WASHINGTON – A new report shows how third-party litigation financing is driving up costs for American consumers and families more than $600 per household annually when affordability remains a top concern across the country.
The report, released January 20 by Citizens Against Lawsuit Abuse, shows higher prices, lost income, and lost tax revenue tied to exploitative lawsuit investment practices. The study, prepared by The Perryman Group, examines how outside foreign and sovereign entities that are financing lawsuits in exchange for a share of the payout are distorting the civil justice system and passing exorbitant costs onto households through inflated prices and reduced economic growth.
CALA’s executive director says third-party litigation financing, or TPLF, turns courtrooms into profit machines for deep-pocketed investors while working families pay the price at the checkout counter and in their monthly bills.
Gomez
“Third-party litigation financing has quietly become a significant burden on American families,” said Victor Gomez, Executive Director of Citizens Against Lawsuit Abuse. “When Wall Street-style investors bankroll lawsuits for profit, the costs are not constrained to the courtroom.
“Americans are facing these consequences through increased prices, higher premiums, job losses, and reduced purchasing power for everyday consumers.”
The president of the Florida Justice Reform Institute says TPLF has other consequences as well.
Large
“Third-party litigation funding increases the probability that meritless claims will be brought, inserts questions about who is actually controlling the litigation, results in inevitable conflicts of interest among the lawyer, client and litigation funder and makes settling lawsuits far more difficult and expensive,” William Large told Legal Newsline. “For far too long, institutional investors have been allowed to invest in litigation with little oversight, to the detriment of the parties and the court system itself.
“Reform on this subject is needed now."
CALA says this “highly unregulated and purposefully opaque practice turns America’s courtrooms into casinos that are open for business to investors at the expense of American citizens and businesses. Adding insult to injury, foreign investors can often avoid paying taxes on their profits.”
According to the report, the economic impact of third-party litigation financing is:
· More than $607 per household per year in lost earnings and reduced purchasing power due to higher inflation and slower economic growth
$192.79 per person annually in direct consumer costs tied to TPLF-driven litigation inefficiencies
More than $31 billion in added inflationary pressure across the economy, driven in part by higher insurance and liability-related costs
More than $54 billion in lost economic output annually, weakening job growth and income gains that families rely on to keep up with rising costs
About 454,450 jobs are lost every year as businesses struggle to absorb the rising costs and uncertainty created by third-party litigation financing
About $15 billion in annual tax receipts are lost across federal, state and local governments due to excessive TPLF litigation.
“These findings confirm what we are already feeling at the checkout counter and when paying our monthly bills,” Gomez said. “TPLF fuels the wave of frivolous litigation that raises costs across the economy, leaving families with less money in their pockets and fewer opportunities to get ahead while these wealthy outside investors earn millions in tax-free profits.”
CALA’s report is part of its ongoing efforts to highlight how lawsuit abuse and predatory litigation undermine affordability, economic stability, and fairness for consumers nationwide. While it says a fair civil justice system is essential, CALA says practices that inject profit-driven incentives into litigation can create ripple effects that hurt households and economic viability long after a case is filed.
The result, according to CALA, is a hidden affordability burden that consumers feel in their monthly bills, wages and everyday expenses.
