This issue is another example of how our justice system is being destroyed from within.
The moral hazard of monetized justice
Money has shaped the justice system for centuries through common law tort principles that balance financial restitution with moral accountability. But over several decades, that balance has collapsed. Wall Street and other big investorsare now allying themselves with trial attorneys to take stakes in litigation outcomes. They have entered the courtroom through third-party litigation funding and accelerated the decline of justice from a pursuit of truth into a profit-driven enterprise.
What began as a system designed to make victims whole has become one in which financiers gamble on corporate risk aversion and human suffering. By stripping away the ethical restraints that once guided tort law, monetized justice has created a moral hazard, turning the courtroom into something between an amoral casino and an extortion racket.
The first steps toward the perversion of our justice system came five years before Saul Alinsky advised community organizers to “pick the target, freeze it, personalize it, and polarize it.” The behavior of many litigation law practitioners is akin to that of Alinsky’s Rules for Radicals, a primer on militant strategy and tactics.
In 1966, the Federal Rules of Civil Procedure were rewritten to create the “opt-out” class action, in which affected people are automatically included as part of a lawsuit unless they withdraw. This rule change opened the door for a new generation of mass tort lawsuits. In Alinskyite fashion, a key strategy was to turn defendants into villains.
Billion-dollar judgments against asbestos, breast implant and contraceptive device manufacturers, among others, followed. Companies were left bankrupt. Thousands of jobs have been lost. And trial lawyers developed a playbook to manufacture new claims.
“Don’t wait for the next big tort. Build it,” Mike Papantonio told the spring 2025 Mass Torts Made Perfect conference. “If you want to build a new project, you better build it around a story, a human story that the average American juror can relate to. That’s where it starts. That’s how you win.”
For decades, trial lawyers had to use their own money to “build” the stories needed to freeze, personalize, and polarize litigation targets. But now, thanks to another set of rule changes, ones imported from overseas, trial lawyers have endless resources to pour into television and social media campaigns attacking their targets. It is called third-party litigation financing. And it has enabled trial lawyers to spend over $131 million on television ads alone targeting Monsanto and its herbicide Roundup. The campaign was so successful that Bayer AG bought Monsanto and retired the name. The Monsanto brand was essentially sued out of existence.
If you went to law school as recently as even a decade ago, the concept of lawyers using money from Wall Street investors to fund litigation sounds like something that ought to be regarded as a per se violation of the Model Rules of Professional Conduct.
Rule 5.4(a) clearly states, “A lawyer or law firm shall not share legal fees with a nonlawyer” except in a number of specifically enumerated exceptions, including the death of a lawyer and sharing fees with a nonprofit organization. Rule 5.4(b) prohibits forming “a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.”
Rule 5.4 exists to protect the professional independence of lawyers and thus of the tort system by preventing nonlawyers from exerting control or influence over legal judgment or the attorney-client relationship. By limiting law firm ownership and management to licensed attorneys, the rule is supposed to ensure that lawyers remain accountable solely to their clients and to the quality of their legal work, unaffected by profit motives or business pressures from outside investors. Lawyers are supposed to base their advice entirely on the client’s best interests and the requirements of the law.
A plain-text reading of Rule 5.4 would make third-party litigation financing unethical. But lawyers don’t get paid to follow rules — they get paid to manipulate them for financial benefit to themselves, their clients, and now, their investors. That is exactly what has happened with the regulation of third-party litigation funding over the past 20 years.
The loosening of the rules against third-party litigation started in Australia in the 1990s when the parliament passed a law allowing companies in bankruptcy to accept money from investors to finance the pursuit of preexisting legitimate claims. But the practice quickly leached beyond the context of bankruptcy. In a landmark 2006 case, Australia’s high court allowed third-party investors to finance legal claims of tobacco retailers who had been charged illegal licensing fees by tobacco wholesalers. The court reasoned that since retailers and investors were “of full age and capacity” to bargain fairly, there was no reason to bar such agreements.
............................
“Third-party litigation financing is not a traditional investment. It does not produce anything. It just generates litigation. It takes bets on the outcome of litigation, with the investors counting odds,” George Mason University Antonin Scalia Law School professor Donald Kochan recently testified before Congress. “This kind of influence fundamentally changes traditional dynamics in the litigation system. It is the casino-ification of our civil justice system.”
“Courts should not become just a playground for investment and gambling,” Kochan continued. “We need to maintain a civil justice system outside the market if we are to preserve the civil justice system as a predictable, neutral, and accessible system that serves the market. In order to preserve the effectiveness of our nation’s courts to serve as necessary and neutral forums that facilitate the market, the court system must be insulated from market forces.”
Ideally, Congress would take action to ban third-party litigation financing from our courtrooms. The justice system functioned fine without it for over 200 years. We can easily go back to forcing lawyers to finance their own lawsuits. Unfortunately, none of the legislation currently in Congress would do that.
Legislation has been written but not passed, and it focuses more on creating transparency in the industry through reporting requirements and closing some tax loopholes enjoyed by third-party financiers. Rep. Darrell Issa’s (R-CA) Litigation Transparency Act would require all parties in federal civil cases to disclose any third-party funding agreements. Meanwhile, Sen. Thom Tillis (R-NC) and Rep. Kevin Hern (R-OK) have introduced the Tackling Predatory Litigation Funding Act, which imposes a tax on profits received by third-party funders from litigation, effectively treating them as ordinary income rather than capital gains.
If we are going to allow third-party litigation financing, a reporting requirement is absolutely essential. How are judges supposed to make decisions about what discovery requests are reasonable if they don’t even know the true resources available to each party? How are they supposed to determine if a class action settlement is fair if they don’t know all the parties with a financial interest in the case?
But why accept and normalize this corruption of the legal system? Third-party litigation financing does not create or produce anything of value, even though it generates billions of dollars for predatory lawyers and their financial backers. It certainly does not make our country any more just. It is a parasitical practice draining vitality from the economy and eroding our justice system, sometimes at the behest of foreign entities. Why is this tolerated at all?
There is, of course, no reason to trust either Congress or the courts to fix a system that encourages that traditional species known as “shyster lawyers.” Many members of Congress, principally the Democrats, are helped to stay in their jobs because of donations supplied by the plaintiffs’ bar. And it was the courts that created the problem in the first place, partly by lumping cases together in class actions to deal with them all faster, and partly when many judges are elected and suffer the same conflicts of interest as do members of Congress.
Democrats have always been the favored political party of trial lawyers, and the same is true of third-party litigation financing firms. Burford Capital, the world’s largest third-party litigation financier, gave almost $100,000 to Democrats in the 2024 cycle, including to then-Vice President Kamala Harris’s campaign. The money Wall Street pours into third-party litigation financing is thus used first to take money away from productive investments by American companies, and then it is funneled to lawyers and financiers, and then some of it is given to the Democratic Party. It is a cycle of corruption and waste. It should be banned entirely.
In the end, third-party litigation funding is not justice. It’s Saul Alinsky’s playbook with Wall Street’s bankroll. What Alinsky once urged activists to do — “pick the target, freeze it, personalize it, and polarize it” — is now the business model of modern trial lawyers and financiers. Lawsuits are no longer about truth or fairness but about turning companies into villains to extract settlements. Hedge funds bankroll the outrage, lawyers craft the narratives, and juries are the weapons. Foreign powers exploit the same tactics to wound U.S. firms and steal their secrets. This isn’t justice — it’s organized, monetized activism. Congress should end it, not mend it.
https://www.washingtonexaminer.com/premium/3867311/moral-hazard-monetized-justice-saul-alinsky/
The moral hazard of monetized justice
Money has shaped the justice system for centuries through common law tort principles that balance financial restitution with moral accountability. But over several decades, that balance has collapsed. Wall Street and other big investorsare now allying themselves with trial attorneys to take stakes in litigation outcomes. They have entered the courtroom through third-party litigation funding and accelerated the decline of justice from a pursuit of truth into a profit-driven enterprise.
What began as a system designed to make victims whole has become one in which financiers gamble on corporate risk aversion and human suffering. By stripping away the ethical restraints that once guided tort law, monetized justice has created a moral hazard, turning the courtroom into something between an amoral casino and an extortion racket.
The first steps toward the perversion of our justice system came five years before Saul Alinsky advised community organizers to “pick the target, freeze it, personalize it, and polarize it.” The behavior of many litigation law practitioners is akin to that of Alinsky’s Rules for Radicals, a primer on militant strategy and tactics.
In 1966, the Federal Rules of Civil Procedure were rewritten to create the “opt-out” class action, in which affected people are automatically included as part of a lawsuit unless they withdraw. This rule change opened the door for a new generation of mass tort lawsuits. In Alinskyite fashion, a key strategy was to turn defendants into villains.
Billion-dollar judgments against asbestos, breast implant and contraceptive device manufacturers, among others, followed. Companies were left bankrupt. Thousands of jobs have been lost. And trial lawyers developed a playbook to manufacture new claims.
“Don’t wait for the next big tort. Build it,” Mike Papantonio told the spring 2025 Mass Torts Made Perfect conference. “If you want to build a new project, you better build it around a story, a human story that the average American juror can relate to. That’s where it starts. That’s how you win.”
For decades, trial lawyers had to use their own money to “build” the stories needed to freeze, personalize, and polarize litigation targets. But now, thanks to another set of rule changes, ones imported from overseas, trial lawyers have endless resources to pour into television and social media campaigns attacking their targets. It is called third-party litigation financing. And it has enabled trial lawyers to spend over $131 million on television ads alone targeting Monsanto and its herbicide Roundup. The campaign was so successful that Bayer AG bought Monsanto and retired the name. The Monsanto brand was essentially sued out of existence.
If you went to law school as recently as even a decade ago, the concept of lawyers using money from Wall Street investors to fund litigation sounds like something that ought to be regarded as a per se violation of the Model Rules of Professional Conduct.
Rule 5.4(a) clearly states, “A lawyer or law firm shall not share legal fees with a nonlawyer” except in a number of specifically enumerated exceptions, including the death of a lawyer and sharing fees with a nonprofit organization. Rule 5.4(b) prohibits forming “a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.”
Rule 5.4 exists to protect the professional independence of lawyers and thus of the tort system by preventing nonlawyers from exerting control or influence over legal judgment or the attorney-client relationship. By limiting law firm ownership and management to licensed attorneys, the rule is supposed to ensure that lawyers remain accountable solely to their clients and to the quality of their legal work, unaffected by profit motives or business pressures from outside investors. Lawyers are supposed to base their advice entirely on the client’s best interests and the requirements of the law.
A plain-text reading of Rule 5.4 would make third-party litigation financing unethical. But lawyers don’t get paid to follow rules — they get paid to manipulate them for financial benefit to themselves, their clients, and now, their investors. That is exactly what has happened with the regulation of third-party litigation funding over the past 20 years.
The loosening of the rules against third-party litigation started in Australia in the 1990s when the parliament passed a law allowing companies in bankruptcy to accept money from investors to finance the pursuit of preexisting legitimate claims. But the practice quickly leached beyond the context of bankruptcy. In a landmark 2006 case, Australia’s high court allowed third-party investors to finance legal claims of tobacco retailers who had been charged illegal licensing fees by tobacco wholesalers. The court reasoned that since retailers and investors were “of full age and capacity” to bargain fairly, there was no reason to bar such agreements.
............................
“Third-party litigation financing is not a traditional investment. It does not produce anything. It just generates litigation. It takes bets on the outcome of litigation, with the investors counting odds,” George Mason University Antonin Scalia Law School professor Donald Kochan recently testified before Congress. “This kind of influence fundamentally changes traditional dynamics in the litigation system. It is the casino-ification of our civil justice system.”
“Courts should not become just a playground for investment and gambling,” Kochan continued. “We need to maintain a civil justice system outside the market if we are to preserve the civil justice system as a predictable, neutral, and accessible system that serves the market. In order to preserve the effectiveness of our nation’s courts to serve as necessary and neutral forums that facilitate the market, the court system must be insulated from market forces.”
Ideally, Congress would take action to ban third-party litigation financing from our courtrooms. The justice system functioned fine without it for over 200 years. We can easily go back to forcing lawyers to finance their own lawsuits. Unfortunately, none of the legislation currently in Congress would do that.
Legislation has been written but not passed, and it focuses more on creating transparency in the industry through reporting requirements and closing some tax loopholes enjoyed by third-party financiers. Rep. Darrell Issa’s (R-CA) Litigation Transparency Act would require all parties in federal civil cases to disclose any third-party funding agreements. Meanwhile, Sen. Thom Tillis (R-NC) and Rep. Kevin Hern (R-OK) have introduced the Tackling Predatory Litigation Funding Act, which imposes a tax on profits received by third-party funders from litigation, effectively treating them as ordinary income rather than capital gains.
If we are going to allow third-party litigation financing, a reporting requirement is absolutely essential. How are judges supposed to make decisions about what discovery requests are reasonable if they don’t even know the true resources available to each party? How are they supposed to determine if a class action settlement is fair if they don’t know all the parties with a financial interest in the case?
But why accept and normalize this corruption of the legal system? Third-party litigation financing does not create or produce anything of value, even though it generates billions of dollars for predatory lawyers and their financial backers. It certainly does not make our country any more just. It is a parasitical practice draining vitality from the economy and eroding our justice system, sometimes at the behest of foreign entities. Why is this tolerated at all?
There is, of course, no reason to trust either Congress or the courts to fix a system that encourages that traditional species known as “shyster lawyers.” Many members of Congress, principally the Democrats, are helped to stay in their jobs because of donations supplied by the plaintiffs’ bar. And it was the courts that created the problem in the first place, partly by lumping cases together in class actions to deal with them all faster, and partly when many judges are elected and suffer the same conflicts of interest as do members of Congress.
Democrats have always been the favored political party of trial lawyers, and the same is true of third-party litigation financing firms. Burford Capital, the world’s largest third-party litigation financier, gave almost $100,000 to Democrats in the 2024 cycle, including to then-Vice President Kamala Harris’s campaign. The money Wall Street pours into third-party litigation financing is thus used first to take money away from productive investments by American companies, and then it is funneled to lawyers and financiers, and then some of it is given to the Democratic Party. It is a cycle of corruption and waste. It should be banned entirely.
In the end, third-party litigation funding is not justice. It’s Saul Alinsky’s playbook with Wall Street’s bankroll. What Alinsky once urged activists to do — “pick the target, freeze it, personalize it, and polarize it” — is now the business model of modern trial lawyers and financiers. Lawsuits are no longer about truth or fairness but about turning companies into villains to extract settlements. Hedge funds bankroll the outrage, lawyers craft the narratives, and juries are the weapons. Foreign powers exploit the same tactics to wound U.S. firms and steal their secrets. This isn’t justice — it’s organized, monetized activism. Congress should end it, not mend it.
https://www.washingtonexaminer.com/premium/3867311/moral-hazard-monetized-justice-saul-alinsky/
