The Rise of Plaintiff Investment Funding in Legal Battles

Forget cryptocurrency—there is another kind of investment making the news in recent years, and it is one creating some major headaches for insurance carriers, policyholders, and even attorneys. Third-party lenders can help pay plaintiffs' legal fees when pursuing claims against insurers and other deep-pocketed defendants. This type of investment, known as plaintiff investment funding or third-party litigation funding (TPLF), allows investors to provide financial support to plaintiffs in exchange for a portion of any award.

A recent decision to refer attorneys to the disciplinary counsel of their respective bars and to seek U.S. Department of Justice review in a case involving plaintiff investment funding has sparked discussions about the ethical implications of this practice. Kahn Swick & Foti, LLC (“KSF”) and KSF partner, former Attorney General of Louisiana, Charles C. Foti, Jr., remind investors to exercise caution when getting involved in such arrangements.

Sean Duffy, an investment and fiduciary consultant with Conrad Siegel, highlights key cases and learnings from the year in 401(k) litigation, shedding light on the impact of plaintiff investment funding on legal proceedings. Ever heard of litigation funding? It's a relatively new, multibillion-dollar industry where investors fund lawsuits in exchange for a share of the settlement. This practice has been gaining traction and changing the landscape of legal battles.

Plaintiffs are now winning more cases as a result of litigation funding, with third-party financiers playing a crucial role in leveling the playing field against well-funded defendants. Third-party litigation funding allows investors to take on the financial risk of lawsuits in exchange for a potential return on their investment, without any direct legal involvement. These increased costs have implications for federal, state, and local governments, as well as insurance carriers and policyholders.

In the realm of legal finance, plaintiff investment funding is a hot topic that is reshaping the dynamics of litigation. As more investors see the potential for returns in supporting legal claims, the industry continues to grow. The ethical considerations surrounding third-party litigation funding are being scrutinized, with calls for transparency and regulation to protect the interests of all parties involved.