How Legal Funding Is Changing the Dynamics of Class Action Lawsuits

Disclaimer: Consumer legal fundings and advances are not loans under applicable financing laws. Rockpoint’s products are non-recourse, meaning if you don’t win your case, you don’t have to pay us back. Receiving financial support in connection with a legal case is typically (and oftentimes incorrectly) referred to as a “lawsuit loan” or “loan.” Therefore, for the ease of search references, these terms may be used in this context to refer to our funding products, but we maintain our separateness from consumer loan products in all legal aspects.

Class action lawsuits have become more lucrative than ever. A recent study revealed that 15 class action lawsuits were settled for over $1 billion in 2022 alone and that over 600 class action lawsuits were settled for over $63 billion in total that year. With legal funding increasing in popularity in the U.S., class action lawsuits could become even more lucrative in the near future.

There’s no denying that third-party litigation funding has had a huge effect on lawsuits across the board. However, the pre-settlement funding options that lenders like Rockpoint Legal Funding provide are having an especially big impact on class action lawsuits.

Find out how legal funding is changing the dynamics of class action lawsuits and what it might mean for you below.

Increasing the Number of Class Action Lawsuits

Class action lawsuits have existed since medieval times and have been used in the U.S. since the early 1800s. They involve multiple parties filing a single lawsuit against a defendant and making similar claims.

As you might imagine, filing class action lawsuits can be very complicated. Because of this, some potential class action plaintiffs have decided against filing them in the past. However, the availability of legal funding is beginning to change this.

Third-party litigation funding is on the rise, making it easier than ever to file class action lawsuits. Investors have started providing those who wish to file class action lawsuits with the legal funding they need to bring these cases to light. This has effectively lowered the barrier for those hoping to file these lawsuits and led to more of them becoming realities.

Minimizing the Class Action Lawsuit Risks

The legal funding that class action plaintiffs can apply for is typically non-recourse financing. In other words, if these plaintiffs aren’t able to earn legal victories in their class action cases, they won’t have to repay the lenders that provided them with initial payments. Lenders are the ones who must worry about risk management and diversification in class action lawsuits.

This is yet another way legal funding is poised to send the number of class action lawsuits filed annually skyrocketing. This funding provides people interested in filing class action lawsuits with peace of mind. They don’t need to be overly concerned about the usual risks of filing them, so they’re becoming more open to doing it.

Class action lawsuits are also proving to be less stressful than they used to be for those leading the charge when filing them. They aren’t as afraid about what might happen if they lose these cases since they don’t have as much to lose financially.

Encouraging More Class Action Lawsuit Settlements

Traditionally, very few class action lawsuits have gone to trial. Some reports have revealed that just 2% of these cases reach the trial phase.

Many class action lawsuits — roughly three-fourths — are settled outside the courtroom. That number is expected to climb even higher in the coming years as more class action plaintiffs come to litigation funding agreements with lenders.

When class action defendants know plaintiffs have the backing of litigation funding companies, they’re more likely to agree to settlements. Threatening to take these plaintiffs to trial doesn’t have the impact it once did.

Creating Larger Class Action Lawsuit Settlements

Legal funding is increasing the frequency of class action settlements and contributing to settlements breaking records in recent years.

Class action defendants used to be able to lowball plaintiffs during settlement negotiations. However, they can no longer rely on using this strategy. They’ve come to understand that many third-party litigation funding companies are pulling the strings behind the scenes and won’t accept lowball offers anymore.

This could explain the increase in settlement agreements over the last few years. Class action defendants are coming around to the idea of giving plaintiffs more money than they may have in the past. This trend could very well continue as more defendants learn that legal funding is here to stay.

Leading to More People Joining Class Action Lawsuits

Joining class action lawsuits hasn’t always been worth it for Americans. Studies have suggested the average class action lawsuit only leads to a person pocketing about $32. It’s enough to make some people who might otherwise join these lawsuits say, “Thanks, but no thanks!” as it hasn’t usually been worth the trouble.

Legal funding could eventually lead to more people joining class action lawsuits. Since there is minimal risk associated with doing it in cases involving legal funding, it wouldn’t be shocking to see more class action plaintiffs coming forward to participate in ongoing cases.

It’s just one more instance of litigation funding turning the legal world upside down. This niche industry could eventually be regulated more. But for now, it seems like pre-settlement funding companies will continue to impact class action lawsuits in various ways.

See How Legal Funding Could Benefit Your Class Action Lawsuit

Are you kicking around the idea of filing a class action lawsuit with a group of other plaintiffs? Look into the possibility of collecting third-party litigation funding. It could make your case more compelling and ultimately set it up to be more successful in the end.

Rockpoint Legal Funding can lend a hand to plaintiffs who are preparing to go through lawsuits. We can offer the pre-settlement lawsuit funding you need to make your legal proceedings less risky and possibly more lucrative overall.

Reach out to us at (855) 626-3214 today for more information on the legal funding options we can extend to you.