The Benefits of Cartiga’s Consumer Legal Funding, Fully Explained

Legal and economic research shows that consumer legal funding offers compelling benefits to claimants pursuing legal claims.¹ This article explains in detail why Cartiga’s funding benefits are so compelling and how these benefits create significant litigation advantages for consumers.

Benefits of Liquidity

Consumers benefit from funding if they need more money to pay personal or medical bills. Funding gives consumers “liquidity” (access to a source of funds) to pay those bills that cannot wait and to keep their lives intact. These funds are critical for consumers whose personal injuries have kept them out of work and unable to cover simple expenses, much less the costs of medical treatment necessary to return to health.² The most valuable asset these consumers own is often their legal claim, which they can “monetize” (or convert to cash) using consumer funding.³

In addition to the benefit of paying bills, consumer legal funding also creates two significant litigation advantages. First, the liquidity from funding makes it more likely because they can pay for the medical treatments they need. That enables consumers to enforce their legal rights successfully: the proof of payments for medical treatments is critical evidence of the economic damages suffered and an important foundation for establishing non-economic damages/pain and suffering.

Second, the liquidity from consumer legal funding permits consumers to resist financial pressure to settle for less than the full value of their claim.⁴  Legal scholars and economists have recognized that plaintiffs who have meritorious claims but few resources are often “induced to settle at an amount that under-compensates for their true injury.” ⁵  Consumer legal funding corrects this imbalance by “enabling plaintiffs who have meritorious cases to exercise greater bargaining power in settlement negotiations and avoid premature settlements at a discount due to the exhaustion of funds.” ⁶

Numerous courts have agreed that consumer legal funding permits “lawsuits to be decided on their merits, and not based on which party has deeper pockets or stronger appetite for protracted litigation.” ⁷

Benefits of Sharing Risk

Consumers also benefit from funding because they transfer the risk of losing their legal claim to the funding company and lock in some of the value of their claim early. One commentator explains that funding “allows injured parties to recover sooner and with greater certainty.”⁸

There is always a risk that there will be no recovery on a legal claim or a risk that the recovery will be lower than expected. That risk depends on many factors beyond anyone’s control or foresight. In the words of one law review: “Will the key witness wilt on the stand? Will the plaintiff draw a sympathetic judge or jury? Will discovery reveal a smoking gun—or shoot the plaintiff in the foot? Even the strongest legal claims are not sure bets, and even if they were, they would still bring uncertainties around how long the litigation will last.” ⁹

As every trial lawyer knows, this risk of a low or incomplete recovery is always present. Studies of tort litigation show that victims are often under-compensated for their losses. Many injured victims who sue “often learn that the tort system is stingy. On average, victims do not recover their hard costs—their out-of-pocket expenses and lost wages—let alone recompense for their pain and suffering, diminished enjoyment of life, or other soft damages.” ¹⁰

As a result, funding not only creates value by transferring the risk of loss. It establishes a litigation advantage as well. Without funding, risk-averse consumers might accept settlement offers well below the “real claim values” to avoid all the risks of these uncertainties.¹¹ Instead, funding provides them with an alternative to pursue a settlement that is closer to the “expected” value for their claim.¹²

Receiving an adequate recovery is one of many risks consumers can transfer using funding. There is also “duration risk” — the uncertainty of when the consumer’s claim will be resolved and a payment will be made. “Since many consumers need money when the wrong happens, not many years later when the defendant pays damages, they may immediately need funding to pay their bills. Their legal claim “may be their best (and perhaps their only) asset” to convert into cash right away,¹³ and they have “a greater need for certain payment today than for a chance at [a higher payment] next year.” ¹⁴ In essence, the uncertainty of when a payment will be made is transferred from the consumer to the funding company.

Conclusion

In short, the liquidity and risk sharing benefits delivered by Cartiga’s consumer legal funding are compelling not only on their own. They optimize litigation outcomes by allowing “ (i) more injured parties to recover; (ii) injured parties to recover more; and (iii) injured parties to recover sooner and with greater certainty.”¹⁵ These benefits are particularly compelling because the research also shows that the benefits of funding outweigh the costs, and they lead to higher recoveries. Those are important reasons for law firms and their clients to use Cartiga’s consumer legal funding to maximize their legal claims.

This article is for marketing purposes only, does not constitute legal advice, and should not be relied upon as legal advice.

1. See, e.g., Heuristics, Biases, and Consumer Litigation Funding at the Bargaining Table, Vanderbilt Law Review, Vol. 68:1:261, 266 (2015); Ronen Avraham and Anthony Sebok, An Empirical Investigation of Third-Party Consumer Litigant Funding, 104 Cornell L. Rev. 1133 (2019); Paige Marta Skiba and Jean Xiao, Consumer Litigation Funding: Just Another Form of PayDay Lending? Law and Contemporary Problems, Vol. 80:117, 119, 121-123, 126, 137-138, No. 3 (2017); Andrew F. Daughety and Jennifer F. Reinganum, The Effect of Third-Party Funding of Plaintiffs on Settlement, American Economic Review, Vol. 104, No. 8, pp. 5-6 (August 2014); Susan Lorde Martin, Litigation Financing: Another Subprime Industry That Has A Place In The United States Market, 53 Vill. L. Rev. 83, 84-85, 100, 101-102 (2008); GAO Report on Third-Party Litigation Funding: Market Characteristics, Data, and Trends, pp.12-14, 18-19 (December 2022).
2. Michael K. Velchik and Jeffery Y. Zhang, Islands of Litigation Finance, 24 Stanford Journal of Law, Business, and Finance, 45-46 (2019).
3. Glickman, Embracing Third-Party Litigation Finance, 43 Fla. St. U. L. Rev. 1043, 1045-1046 (2016).
4. Suneal Bedi and William C. Marra, The Shadows of Litigation Finance, 74 Vanderbilt Law Review 563 (2021) Available at: https://scholarship.law.vanderbilt.edu/vlr/vol74/iss3/6. Other scholars have tracked this analysis to conclude that litigation finance is likely to improve social welfare by expanding the market for settlements. Id.
5. Glickman, supra, at 1064; see also Maya Steinitz, Whose Claim Is This Anyway? Third-Party Litigation Funding, 95 Minn L. Rev. 1268, 1276 (April 14, 2011). Bedi and Marra, supra, at 577-581, 608-610; Heuristics, Biases, and Consumer Litigation Funding at the Bargaining Table, supra, at 266; Avraham and Sebok, supra; Skiba and Xiao, supra, 121-123, 126, 137-138; Daughety and. Reinganum, supra, at 5-6 (August 2014); Martin, supra, at 84-85, 100, 101-102 (2008).
6. Velchik and Zhang, supra, at 45.
7. See, e.g., Lawsuit Funding, LLC v. Lessoff, No. 650757/2012, 2013 WL 6409971, at *6 (N.Y. Sup. Ct. Dec. 4, 2013). Fausone v. U.S. Claims, Inc., 915 So. 2d 626, 630 (Fla. Dist. Ct. App. 2005) (“A person who suffers a severe personal injury will often need money to care for herself and her family during the pendency of litigation. Lawsuits take time and come with few guarantees. Grocery stores and home mortgage lenders do not wait for payment merely because a person is unable to work due to an automobile accident or other injury.”); Maslowski v. Prospect, Funding Partners LLC, 944 N.W.2d 235, 241 (Minn. 2020);
8. Velchik and Zhang, supra, at 45-46.
9. Bedi and Marra, supra at 579.
10. Charles Silver, Litigation Funding versus Liability Insurance: What’s the Difference? 63 DePaul L. Rev. 617, 631 (2014). Available at: https://via.library.depaul.edu/law-review/vol63/iss2/15
11. Id. at 630.
12. Molot, Litigation Finance: A Market Solution to a Procedural Problem,  99 Geo. L. J. 65 (2010)(funding provides risk-averse plaintiffs with a “market alternative” to settling; they are able to hold out for higher settlements that are closer to the mean expected damages award).
13. Glickman, supra, at 1045-1046.
14. Velchik and Zhang, supra, at 46.
15. Id. at 44.