ABSTRACT
Litigation finance has moved from a curiosity at the margins of American law into a billion-dollar market that creates serious dilemmas for claimants, law firms, and courts alike. This Article argues that ‘litigation finance’ encompasses three distinct paradigms that raise different regulatory concerns: consumer financing for injured claimants, nonlawyer financing of law firms, and the financing of claim aggregation in mass-tort multidistrict litigation.
Each of these paradigms demands a different regulatory response to varying degrees. But it is the third paradigm that presents the most urgent problem for our litigation landscape. The cost-reducing function of the MDL in combination with advertising-driven claim aggregation and presence of external capital has produced with this Article calls the ‘shadow portfolio’: large inventories of claims that have been identified and nominally retained but never filed, developed, or meaningfully scrutinized. Out of the court’s reach, these claims allow actors to gain influence over mass litigation without ever trying a case – a dynamic only accelerated by artificial intelligence. Reigning in the shadow portfolio will require reaching beyond the familiar regulatory toolkit – a difficult but necessary task to preserve the functionality of MDLs.
Issacharoff, Samuel and Kohlasch, Anna, Litigation Finance and Its Discontents: Three Paradigms for an Emerging Market (September 11, 2026), New York University Law Review (forthcoming); New York Law School Law Review, Forthcoming.
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