Legal Memorandum: Non-recourse, Pre-settlement Funding

Issue: Is non-recourse, pre-settlement funding individualized tort reform?

Non-recourse, pre-settlement funding transactions are offered by a limited number of investment companies nationwide, and are designed to fill a void left by lenders and bankers who are unwilling to enter into these high-risk transactions. 

Through non-recourse, pre-settlement funding transactions, plaintiffs are able to obtain financial assistance, via the assignment of a portion of their future, contingent expectancy of a recovery in their lawsuits, in order to pay for personal financial obligations they may otherwise be unable to meet.  The funds advanced for the purchase of the assignment allow the plaintiffs to pay personal expenses such as mortgages, utilities and medical bills, while awaiting the resolution of their lawsuits.

In many ways, non-recourse, pre-settlement funding is individualized tort reform. See Saladini v. Righellis, 426 Mass. 231, 236, 687 N.E.2d 1224 (1997) (“[w]e have long abandoned the view that litigation is suspect, and have recognized that agreements to purchase an interest in an action may actually foster resolution of a dispute”).  Our litigation process brings with it an inherent inequity, cost. While widespread acceptance of the attorney contingency fee removed some of the financial inequities from the litigation process, non-recourse pre-settlement funding helps further level the playing field.  It addresses the financial pressures that many plaintiffs deal with outside the confines of the courthouse.  Non-recourse funding helps plaintiffs resolve their cases solely on the merits, not on the respective financial conditions of the parties.

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