An Empirical Examination of Consumer Litigation Funding

Abstract

This dissertation is the first work to empirically examine a growing type of credit for cash-constrained tort plaintiffs called consumer litigation funding (“CLF”), which takes the form of a nonrecourse loan. A plaintiff obtains a cash advance in exchange for repaying that advance and any interest or fees out of the lawsuit proceeds that remain after the attorney and other higher-priority creditors are paid. The plaintiff pays either these remaining case proceeds or the total owed to the financier—whichever amount is lower. The plaintiff pays the financier nothing if he loses his lawsuit. Chapter I investigates the effect of access to CLF on medical malpractice claim payment, claim duration, and the filing rate. Chapter II explores the effect of access to CLF on consumer welfare, measured by Chapter 7 and 13 bankruptcy filings. Chapter III examines whether the strength of the relationship between the financier and the funded plaintiff’s law firm is positively or negatively associated with the financier’s gross return and interest rate. Further, Chapter III presents the first look at descriptive statistics of a CLF financier’s administrative data.