Law Commons^™

Screening Legal Claims Based On Third-Party Litigation Finance Agreements And Other Signals Of Quality, Michael Abramowicz, Omer Alper

Vanderbilt Law Review

The advent of third-party litigation finance introduces a new gatekeeper to the legal process. Before deciding to lend money to a plaintiff, a litigation finance company will conduct at least some review and make an assessment of the quality of the case.' Since litigation finance loans are generally nonrecourse, a litigation finance company is likely to refuse to loan money to plaintiffs with the weakest cases. Such voluntary claim screening may improve social welfare by reducing the incidence of frivolous claims. But the volume of frivolous claims may still be higher than it would be in a world without third-party …