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Victory for Consumer Legal Funding in Recent Minnesota Case

June 4, 2020

Victory for Consumer Legal Funding in Recent Minnesota Case

The common law doctrine that bans champerty has been around since the middle ages. This dark age law prohibiting funding for legal cases by outside parties (who then receive a share of a winning award) is still in place in some parts of the world. But Minnesota is no longer one of those places—earlier this week, the Minnesota Supreme Court abolished the champerty doctrine. Bloomberg Law explains that this is a major win for litigation funders, as it affirms its positive impact on the legal world. This follows the trend of other states either refusing to recognize champerty laws, or outright legalizing third-party legal funding. Texas, Ohio, New Jersey, New Hampshire, Massachusetts, Illinois, Hawaii, Connecticut, Colorado, California, Arkansas, and Arizona are all on board with lit fin as a growing field. This recent decision began with a personal injury case wherein an injured party made an agreement to receive funding from Prospect Funding Holdings LLC. The plaintiff agreed to pay Prospect Funding about $14,000, but her lawyer refused, saying the agreement was invalid because of the state-wide ban on funding. The funder sued, and lost in district court—the agreement was declared unenforceable because it was not technically legal to begin with. The Minnesota Supreme Court ruling reversed this decision. Eric Schuller, President of ARC—the Alliance for Responsible Consumer Legal Funding, expressed satisfaction with the decision. “The Minnesota Supreme Court got it right. We hope that this decision will allow the opponents of the industry to finally put the issue of champerty to rest.” Schuller goes on to explain the necessity of Litigation Finance, “Consumer Legal Funding is a financial product that allows consumers to get the proper outcome of their legal claim when they don’t have the financial wherewithal to meet their day-to-day obligations like mortgage, rent, or just putting food on the table.”

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Nonprofit Milestone Foundation Forms Advisory Council to Champion ‘Simple Interest’ Litigation Funding

By John Freund |

The Milestone Foundation, a western New York nonprofit that bills itself as the country's only organization dedicated to litigation funding for plaintiffs, has assembled a new advisory council to advance its mission and promote a funding model built on simple, non-compounding interest rates. The move marks an effort to position nonprofit funding as an alternative to the high-cost consumer products that have drawn regulatory scrutiny.

As reported by Law.com, the Buffalo-based foundation unveiled a multi-disciplinary council spanning the full litigation ecosystem, drawing together professionals from across the plaintiff, finance, and legal services landscape to guide its work and broaden its reach.

Founded in 2016 by John and Amy Bair, the Milestone Foundation operates as a 501(c)(3) nonprofit and offers pre-settlement funding at 15% simple interest and post-settlement funding at 10% simple interest, with interest that never compounds. Like commercial consumer legal funding, its advances are non-recourse, meaning plaintiffs owe nothing if their case is unsuccessful. The foundation says it has provided more than $6 million in funding to over 900 plaintiffs in partnership with more than 320 law firms nationwide.

The council's formation comes amid intensifying debate over how consumer legal funding should be priced and regulated, exemplified by recent state legislation such as the Kansas Transparency in Consumer Legal Funding Act. By emphasizing transparent, simple-interest terms, the foundation is staking out a distinct position in a market often criticized for opaque and compounding charges, offering a model that supporters argue better aligns funding costs with plaintiffs' interests.

Consumer

Illinois Moves to Restrict Private Equity and Hedge Fund Control of Law Firms

By John Freund |

Illinois has joined a growing list of states moving to rein in non-lawyer ownership and control of law firms, advancing legislation that restricts the influence of private equity, hedge funds, and outside investors over legal practice. The measure reflects mounting concern that capital-driven ownership structures, closely related to litigation finance, could compromise attorney independence.

As reported by Crain's Chicago Business, House Bill 5487 places new limits on alternative business structures (ABS) and management services organizations (MSOs). The bill prohibits non-lawyers and outside investors from interfering with attorneys' professional judgment, accessing client records, hiring or firing lawyers, or charging fees tied to a firm's revenues or profits. Firms must also disclose any MSO or ABS arrangement to their clients.

Rather than banning the structures outright, the legislation significantly curtails non-lawyer involvement in firm operations and decision-making. The bill drew an unusual coalition, with both the Illinois Trial Lawyers Association and Illinois Defense Counsel backing it, alongside State Rep. Jay Hoffman and House Speaker Emanuel "Chris" Welch.

Supporters framed the measure as a response to rising private equity and venture capital involvement in civil litigation, drawing explicit parallels to third-party litigation funding arrangements that finance cases in exchange for a share of recoveries. Illinois follows California and Colorado in tightening ABS rules, amid criticism that Arizona's permissive regime has allowed non-lawyer-owned firms to manage mass tort caseloads while funded through attorney-fee percentages. The trend signals growing legislative resistance to investor control of the litigation process.

Consumer

The Case for Nonlawyer-Owned Firms: Filling Consumer Justice Gaps Left by Big Law

By John Freund |

As states such as Illinois move to restrict non-lawyer ownership of law firms, defenders of alternative business structures are pushing back, arguing that ABS models expand access to justice for consumers and small businesses that traditional firms have little economic incentive to serve. The debate goes to the heart of how technology and outside capital should reshape the delivery of legal services.

As reported by Bloomberg Law, Matt Freund, co-founder and chief executive of Arizona ABS-licensed firm ClaimsHero, contends that conventional firms lack the incentive to handle consumer protection and wage-theft claims where clients cannot afford hourly billing. ABS firms, he argues, combine legal expertise with technology to operate on contingency at scale, serving more than 100,000 clients at no cost to consumers through automated onboarding, eligibility screening, and client communication.

Freund counters concerns that non-lawyer ownership weakens oversight, asserting that ABS firms face stricter regulation than traditional practices. Entity-level licensing, he notes, creates firm-wide accountability, with semi-annual audits, biennial renewals, compliance-attorney requirements, and the risk of firm-wide suspension for ethics violations. He cites a 2025 Stanford Law School study finding that 85% of Arizona ABS firms target individual consumers and that there was "de minimis evidence of consumer harm."

To address skeptics, Freund recommends entity-level regulation, feedback mechanisms, ownership transparency, and governance safeguards for attorney independence as a template for other states. The argument offers a direct counterpoint to the restrictive measures gaining traction in statehouses across the country.