Saturday, October 8, 2016

Zimmerman et al. on the Economics and Evolution of Non-Party Litigation Funding

Alan L. Zimmerman, Fiona McKenna, Daniel J. Bush, and Cheryl Kaufman have published their article, Economics and the Evolution of Non-Party Litigation Funding in America: How Court Decisions, the Civil Justice Process, and Law Firm Structures Drive the Increasing Need and Demand for Capital, 12 N.Y.U. J.L. & Bus. 635 (2016).

From the introduction:

Economic historians have said that “America is the Canaan of capitalism, its promised land” where the tendencies of western capitalism could find fullest expression. One essential requirement for the continued success of American capitalism is a civil justice system that provides a fair and trusted forum for all parties seeking timely redress of economic disputes.


Beginning in kindergarten, American children start each day with a Pledge of Allegiance, ending with the words “with liberty and justice for all.” The current economic reality is that civil justice in America has become a “pay to play” process. With few exceptions, it does not function fairly or effectively unless each side of a dispute has enough capital to pay the very substantial cost of full participation.


The United States is experiencing a high degree of wealth and resource inequality among its citizens. There can be no ‘justice for all’ unless each side of an economic dispute can aggregate the capital needed to ‘play.’ It is not surprising that those with the greatest concentration of wealth experience discomfort when natural economic forces generate funding solutions for their less affluent, potential adversaries enabling them equal access to the field of ‘play.’


This paper views civil litigation initiated by a party seeking money damages through the lens of the underlying economics that impact the civil justice system's ability to achieve fair outcomes. It examines how access to capital has impacted the functioning of civil justice in the United States.


Participation and success in any endeavor seeking profit or economic gain in the American capitalist system requires a sufficient supply of the three basic economic elements: property, labor, and capital. The evolution of each of these elements as applied to civil litigation and the parties and lawyers seeking gain or profit has brought us to the current state of justice in America. Just as horses and buggy whips have given way to engines and motors as major economic drivers, vast developments in our capitalistic society have served as catalysts for change in the U.S. common law legal system and reshaped the nature and interplay of the required resources of property, labor, and capital within that system.


The paper will demonstrate that non-party litigation funding is a natural and healthy capitalistic response to the changes that have occurred in the economy and in civil justice. We examine the historical development of the three economic elements, property, labor and capital, in the context of one economic endeavor, a lawsuit in which at least one party--and all of the lawyers--seek economic gain as the objective, and how the developments have increased the need for capital investment.

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