulation should prevent," said Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding. "New York has now put strong protections in place that directly address many of these concerns, while states such as Kansas have adopted similarly comprehensive regulatory frameworks. The answer is not to take Consumer Legal Funding away from injured consumers who need help paying their rent, mortgage, utilities or putting food on the table while their case moves through the legal system. The answer is to establish clear rules, enforce those rules and hold anyone who violates them accountable. Responsible regulation protects consumers while preserving access to Consumer Legal Funding for the people who truly need it."