Shedding Light on False Narratives: Commercial Litigation Finance Remains an Important Tool for Ensuring Access to Justice

In January 2026, the Citizens Against Law Firm Abuse (“CALA”), released a report entitled “The Impact of Third-Party Litigation Funding on US Business Activity and Consumers (the “CALA Report”),” advancing the notion that third-party litigation funding is costing Americans $600 per year, per household in the form of lost earnings and inflation.  This, of course, makes for a rather salacious headline.  Yet like all such rhetoric demonizing the litigation funding industry—including its purported contribution to “social inflation,” “frivolous lawsuits,” and “foreign malign influence”—it is breathtaking in its lack of factual support.  Not one dime of this supposed “litigation finance tax” on American households has been, or can be, empirically validated.  Indeed, the CALA Report is based on the same parade of horribles advanced by the US Chamber of Commerce, its Institute for Legal Reform (the “Chamber”), and the insurance industry lobby, which have a vested interest in preventing meritorious lawsuits from advancing against their constituents in the often cost-prohibitive U.S. judicial system. 

This article explores the CALA Report’s conclusions and explains how it is inherently biased, bereft of support, and fails to consider any of the documented drivers of “social inflation” and “nuclear verdicts.”

The CALA Report

The CALA Report argues that the growing use of outside capital to finance litigation has negative macroeconomic consequences, including higher prices, reduced business activity, job losses, and diminished household purchasing power.  It gets there by modeling “excess tort costs” (allegedly) attributed to litigation funding and projects their downstream macroeconomic impacts under a set of layered assumptions.  These assumptions follow an attenuated logic tree: litigation finance increases litigation volume, which in turn raises costs of litigation and verdict sizes, businesses then pass those costs to consumers, which results in reduced economic growth. 

A Distinction Between Commercial and Consumer Litigation Funding Is Important

As a preliminary matter, most of the industry’s detractors fail to make any distinction between the commercial and consumer litigation finance markets.  CALA is no different.¹  Commercial litigation finance typically involves a non-recourse transaction between sophisticated parties represented by competent counsel, relating largely to complex commercial, intellectual property, or international arbitration claims.  In most cases, the types of lawsuits considered by commercial funders (e.g., antitrust, patent infringement, breach of contract, bilateral investment treaty claims) do not even implicate insurance coverage.  Many commercial litigation finance companies set a minimum deployment commitment in the hundreds of thousands of dollars, if not millions of dollars, to fund fees, costs, and working capital associated with the funded claims.  In contrast, consumer litigation funding is most often geared toward providing living and/or medical expenses for individuals who have suffered personal injuries.  These arrangements typically involve up-front deployments of less than $10,000.  They tend to be governed by interest rates and can be fully recourse.  And they often involve claimants without legal representation relating to the financial transaction.  Regardless of the distinction, neither can be correlated to increasing annual household costs or causing social inflation. 

The CALA Report Must Be Read With a Pound of Salt

Context, too, is of critical importance.  That includes an examination of potential biases behind public messaging to assess the level of credence it deserves.  In other words, it is imperative to “consider the source.”  CALA describes itself as “a nonpartisan, grassroots movement” designed to eliminate “rampant lawsuit abuse.”²  Much like the Chamber, CALA appears to be a rather secretive organization when it comes to its financial backing—ironic given the push for these and other special interest groups for blanket disclosure of litigation funding.  Setting that aside, even a cursory review of its causes and publications shows that it uses grassroots theater as a façade for business‑friendly legislation.  As observers have noted, CALA is in fact a corporate‑funded tort‑reform advocacy network, structured as nonprofit “grassroots” groups, but created and coordinated by major corporate interests seeking to limit liability.³ The Perryman Group, which has prepared this and every other CALA-promoted economic report since at least 2019, fares no better.  Its clients include the US Chamber of Commerce, major insurance carriers (AIG, Lloyd’s, Travelers, Berkshire Hathaway (parent of Chubb), and State Farm), major chemical and energy companies (BP, Chevon, DuPont, ExxonMobil, and Monsanto), as well as tech giants (Apple, Dell, Google, Intel, Samsung, and Toshiba).⁴ This client roster alone suggests that the Report is likely about as authentic as the fox lobby authoring a study supporting fewer henhouse door locks in the name of reducing unnecessary barriers to poultry freedom.  Dr. Ray Perryman is well-credentialed, and this article is not a personal attack on him or his group.  But the macroeconomic models in the CALA Report (and others) do not stand up to scrutiny and would wither under even the most leniently applied Daubert standards.⁵ 

The CALA Report Lacks Support

Nothing in the CALA Report or its stated methodology analyzes actual court-level filing data, compares funded cases to unfunded cases, or controls for unrelated litigation drivers such as mass torts, regulatory changes, corporate conduct shifts, or the actual benefits of accountability, deterrence, and access to justice.  It also fails to take into account the overall massive inflation of hourly rates—including, for the AmLaw 50, now over $900 for associates and $2,000 for senior partners—as drivers of litigation costs.⁶  Instead, the CALA Report proposes that if one assumes litigation is economically harmful and assumes litigation finance increases litigation, then standard macro models will generate large negative numbers.  This type of scenario construction proves nothing. 

Indeed, the Perryman Group merely establishes a Möbius strip of sourcing.  It cites other reports created by itself (e.g., US Multi Regional Impact Assessment System, The Perryman Group (“USMRIAS”), and An Analysis of the Value Received by Patent Owners from Sales to Non-Practicing Entities, The Perryman Group, Oct. 2024, among others), which lacks any policy neutrality or real transparency.  Moreover, the “direct effects” methodology attempts to “determine a reliable estimate of the direct costs” but does so by conceding that “[a]lthough not all commitments by third-party funders are disclosed, available data was used to determine a conservative value for the level in 2023, which was then projected forward to 2024 based on recent growth trends.”  CALA Report at 10.  However, only in rare cases are funding commitments disclosed (as opposed to the existence of funding), so any extrapolation can only be based on a highly unreliable micro data set.  Nevertheless, the study forges ahead and merges that data with other biased data from the Chamber and major insurance companies.  Id.  Stated politely, flawed inputs inevitably produce flawed results. 

The Perryman Group Tries to Bootstrap Litigation Finance to Excessive Tort Costs

Curiously, in April 2025, The Perryman Group also issued another study entitled The Economic Impact of Excessive Tort Costs on US Households.⁷  This study also is based on USMRIAS, and concludes that “the effects of excessive tort costs” leads to an estimated inflation cost of $955 per household, per year.  This April 2025 report is nearly identical to the CALA Report except the April 2025 report never once mentions third-party litigation funding as a driver of this increase or otherwise.  Despite this omission, the most recent CALA Report asserts that “[a] significant aspect of excess tort costs is third-party litigation funding” and “[f]oregone economic activity due to excess tort costs associated with third-party financing leads to lower earnings, and higher inflation reduces purchasing power.”  Both reports’ reliance on the same USMRIAS data is fatally flawed by assumption stacking problems. 

Litigation Funders Back Only the Strongest Claims

The CALA Report also fails to recognize the scrutiny applied to each claim by a litigation funder before a single dollar is deployed.  Commercial litigation funders rigorously underwrite investments and, on average, reject more than 95% of the opportunities presented to them.⁸  Naturally, litigation funders strive to fund only claims that are highly likely to result in significant recoveries, preferably by way of a reasonable settlement on the merits after defendants have exhausted all challenges except trial.  Indeed, the notion that litigation funders favor, let alone seek out, cases with the potential for so-called “nuclear” or “thermo-nuclear” verdicts—i.e., outsized awards often involving a large punitive component—is make believe.  Such awards are impossible to achieve absent an inherently risky trial.  They are even more difficult to maintain after trial given the high statistical likelihood of any outsized award being reduced by post-trial motions or appellate review.  This does not even account for the duration and potential collection and enforcement risk associated with this outcome.  The goal is to weather the storm of discovery and dispositive motion practice, often against adversaries with a massive financial advantage, and reach a mutually agreeable resolution when each party faces the uncertainty of trial.  The decades-long rhetoric about frivolous lawsuits and more recent outcry over nuclear verdicts display a distorted view of how the industry strives to support litigants in meritorious campaigns. 

Litigation Funding is not Correlated to Social Inflation or Nuclear Verdicts

The rationale for the CALA Report parrots the unsubstantiated refrain that litigation funding is a contributing factor to the narrative umbrella of “social inflation.”  Neither this report or other similar “studies” can provide any actual authority for this position—a fact observed by numerous industry experts over the years.⁹  Instead, it again displays a fundamental, and likely willful, misunderstanding of litigation finance.  Among numerous other fallacies, the proponents of “social inflation” and its supposed connection to litigation finance also omit any evidence that (as they suggest) most large awards are incorrect, that any supposed “nuclear verdicts” are the causal result of litigation finance whatsoever, or that litigation funding has contributed in any way to a scourge of frivolous litigation or its ostensible impact on premiums and insurer loss ratios.¹⁰  Ironically, while most insurers blame litigation funders for “nuclear verdicts,” they also acknowledge other reasons, including juries’ increasing willingness to punish large corporations, influenced by growing public distrust and cultural shifts favoring accountability¹¹ increasingly negative views of corporate behavior, and belief that companies should take extraordinary measures to prevent harm, amplify verdict sizes¹²  and broader social forces—including perceptions of inequality and social injustice, which affect jury decision‑making in liability cases.¹³ 

An Imbalanced Judicial System Needs Litigation Funding

Part of the CALA Report’s conclusion ironically reiterates the precise reason why litigation funding exists, and why it is such a threat to industry detractors: 

The judicial system is essential to resolving disputes, compensating those that have been harmed, and deterring undesirable behavior. However, if it becomes unbalanced, it can cause misallocation of resources and unreasonably constrain economic growth.

CALA Report at 9.  Of course, the judicial system has long been imbalanced.  The outcome of litigation should never hinge on which party has more resources.  But it would be disingenuous to deny that the scale of justice tips heavily in favor of the more well-heeled litigant.  Using CALA’s own economic comparison, this reality means the rich get richer by avoiding liability and the poor remain poor by lacking the means to bring legitimate lawsuits.  Litigation finance is a crucial tool needed to fix that imbalance and ensure accountability for genuinely unlawful conduct without increasing the cost to American households.