Litigation funding is no longer novel, but for many law firms it remains unfamiliar. A significant number of the firms we work with— including large and sophisticated practices—are engaging with a litigation funder for the first or second time. When firms ask how best to navigate these relationships, our guidance consistently centers on three principles: Confidentiality, Conflicts of Interest, and Control . Addressed early and thoughtfully, these issues help preserve the integrity of the lawyer-client relationship while allowing funding arrangements to function as intended. Confidentiality To get your case funded, you’ll likely need to share certain confidential case information with a funder. (For an overview of what you’d want to include in a memo requesting funding, see this article with helpful tips.) Before sharing confidential information, lawyers must ensure they have their client’s informed consent. Ethical rules—including ABA Model Rules of Professional Conduct, Rule 1.6 and its state analogues—generally prohibit disclosure of client confidential information absent client authorization or implicit authorization arising from the representation. Once client consent is obtained, counsel should enter into a non-disclosure agreement with each funder before sharing substantive information. While the absence of an NDA does not mean that a defendant can obtain information shared with a funder—and courts generally deny discovery into litigation funding—NDAs remain an important tool for protecting confidentiality and reducing the risk of later discovery disputes. For an overview of what’s in an NDA, see this article on the subject). Best Practice Tip: Consider addressing litigation funding explicitly in engagement letters, including advance authorization to share confidential information with funders at the client’s direction. Conflicts of Interest Litigation funding should not create conflicts between a law firm and its client. While the lawyer-client relationship is paramount, it often overlaps with economic arrangements—hourly fees, contingency fees, or hybrid structures—whether or not funding is involved. For that reason, many claimholders elect to retain independent deal counsel to negotiate funding agreements. These negotiations frequently involve corporate, tax, and financial issues that fall outside the core expertise of trial counsel. Separating deal negotiation from litigation strategy can help preserve alignment and avoid conflicts. Best Practice Tip: Claimholders should consider using independent counsel—rather than litigation counsel—to negotiate funding agreements. Control In funded cases, claimholders retain control over litigation strategy and settlement decisions. Many regulatory proposals and court disclosure rules focus on whether a funder has approval rights over such decisions, reflecting the principle that third-party funding should not compromise attorney independence. For example, court rules in the District of New Jersey and disclosure requirements imposed by Chief Judge Connolly in the District of Delaware require disclosure of whether a third party has approval rights over litigation or settlement decisions. While funders are entitled to information about case developments—and may retain limited termination rights in circumstances such as fraud or material breach—they do not direct litigation or settlement strategy. Best Practice Tip: Clearly memorialize the funder’s lack of control rights in both the funding agreement and the engagement letter, using language that mirrors applicable disclosure rules where appropriate. Beyond the Basics: Building Successful Partnerships Beyond these core principles, successful partnerships between law firms and litigation funders depend on: Early Engagement: Involving funders early in case evaluation can provide valuable insights and streamline the funding process. Transparency: Regular conversations among counsel, client, and funder create alignment without compromising control. Realistic Expectations: Understanding the typical funding process timeline and requirements helps manage client expectations.
Litigation is inherently complex, dynamic, and increasingly expensive. Outcomes are difficult to predict, shaped by variables ranging from jurisdiction and judge to opposing counsel, discovery disputes, and motion practice that often unfolds in unexpected ways. In a volatile economic environment, forecasting the cost of a case can feel more like art than science. Yet budgeting remains one of the most important—and most overlooked—components of successful litigation. In the litigation finance context, budgets do more than estimate costs. They establish the financial architecture of a case. Funders commit a capped amount of capital for legal fees and case expenses. Law firms allocate resources within that constraint—and are typically responsible for any legal fees incurred above the budget. Meanwhile, claimholders are typically responsible for case expenses incurred above the budget, while their ultimate recoveries may depend on how closely spending tracks expectations. A budget that is too optimistic risks early depletion of funds. A budget that is overly conservative may deter funding altogether or unnecessarily suppress a client’s net recovery. Sound budgeting, by contrast, allows a case to be litigated through key inflection points—and, if necessary, to conclusion—without surprises that undermine strategy or alignment. Why Litigation Budgeting Is Hard—and Essential Despite its importance, budget creation is rarely taught in law school and is often learned only through experience. Most lawyers work on an hourly fee without a capped budget. Thus many excellent litigators have spent years trying cases without ever being required to forecast costs across an entire lifecycle. Litigation finance forces that discipline early. A funding request typically requires counsel to articulate not only the merits of a claim, but also the cost required to prosecute it and the relationship between spend, risk, and expected recovery. A commonly used rule of thumb is that expected damages should substantially exceed the amount of requested funding. While a 10:1 ratio is often the proposed rule of thumb, a meaningful spread between potential recovery and projected spend helps ensure that funders can achieve target returns, clients can realize meaningful net recoveries, and law firms can be compensated for their work without undue financial strain. What a Litigation Budget Typically Covers In funded matters, budgets generally distinguish between legal fees and case expenses , often with separate caps for each. Legal fees reflect hourly rates and anticipated staffing across phases of the case. Funders may cover a portion of those fees up to a cap, with law firms responsible for the balance and for any spend exceeding agreed limits. Expenses typically include items such as expert witnesses, discovery vendors, travel, local counsel, and court costs. These expenses are often funded at a higher percentage, again subject to caps. Clear allocation of responsibility above those caps is essential to avoid disputes later in the case. Core Questions That Drive Realistic Budgets Effective budgets begin with a clear understanding of the case itself. Among the most important questions: Scope of the case. How many claims are asserted? Are they tightly focused or sprawling? Nature of the claims . Certain claims—such as antitrust or patent matters in federal court—are typically more resource-intensive than straightforward commercial disputes. Jurisdictional considerations . Venue, procedural rules, and potential jurisdictional challenges can materially affect cost and duration. Damages theory and collectability . How will damages be proven? Are there risks to collection? Are non-monetary outcomes possible? Expected defense strategy . Will the defendant pursue aggressive motion practice or discovery tactics designed to increase cost and delay? Staffing model . What mix of partners, associates, and specialists is optimal at each stage? Time to resolution . Is the case likely to resolve early, or should it be budgeted through trial and appeal? Discovery: The Largest Variable Discovery is often the single largest expense—and the hardest to predict. When budgeting for discovery, it is critical to consider: The scope of discovery permitted in the jurisdiction The volume and sources of potentially relevant documents The complexity of collection, review, and production The number and location of depositions The need for expert testimony, often among the most expensive components of a case The availability and accessibility of key witnesses Thoughtful planning at this stage can materially reduce cost without compromising litigation objectives. The Role of Funders in Budget Discipline Experienced funders can play a constructive role in budget management—not by directing litigation strategy, but by helping track spend against expectations and flagging deviations early. Regular reporting and periodic check-ins allow counsel and clients to address emerging issues before they become financial problems. Funders also bring cross-case experience across jurisdictions, industries, and claim types that can inform contingency planning and resource allocation. Tips for Creating and Sticking to Budgets Effective litigation budgets are not static documents. They are management tools—designed to impose discipline, anticipate inflection points, and align incentives as cases evolve. In practice, several mechanisms can help law firms and clients create budgets that are both realistic and durable: Budget precedents . Where available, budgets from comparable matters—whether maintained by the law firm or the funder—can provide a valuable reality check. Historical data from similar cases often reveals cost drivers that are easy to underestimate in the abstract. Monthly flat-fee structures . Some firms have moved away from pure “fees-as-incurred” models in favor of monthly flat fees. When appropriately calibrated, this approach can smooth cash flow for the firm during slower periods while reducing the risk of budget overruns during more intensive phases of litigation. Staged funding . Staging capital by phase—such as through a motion to dismiss, summary judgment, or trial—can help ensure that spending remains tied to progress and performance. Phase-based caps encourage early reassessment without forcing premature strategic decisions. Reallocation flexibility . In some cases, budgets permit limited reallocation between categories, such as legal fees and expenses. When used carefully, this flexibility can accommodate unforeseen developments without requiring wholesale renegotiation of the budget. Taken together, these tools reinforce what effective budgeting is ultimately about: creating a financial structure that supports the litigation strategy, rather than constraining it.
The American civil justice system is premised on the existence of real and enforceable rights. Yet for a significant category of harm—injuries that are widespread in aggregate but modest when considered individually—this premise often fails in practice. Rights without practical remedies are rights in name only. And when the gap between entitlement and enforcement operates at scale, the consequences are not just individual—they are systemic. In a prior post , I traced the procedural evolution of mass actions from their equitable origins, through Rule 23, to the modern dominance of the MDL. That article explained how the American legal system developed tools to aggregate claims. This post asks why those tools matter. Consider a consumer injured by a defective product. If the injury is catastrophic, the economics of litigation may justify individual pursuit. But if the injury is less severe, or the causal chain complex, the calculus changes. The costs of prosecution (with lawyers billing hundreds if not thousands of dollars an hour) regularly exceed the potential recovery. In that common situation, the economically rational response is to do nothing—even when the claim is valid and the defendant culpable (e.g., 3M Combat Arms earplug litigation where claim value was as low as $5,000). This is not a doctrinal failure; it is a structural failure: Bilateral litigation assumes rough proportionality between claim value and litigation cost. When that proportionality breaks down, the system produces under-enforcement at scale. Mass tort aggregation mechanisms exist precisely to solve this problem. Contrary to the arguments of repeat defendants and their lawyers, mass torts are not procedural innovations designed to manufacture litigation where none should exist . They are a structural response to a structural deficiency—and a key way to ensure that the American civil justice system lives up to its core premise of equal access to justice. The Economics of Under-Enforcement Three categories of expense drive the access problem in complex litigation. First, discovery in product liability cases can generate millions of pages of documents requiring substantial attorney time and technology to analyze. Combined with related motion to compel and deposition practice, this is the billable-hour lifeblood of many defense firms. While extremely profitable for the well-placed defense lawyer , it is essentially unaffordable for most injured plaintiffs, pricing them out of justice. Second, expert witness expenses add another layer of cost. As background, establishing defect and causation in pharmaceutical, toxic exposure, and product defect cases demands specialists whose development, report drafting, and testimony can easily reach six or seven figures in hourly fees. In such situations, it is economically irrational for an individual plaintiff to hire an expert to opine on their injury given the anticipated ratio of cost to recovery. This reality is complicated by the fact that the class action mechanism, and its concomitant sharing of costs, is generally unavailable for personal injury mass torts . Third, time horizons exacerbate everything. It is not unusual for certain torts to run from five to ten years, with Talc being a key example . This means that attorney time (or funding) is advanced without guarantee of return with significant duration risk. These economic considerations are further aggravated by informational asymmetries between plaintiffs and defendants. Institutional defendants maintain in-house expertise, established relationships with specialized counsel, and the documents and data plaintiffs must obtain through discovery. They are repeat players who approach each case with experience accumulated over frequent litigation of the same issues. Individual plaintiffs, by contrast, are one-shot participants dependent on attorneys who often themselves face tremendous informational disadvantages. The result is a collective action problem. If pursuing a claim costs more than its expected value, rational actors will not sue—even when aggregate harm is substantial. Free-rider dynamics compound the problem: If one plaintiff invests in developing evidence, others benefit without bearing costs, reducing everyone’s incentive to act first. Defendants who cause diffuse harm face reduced liability exposure, and the incentive to invest in safety diminishes accordingly (e.g., the Opioid crisis where defendants ignored obvious safety risk). Crucially, the erosion of deterrence is not merely an individual injustice—it is a public welfare concern that compounds with every claim that goes unfiled. How Aggregation Restructures Litigation Economics The MDL process addresses these dynamics by restructuring litigation economics to make otherwise impractical individual claims economically rational. Shared discovery is perhaps the most significant efficiency. Corporate document productions occur once, not thousands of times. Depositions of key witnesses are taken for the consolidated proceeding and made available to all parties. The marginal cost of discovery for any individual plaintiff thus drops dramatically once centralized infrastructure is in place. Common motion practice produces similar efficiencies. Legal issues that recur across cases (e.g., preemption, general causation) are resolved through consolidated briefing. Coordinated expert development addresses the expense problem directly: plaintiff leadership invests in scientific evidence that benefits every plaintiff in the litigation. An individual whose claim could never justify a $500,000 expert investment can benefit when costs are shared across thousands of claimants. The cumulative effect is cost reduction. Claims that would be economically irrational to pursue individually become viable when aggregated. The collective action problem is solved, not by changing substantive law or lowering evidentiary standards, but by restructuring the economics of claim pursuit. Bellwethers and Informational Efficiency The economic efficiencies of the MDL process are mirrored by their informational efficiencies. Bellwether trials (representative cases selected for full trial proceedings) serve critical functions in this structure. They generate information that disciplines settlement negotiations. Before bellwethers, both sides operate with imperfect knowledge about litigation value. Bellwether outcomes provide hard data on how claims perform in actual adjudication, allowing both sides to update their assessments and negotiate from common informational foundations. Bellwethers also serve a quality-control function. Claims that cannot survive trial are revealed as such, and plaintiffs with similar claims must adjust expectations or withdraw. The process operates as a filter separating viable claims from those that cannot withstand adjudication. Addressing the Overreach Critique Critics contend that aggregation inflates claim values, coerces settlements regardless of merit, and manufactures litigation where none should exist. While ultimately outweighed by the benefits, these concerns deserve thoughtful engagement. The critique rests on an implicit comparison to bilateral litigation as baseline. But as the preceding analysis shows, bilateral litigation systematically under-enforces valid claims when harms are diffuse. If critics call aggregation “inflation,” we should recognize bilateral under-enforcement for what it is: deflation. If we accept that the bilateral baseline is itself distorted—producing under-enforcement rather than accurate enforcement—then aggregation’s effects look different. Enabling claims that would otherwise be impractical is not inflation; it is correction. The concern about settlement pressure similarly assumes defendants are coerced into paying for weak claims. But settlement in mass litigation is heavily mediated by information and procedural safeguards. Daubert motions screen expert reliability, summary judgment tests legal sufficiency, and bellwether losses expose plaintiff theories that cannot withstand adjudication. Defendants facing weak claims have ample opportunity to expose that weakness before settlement pressure materializes. Finally, the critique conflates access with abuse. That aggregation enables more claims does not mean it enables more frivolous claims . Centralized proceedings concentrate scrutiny on claim quality in ways bilateral litigation disperses. A transferee judge managing thousands of cases has strong incentives to identify deficient claims. MDL structure provides quality-control mechanisms bilateral litigation lacks. Conclusion Mass tort aggregation restructures litigation economics to make diffuse-harm claims practical. It does this by correcting asymmetries that would otherwise favor institutional defendants (with deep pockets and, at times, questionable judgment ). And by solving collective action problems that would otherwise produce under-enforcement. The alternative to aggregation is not a pristine bilateral system. The alternative is under-enforcement of rights and a free pass for corporate negligence . In that world, valid claims go unfiled, wrongdoing goes unaddressed, deterrence erodes, and the civil justice system serves institutional defendants more effectively than the common citizen consumer. Ignoring this dynamic—and its political ramifications—is dangerous. As Judge Learned Hand warned : “If we are to keep our democracy, there must be one commandment: Thou shalt not ration justice.”
Law.com recently interviewed and quoted Certum Group’s William Marra in an article examining a proposal by the Pennsylvania Civil Rules Committee that would permit discovery into litigation finance agreements. In the article, Marra explained that most courts have recognized that litigation funding agreements generally are not the proper subject of discovery. Courts have often concluded that these agreements are protected by the work product doctrine and are not relevant to the merits of the underlying dispute. The debate over litigation finance disclosure continues to evolve across federal and state courts. While some jurisdictions have adopted narrow disclosure requirements designed to identify potential conflicts of interest, courts have frequently rejected broader attempts to obtain litigation funding agreements through discovery. Marra emphasized that any disclosure rules should remain narrowly tailored to address legitimate concerns without creating strategic advantages for defendants. “Cases should be decided on the merits and any rules that we have in this regard, I would recommend should ensure that the parties are going to focus litigation on the merits rather than on potential expensive sideshows about the terms of someone’s financing agreements,” Marra told Law.com. Certum has previously addressed this issue in its recently-published model brief opposing discovery into litigation funding agreements, which highlights the doctrinal and policy reasons courts have declined to compel disclosure of funding arrangements. The Law.com article is available here .
Above the Law, a leading blog focused on the legal industry, recently highlighted Certum Group’s litigation finance fellowship, noting the opportunity for law students and business students to gain “a four-week, hands-on immersion in what it actually looks like when capital meets complex litigation.” “To succeed, lawyers need to understand not only doctrine but also finance. Law schools are beginning to reflect that shift, and students want to understand it,” Certum’s William Marra told Above the Law. “Our Summer Fellowship is about opening that door for both law and business students, and giving them meaningful exposure to the capital side of litigation.” Applications for the fellowship are due on March 31, 2026, and should include a resume, law school transcript, and a brief 250-word statement of interest. Applications should be sent to SummerFellowship@CertumGroup.com . Above the Law’s coverage is available here , and Certum’s application page for the fellowship is available here .
For the third consecutive year, Certum Group will host one or more summer fellows, introducing accomplished law students and business students to the growing field of litigation finance. The Certum Group Litigation Finance Fellowship provides top law students with an opportunity to gain hands-on experience in the rapidly growing fields of litigation finance and litigation insurance. Fellows will evaluate litigation funding submissions, draft memoranda analyzing legal and damages issues, help structure and negotiate funding agreements, and contribute to marketing and business development initiatives. They will work closely with Certum’s experienced team of litigation finance, litigation insurance, and investment professionals. Throughout the program, Fellows will develop a practical understanding of how claimholders, law firms, insurers, and capital providers assess litigation risk — and how capital can be deployed as a strategic tool in complex disputes. Further information about the fellowship and instructions about how to apply are available here.
Columbia Law School’s blog on corporations and the public markets, The CLS Blue Sky Blog, recently featured the scholarly work on litigation finance written by Indiana University Business School Professor Suneal Bedi and Certum’s William C. Marra. In their blog post, Bedi and Marra discuss their article Litigation Finance in the Market Square , which was recently published in the Southern California Law Review. Their work reframes litigation finance as a capital markets innovation rather than solely a civil justice mechanism. While much of the public debate has centered on questions of disclosure, control, and settlement incentives, Bedi and Marra emphasize that legal claims often represent significant but illiquid contingent assets on a firm’s balance sheet. When policymakers regulate litigation finance, they are regulating not just the legal business but the capital markets. And they are regulating capital markets in a way that is more likely to harm small and medium-sized enterprises (SMEs) while protecting large companies from competition. The full blog post is available here.
You signed an NDA and shared case materials with your funder. Then you negotiated and signed a term sheet . Now it’s time to negotiate the litigation funding agreements. Funding agreements sit at the intersection of law, finance, and business. They’re not equity transactions, and they’re not debt transactions either. For most people, they’re new: Most funded parties we encounter—even the most experienced operators—have never before negotiated or signed a funding agreement. Here are some tips as you navigate the funding agreement process. Make Sure the Funding Agreement Tracks the Term Sheet The term sheet sets the commercial deal, but the funding agreement is the binding contract. The funding agreement should accurately reflect the economics and key terms you agreed to. Pay close attention to ensure the return structure, waterfall, and budget closely track what was agreed to in the term sheet. Small deviations from the term sheet can have big economic consequences. Confirm that the final agreement memorializes the deal you negotiated. Control and Decision-Making Litigation funders do not control litigation strategy or settlement decisions. Some court rules, including those in the District of New Jersey , request a disclosure that a funder’s approval is not necessary for case strategy or settlement. Certum’s contracts expressly disclaim control. Consider whether an express disclaimer of control, frequently tracking the language of the District of New Jersey rule, is appropriate. As repeat players in the litigation space , litigation funders can and do still provide valuable advice to funded parties, who are often involved in their first and only litigation. Thus although funders cannot control litigation, funded parties typically consult with funders for advice during the course of the litigation. Define “Case Proceeds” Clearly Litigation funding agreements are typically non-recourse, which means the funder recovers only if there are case proceeds. So the definition of “case proceeds” is quite important, and it’s something you should pay close attention to. Cash recoveries are straightforward, but not all litigations resolve solely or exclusively for cash. What happens if there is a non-cash settlement—for example, if the funded party receives stock, real estate, IP rights? What happens if the settlement is structured as a payment over time? Or if there is a sanctions award entered against the defendant? It’s best to address all these issues ex ante at the time of the funding agreement. Funding agreements typically provide a mechanism for valuing consideration other than an immediate payment of cash from the defendant to the plaintiff. Resolving this issue today can help avoid ambiguity tomorrow. Address Other Customary Provisions Several boilerplate provisions deserve attention: Representations and warranties: As with all financial transactions, the recipient of funds needs to provide certain customary representations and warranties. Make sure you study those reps and warranties, to ensure you can stand behind them. Termination rights: When can the funder withdraw? Funders typically have termination rights, for example in instances where the funded party commits a material breach of the agreement. Make sure you understand the consequences of a termination. Consider Hiring Experienced Deal Counsel Litigation funding agreements are specialized contracts. They combine elements of finance, litigation, and insurance. Most generalist lawyers—and even many litigators—have never negotiated one. Certum typically recommends that funded parties retain an independent deal counsel who understands the funding market. Experienced advisors can streamline the process and increase the likelihood that the deal will close. And you can typically negotiate with the funder to have the deal counsel’s fees covered as a closing cost of the investment.
When Americans think about civil litigation, we tend to imagine its bilateral form: Company A sues Company B, or John Roe sues Jane Doe. That model works when disputes are discrete, parties are evenly matched, and harms are easily traced. It breaks down, however, when injuries are widespread, claims are too small to justify individual pursuit, and thousands of plaintiffs confront a single, well-resourced defendant. Those conditions gave rise to what we now call mass actions—procedural mechanisms that aggregate claims without extinguishing individual rights. This post traces the evolution of American mass actions from their equitable origins, through Rule 23 class actions, to the modern dominance of multidistrict litigation (“MDL”). Its purpose is to explain how, across each stage of its development, the system moved and evolved in order to tackle the same core problem: how to capture the efficiencies of collective adjudication while preserving individualized justice. The Equitable Origins of Mass Actions For roughly the first 150 years of American civil practice, what we would now recognize as class actions existed in equity, borrowing from English Chancery traditions. Former Equity Rule 48 permitted representative litigation where a common or general interest affected a class so numerous that joinder was impracticable. Courts used these bills in equity to cluster related claims, creating an early—if imperfect—form of aggregation. These tools, however, were ill-suited to large-scale disputes. Among other things, they offered no uniform standard for representation, limited mechanisms for managing individualized issues, and little guidance for balancing efficiency against fairness, including whether absent parties would be bound. As collective harms grew larger and more complex, these limitations became more pronounced. The Adoption of Rule 23 and the Birth of the Class Action The adoption of Federal Rule of Civil Procedure 23 in 1938 marked a turning point. Rule 23 replaced ad hoc equitable practices with a codified framework defining when a small number of plaintiffs could litigate on behalf of many. Rule 23 introduced a new codified framework in 1938, later refined by the 1966 amendments into today’s familiar certification requirements—numerosity, commonality, typicality, adequacy, predominance, and superiority—meant to ensure that aggregation serves both efficiency and fairness. Rule 23 works best where common questions truly drive the case. But as mass disputes expanded—particularly in products liability and antitrust—its limitations became apparent. Variations in exposure, injury, causation, damages, and governing law strain the class model. Under Rule 23(b)(3), courts certify a class only if common questions predominate—a demanding standard that frequently defeats certification in mass torts. Beyond doctrine, this mismatch raises fairness and due-process concerns, as aggregation risks resolving individualized questions of liability and damages through procedural shortcuts ill-suited to protect either side’s substantive rights. The Creation of the JPML and the Rise of the MDL Congress responded in 1968 by creating the Judicial Panel on Multidistrict Litigation. That structure authorizes transfer of civil actions with common factual questions to a single federal court for coordinated pretrial proceedings. Unlike class actions, MDLs preserve the separateness of each plaintiff’s case while centralizing work that benefits from scale, including motions to dismiss, summary judgment, and Daubert proceedings. In practice, transferee judges appoint leadership counsel, coordinate discovery, resolve common dispositive and evidentiary motions, conduct bellwether trials, and facilitate global settlement discussions. The MDL’s central innovation is procedural coordination without substantive consolidation. Each plaintiff formally retains an individual claim, remedy, and trial right, while the system avoids duplicative rulings and inconsistent outcomes and preserves Article III adjudication of individual disputes. Amchem, Ortiz , and the Limits of Settlement-Only Class Actions Supreme Court decisions in Amchem Products, Inc. v. Windsor and Ortiz v. Fibreboard Corp. sharply limited the availability of settlement-only mass tort class actions . The Court held that Rule 23’s requirements apply with full force even when certification is sought solely to effect a global settlement, emphasizing rigorous scrutiny of adequacy, predominance, and intra-class conflicts in heterogeneous litigations. In other words, settlement convenience could not cure structural mismatches between the class device and the individualized nature of mass tort claims. These decisions did not eliminate class actions. But they underscored why mass torts rarely fit comfortably within them—and why MDLs emerged as the system’s primary alternative. Their practical import was to effectively close the door to using Rule 23 as a vehicle for mandatory, one-shot global peace in tort, channeling resolution toward MDL-based private ordering—bellwethers, negotiated matrices, and opt-in inventory settlements—while preserving each plaintiff’s trial right. They also shifted innovation elsewhere: toward issue classes under Rule 23(c)(4) , parens patriae actions by sovereigns, and, in some instances, bankruptcy or “Texas two-step” strategies to obtain non-class global resolutions—developments that further entrenched the MDL as the central forum for mass tort resolution. Why MDL Endures MDL’s durability reflects institutional alignment rather than doctrinal accident. For plaintiffs, MDLs offer scale—shared discovery, coordinated motion practice, and settlement leverage—without forfeiting individual claims or trial rights. For defendants, they provide predictability and efficiency by centralizing pretrial proceedings, reducing duplicative costs, and mitigating inconsistent rulings across jurisdictions. For courts, MDLs conserve scarce judicial resources while preserving adjudicatory limits by restricting consolidation to the pretrial phase. For the justice system, MDLs supply a flexible framework that absorbs heterogeneity without collapsing into either unmanageable fragmentation or overinclusive aggregation. That convergence explains why the MDL has become the default architecture for modern mass tort litigation—and why it has proven resilient despite critique. The Design Challenge That Endures Modern practice selects among procedural tools based on fit. Class actions remain essential where common issues predominate. MDLs dominate where common facts justify coordination but individualized harms demand separation. Together, these mechanisms keep the civil justice system workable—and meaningful—when harms scale beyond the individual case. The enduring challenge is deploying these tools with discipline, judiciously retaining the benefits of individual justice, while capitalizing on the benefits of aggregation.
Litigation funding is no longer novel, but for many law firms it remains unfamiliar. A significant number of the firms we work with— including large and sophisticated practices—are engaging with a litigation funder for the first or second time. When firms ask how best to navigate these relationships, our guidance consistently centers on three principles: Confidentiality, Conflicts of Interest, and Control . Addressed early and thoughtfully, these issues help preserve the integrity of the lawyer-client relationship while allowing funding arrangements to function as intended. Confidentiality To get your case funded, you’ll likely need to share certain confidential case information with a funder. (For an overview of what you’d want to include in a memo requesting funding, see this article with helpful tips.) Before sharing confidential information, lawyers must ensure they have their client’s informed consent. Ethical rules—including ABA Model Rules of Professional Conduct, Rule 1.6 and its state analogues—generally prohibit disclosure of client confidential information absent client authorization or implicit authorization arising from the representation. Once client consent is obtained, counsel should enter into a non-disclosure agreement with each funder before sharing substantive information. While the absence of an NDA does not mean that a defendant can obtain information shared with a funder—and courts generally deny discovery into litigation funding—NDAs remain an important tool for protecting confidentiality and reducing the risk of later discovery disputes. For an overview of what’s in an NDA, see this article on the subject). Best Practice Tip: Consider addressing litigation funding explicitly in engagement letters, including advance authorization to share confidential information with funders at the client’s direction. Conflicts of Interest Litigation funding should not create conflicts between a law firm and its client. While the lawyer-client relationship is paramount, it often overlaps with economic arrangements—hourly fees, contingency fees, or hybrid structures—whether or not funding is involved. For that reason, many claimholders elect to retain independent deal counsel to negotiate funding agreements. These negotiations frequently involve corporate, tax, and financial issues that fall outside the core expertise of trial counsel. Separating deal negotiation from litigation strategy can help preserve alignment and avoid conflicts. Best Practice Tip: Claimholders should consider using independent counsel—rather than litigation counsel—to negotiate funding agreements. Control In funded cases, claimholders retain control over litigation strategy and settlement decisions. Many regulatory proposals and court disclosure rules focus on whether a funder has approval rights over such decisions, reflecting the principle that third-party funding should not compromise attorney independence. For example, court rules in the District of New Jersey and disclosure requirements imposed by Chief Judge Connolly in the District of Delaware require disclosure of whether a third party has approval rights over litigation or settlement decisions. While funders are entitled to information about case developments—and may retain limited termination rights in circumstances such as fraud or material breach—they do not direct litigation or settlement strategy. Best Practice Tip: Clearly memorialize the funder’s lack of control rights in both the funding agreement and the engagement letter, using language that mirrors applicable disclosure rules where appropriate. Beyond the Basics: Building Successful Partnerships Beyond these core principles, successful partnerships between law firms and litigation funders depend on: Early Engagement: Involving funders early in case evaluation can provide valuable insights and streamline the funding process. Transparency: Regular conversations among counsel, client, and funder create alignment without compromising control. Realistic Expectations: Understanding the typical funding process timeline and requirements helps manage client expectations.
Litigation is inherently complex, dynamic, and increasingly expensive. Outcomes are difficult to predict, shaped by variables ranging from jurisdiction and judge to opposing counsel, discovery disputes, and motion practice that often unfolds in unexpected ways. In a volatile economic environment, forecasting the cost of a case can feel more like art than science. Yet budgeting remains one of the most important—and most overlooked—components of successful litigation. In the litigation finance context, budgets do more than estimate costs. They establish the financial architecture of a case. Funders commit a capped amount of capital for legal fees and case expenses. Law firms allocate resources within that constraint—and are typically responsible for any legal fees incurred above the budget. Meanwhile, claimholders are typically responsible for case expenses incurred above the budget, while their ultimate recoveries may depend on how closely spending tracks expectations. A budget that is too optimistic risks early depletion of funds. A budget that is overly conservative may deter funding altogether or unnecessarily suppress a client’s net recovery. Sound budgeting, by contrast, allows a case to be litigated through key inflection points—and, if necessary, to conclusion—without surprises that undermine strategy or alignment. Why Litigation Budgeting Is Hard—and Essential Despite its importance, budget creation is rarely taught in law school and is often learned only through experience. Most lawyers work on an hourly fee without a capped budget. Thus many excellent litigators have spent years trying cases without ever being required to forecast costs across an entire lifecycle. Litigation finance forces that discipline early. A funding request typically requires counsel to articulate not only the merits of a claim, but also the cost required to prosecute it and the relationship between spend, risk, and expected recovery. A commonly used rule of thumb is that expected damages should substantially exceed the amount of requested funding. While a 10:1 ratio is often the proposed rule of thumb, a meaningful spread between potential recovery and projected spend helps ensure that funders can achieve target returns, clients can realize meaningful net recoveries, and law firms can be compensated for their work without undue financial strain. What a Litigation Budget Typically Covers In funded matters, budgets generally distinguish between legal fees and case expenses , often with separate caps for each. Legal fees reflect hourly rates and anticipated staffing across phases of the case. Funders may cover a portion of those fees up to a cap, with law firms responsible for the balance and for any spend exceeding agreed limits. Expenses typically include items such as expert witnesses, discovery vendors, travel, local counsel, and court costs. These expenses are often funded at a higher percentage, again subject to caps. Clear allocation of responsibility above those caps is essential to avoid disputes later in the case. Core Questions That Drive Realistic Budgets Effective budgets begin with a clear understanding of the case itself. Among the most important questions: Scope of the case. How many claims are asserted? Are they tightly focused or sprawling? Nature of the claims . Certain claims—such as antitrust or patent matters in federal court—are typically more resource-intensive than straightforward commercial disputes. Jurisdictional considerations . Venue, procedural rules, and potential jurisdictional challenges can materially affect cost and duration. Damages theory and collectability . How will damages be proven? Are there risks to collection? Are non-monetary outcomes possible? Expected defense strategy . Will the defendant pursue aggressive motion practice or discovery tactics designed to increase cost and delay? Staffing model . What mix of partners, associates, and specialists is optimal at each stage? Time to resolution . Is the case likely to resolve early, or should it be budgeted through trial and appeal? Discovery: The Largest Variable Discovery is often the single largest expense—and the hardest to predict. When budgeting for discovery, it is critical to consider: The scope of discovery permitted in the jurisdiction The volume and sources of potentially relevant documents The complexity of collection, review, and production The number and location of depositions The need for expert testimony, often among the most expensive components of a case The availability and accessibility of key witnesses Thoughtful planning at this stage can materially reduce cost without compromising litigation objectives. The Role of Funders in Budget Discipline Experienced funders can play a constructive role in budget management—not by directing litigation strategy, but by helping track spend against expectations and flagging deviations early. Regular reporting and periodic check-ins allow counsel and clients to address emerging issues before they become financial problems. Funders also bring cross-case experience across jurisdictions, industries, and claim types that can inform contingency planning and resource allocation. Tips for Creating and Sticking to Budgets Effective litigation budgets are not static documents. They are management tools—designed to impose discipline, anticipate inflection points, and align incentives as cases evolve. In practice, several mechanisms can help law firms and clients create budgets that are both realistic and durable: Budget precedents . Where available, budgets from comparable matters—whether maintained by the law firm or the funder—can provide a valuable reality check. Historical data from similar cases often reveals cost drivers that are easy to underestimate in the abstract. Monthly flat-fee structures . Some firms have moved away from pure “fees-as-incurred” models in favor of monthly flat fees. When appropriately calibrated, this approach can smooth cash flow for the firm during slower periods while reducing the risk of budget overruns during more intensive phases of litigation. Staged funding . Staging capital by phase—such as through a motion to dismiss, summary judgment, or trial—can help ensure that spending remains tied to progress and performance. Phase-based caps encourage early reassessment without forcing premature strategic decisions. Reallocation flexibility . In some cases, budgets permit limited reallocation between categories, such as legal fees and expenses. When used carefully, this flexibility can accommodate unforeseen developments without requiring wholesale renegotiation of the budget. Taken together, these tools reinforce what effective budgeting is ultimately about: creating a financial structure that supports the litigation strategy, rather than constraining it.
The American civil justice system is premised on the existence of real and enforceable rights. Yet for a significant category of harm—injuries that are widespread in aggregate but modest when considered individually—this premise often fails in practice. Rights without practical remedies are rights in name only. And when the gap between entitlement and enforcement operates at scale, the consequences are not just individual—they are systemic. In a prior post , I traced the procedural evolution of mass actions from their equitable origins, through Rule 23, to the modern dominance of the MDL. That article explained how the American legal system developed tools to aggregate claims. This post asks why those tools matter. Consider a consumer injured by a defective product. If the injury is catastrophic, the economics of litigation may justify individual pursuit. But if the injury is less severe, or the causal chain complex, the calculus changes. The costs of prosecution (with lawyers billing hundreds if not thousands of dollars an hour) regularly exceed the potential recovery. In that common situation, the economically rational response is to do nothing—even when the claim is valid and the defendant culpable (e.g., 3M Combat Arms earplug litigation where claim value was as low as $5,000). This is not a doctrinal failure; it is a structural failure: Bilateral litigation assumes rough proportionality between claim value and litigation cost. When that proportionality breaks down, the system produces under-enforcement at scale. Mass tort aggregation mechanisms exist precisely to solve this problem. Contrary to the arguments of repeat defendants and their lawyers, mass torts are not procedural innovations designed to manufacture litigation where none should exist . They are a structural response to a structural deficiency—and a key way to ensure that the American civil justice system lives up to its core premise of equal access to justice. The Economics of Under-Enforcement Three categories of expense drive the access problem in complex litigation. First, discovery in product liability cases can generate millions of pages of documents requiring substantial attorney time and technology to analyze. Combined with related motion to compel and deposition practice, this is the billable-hour lifeblood of many defense firms. While extremely profitable for the well-placed defense lawyer , it is essentially unaffordable for most injured plaintiffs, pricing them out of justice. Second, expert witness expenses add another layer of cost. As background, establishing defect and causation in pharmaceutical, toxic exposure, and product defect cases demands specialists whose development, report drafting, and testimony can easily reach six or seven figures in hourly fees. In such situations, it is economically irrational for an individual plaintiff to hire an expert to opine on their injury given the anticipated ratio of cost to recovery. This reality is complicated by the fact that the class action mechanism, and its concomitant sharing of costs, is generally unavailable for personal injury mass torts . Third, time horizons exacerbate everything. It is not unusual for certain torts to run from five to ten years, with Talc being a key example . This means that attorney time (or funding) is advanced without guarantee of return with significant duration risk. These economic considerations are further aggravated by informational asymmetries between plaintiffs and defendants. Institutional defendants maintain in-house expertise, established relationships with specialized counsel, and the documents and data plaintiffs must obtain through discovery. They are repeat players who approach each case with experience accumulated over frequent litigation of the same issues. Individual plaintiffs, by contrast, are one-shot participants dependent on attorneys who often themselves face tremendous informational disadvantages. The result is a collective action problem. If pursuing a claim costs more than its expected value, rational actors will not sue—even when aggregate harm is substantial. Free-rider dynamics compound the problem: If one plaintiff invests in developing evidence, others benefit without bearing costs, reducing everyone’s incentive to act first. Defendants who cause diffuse harm face reduced liability exposure, and the incentive to invest in safety diminishes accordingly (e.g., the Opioid crisis where defendants ignored obvious safety risk). Crucially, the erosion of deterrence is not merely an individual injustice—it is a public welfare concern that compounds with every claim that goes unfiled. How Aggregation Restructures Litigation Economics The MDL process addresses these dynamics by restructuring litigation economics to make otherwise impractical individual claims economically rational. Shared discovery is perhaps the most significant efficiency. Corporate document productions occur once, not thousands of times. Depositions of key witnesses are taken for the consolidated proceeding and made available to all parties. The marginal cost of discovery for any individual plaintiff thus drops dramatically once centralized infrastructure is in place. Common motion practice produces similar efficiencies. Legal issues that recur across cases (e.g., preemption, general causation) are resolved through consolidated briefing. Coordinated expert development addresses the expense problem directly: plaintiff leadership invests in scientific evidence that benefits every plaintiff in the litigation. An individual whose claim could never justify a $500,000 expert investment can benefit when costs are shared across thousands of claimants. The cumulative effect is cost reduction. Claims that would be economically irrational to pursue individually become viable when aggregated. The collective action problem is solved, not by changing substantive law or lowering evidentiary standards, but by restructuring the economics of claim pursuit. Bellwethers and Informational Efficiency The economic efficiencies of the MDL process are mirrored by their informational efficiencies. Bellwether trials (representative cases selected for full trial proceedings) serve critical functions in this structure. They generate information that disciplines settlement negotiations. Before bellwethers, both sides operate with imperfect knowledge about litigation value. Bellwether outcomes provide hard data on how claims perform in actual adjudication, allowing both sides to update their assessments and negotiate from common informational foundations. Bellwethers also serve a quality-control function. Claims that cannot survive trial are revealed as such, and plaintiffs with similar claims must adjust expectations or withdraw. The process operates as a filter separating viable claims from those that cannot withstand adjudication. Addressing the Overreach Critique Critics contend that aggregation inflates claim values, coerces settlements regardless of merit, and manufactures litigation where none should exist. While ultimately outweighed by the benefits, these concerns deserve thoughtful engagement. The critique rests on an implicit comparison to bilateral litigation as baseline. But as the preceding analysis shows, bilateral litigation systematically under-enforces valid claims when harms are diffuse. If critics call aggregation “inflation,” we should recognize bilateral under-enforcement for what it is: deflation. If we accept that the bilateral baseline is itself distorted—producing under-enforcement rather than accurate enforcement—then aggregation’s effects look different. Enabling claims that would otherwise be impractical is not inflation; it is correction. The concern about settlement pressure similarly assumes defendants are coerced into paying for weak claims. But settlement in mass litigation is heavily mediated by information and procedural safeguards. Daubert motions screen expert reliability, summary judgment tests legal sufficiency, and bellwether losses expose plaintiff theories that cannot withstand adjudication. Defendants facing weak claims have ample opportunity to expose that weakness before settlement pressure materializes. Finally, the critique conflates access with abuse. That aggregation enables more claims does not mean it enables more frivolous claims . Centralized proceedings concentrate scrutiny on claim quality in ways bilateral litigation disperses. A transferee judge managing thousands of cases has strong incentives to identify deficient claims. MDL structure provides quality-control mechanisms bilateral litigation lacks. Conclusion Mass tort aggregation restructures litigation economics to make diffuse-harm claims practical. It does this by correcting asymmetries that would otherwise favor institutional defendants (with deep pockets and, at times, questionable judgment ). And by solving collective action problems that would otherwise produce under-enforcement. The alternative to aggregation is not a pristine bilateral system. The alternative is under-enforcement of rights and a free pass for corporate negligence . In that world, valid claims go unfiled, wrongdoing goes unaddressed, deterrence erodes, and the civil justice system serves institutional defendants more effectively than the common citizen consumer. Ignoring this dynamic—and its political ramifications—is dangerous. As Judge Learned Hand warned : “If we are to keep our democracy, there must be one commandment: Thou shalt not ration justice.”
Law.com recently interviewed and quoted Certum Group’s William Marra in an article examining a proposal by the Pennsylvania Civil Rules Committee that would permit discovery into litigation finance agreements. In the article, Marra explained that most courts have recognized that litigation funding agreements generally are not the proper subject of discovery. Courts have often concluded that these agreements are protected by the work product doctrine and are not relevant to the merits of the underlying dispute. The debate over litigation finance disclosure continues to evolve across federal and state courts. While some jurisdictions have adopted narrow disclosure requirements designed to identify potential conflicts of interest, courts have frequently rejected broader attempts to obtain litigation funding agreements through discovery. Marra emphasized that any disclosure rules should remain narrowly tailored to address legitimate concerns without creating strategic advantages for defendants. “Cases should be decided on the merits and any rules that we have in this regard, I would recommend should ensure that the parties are going to focus litigation on the merits rather than on potential expensive sideshows about the terms of someone’s financing agreements,” Marra told Law.com. Certum has previously addressed this issue in its recently-published model brief opposing discovery into litigation funding agreements, which highlights the doctrinal and policy reasons courts have declined to compel disclosure of funding arrangements. The Law.com article is available here .
Above the Law, a leading blog focused on the legal industry, recently highlighted Certum Group’s litigation finance fellowship, noting the opportunity for law students and business students to gain “a four-week, hands-on immersion in what it actually looks like when capital meets complex litigation.” “To succeed, lawyers need to understand not only doctrine but also finance. Law schools are beginning to reflect that shift, and students want to understand it,” Certum’s William Marra told Above the Law. “Our Summer Fellowship is about opening that door for both law and business students, and giving them meaningful exposure to the capital side of litigation.” Applications for the fellowship are due on March 31, 2026, and should include a resume, law school transcript, and a brief 250-word statement of interest. Applications should be sent to SummerFellowship@CertumGroup.com . Above the Law’s coverage is available here , and Certum’s application page for the fellowship is available here .
For the third consecutive year, Certum Group will host one or more summer fellows, introducing accomplished law students and business students to the growing field of litigation finance. The Certum Group Litigation Finance Fellowship provides top law students with an opportunity to gain hands-on experience in the rapidly growing fields of litigation finance and litigation insurance. Fellows will evaluate litigation funding submissions, draft memoranda analyzing legal and damages issues, help structure and negotiate funding agreements, and contribute to marketing and business development initiatives. They will work closely with Certum’s experienced team of litigation finance, litigation insurance, and investment professionals. Throughout the program, Fellows will develop a practical understanding of how claimholders, law firms, insurers, and capital providers assess litigation risk — and how capital can be deployed as a strategic tool in complex disputes. Further information about the fellowship and instructions about how to apply are available here.
Columbia Law School’s blog on corporations and the public markets, The CLS Blue Sky Blog, recently featured the scholarly work on litigation finance written by Indiana University Business School Professor Suneal Bedi and Certum’s William C. Marra. In their blog post, Bedi and Marra discuss their article Litigation Finance in the Market Square , which was recently published in the Southern California Law Review. Their work reframes litigation finance as a capital markets innovation rather than solely a civil justice mechanism. While much of the public debate has centered on questions of disclosure, control, and settlement incentives, Bedi and Marra emphasize that legal claims often represent significant but illiquid contingent assets on a firm’s balance sheet. When policymakers regulate litigation finance, they are regulating not just the legal business but the capital markets. And they are regulating capital markets in a way that is more likely to harm small and medium-sized enterprises (SMEs) while protecting large companies from competition. The full blog post is available here.
You signed an NDA and shared case materials with your funder. Then you negotiated and signed a term sheet . Now it’s time to negotiate the litigation funding agreements. Funding agreements sit at the intersection of law, finance, and business. They’re not equity transactions, and they’re not debt transactions either. For most people, they’re new: Most funded parties we encounter—even the most experienced operators—have never before negotiated or signed a funding agreement. Here are some tips as you navigate the funding agreement process. Make Sure the Funding Agreement Tracks the Term Sheet The term sheet sets the commercial deal, but the funding agreement is the binding contract. The funding agreement should accurately reflect the economics and key terms you agreed to. Pay close attention to ensure the return structure, waterfall, and budget closely track what was agreed to in the term sheet. Small deviations from the term sheet can have big economic consequences. Confirm that the final agreement memorializes the deal you negotiated. Control and Decision-Making Litigation funders do not control litigation strategy or settlement decisions. Some court rules, including those in the District of New Jersey , request a disclosure that a funder’s approval is not necessary for case strategy or settlement. Certum’s contracts expressly disclaim control. Consider whether an express disclaimer of control, frequently tracking the language of the District of New Jersey rule, is appropriate. As repeat players in the litigation space , litigation funders can and do still provide valuable advice to funded parties, who are often involved in their first and only litigation. Thus although funders cannot control litigation, funded parties typically consult with funders for advice during the course of the litigation. Define “Case Proceeds” Clearly Litigation funding agreements are typically non-recourse, which means the funder recovers only if there are case proceeds. So the definition of “case proceeds” is quite important, and it’s something you should pay close attention to. Cash recoveries are straightforward, but not all litigations resolve solely or exclusively for cash. What happens if there is a non-cash settlement—for example, if the funded party receives stock, real estate, IP rights? What happens if the settlement is structured as a payment over time? Or if there is a sanctions award entered against the defendant? It’s best to address all these issues ex ante at the time of the funding agreement. Funding agreements typically provide a mechanism for valuing consideration other than an immediate payment of cash from the defendant to the plaintiff. Resolving this issue today can help avoid ambiguity tomorrow. Address Other Customary Provisions Several boilerplate provisions deserve attention: Representations and warranties: As with all financial transactions, the recipient of funds needs to provide certain customary representations and warranties. Make sure you study those reps and warranties, to ensure you can stand behind them. Termination rights: When can the funder withdraw? Funders typically have termination rights, for example in instances where the funded party commits a material breach of the agreement. Make sure you understand the consequences of a termination. Consider Hiring Experienced Deal Counsel Litigation funding agreements are specialized contracts. They combine elements of finance, litigation, and insurance. Most generalist lawyers—and even many litigators—have never negotiated one. Certum typically recommends that funded parties retain an independent deal counsel who understands the funding market. Experienced advisors can streamline the process and increase the likelihood that the deal will close. And you can typically negotiate with the funder to have the deal counsel’s fees covered as a closing cost of the investment.
When Americans think about civil litigation, we tend to imagine its bilateral form: Company A sues Company B, or John Roe sues Jane Doe. That model works when disputes are discrete, parties are evenly matched, and harms are easily traced. It breaks down, however, when injuries are widespread, claims are too small to justify individual pursuit, and thousands of plaintiffs confront a single, well-resourced defendant. Those conditions gave rise to what we now call mass actions—procedural mechanisms that aggregate claims without extinguishing individual rights. This post traces the evolution of American mass actions from their equitable origins, through Rule 23 class actions, to the modern dominance of multidistrict litigation (“MDL”). Its purpose is to explain how, across each stage of its development, the system moved and evolved in order to tackle the same core problem: how to capture the efficiencies of collective adjudication while preserving individualized justice. The Equitable Origins of Mass Actions For roughly the first 150 years of American civil practice, what we would now recognize as class actions existed in equity, borrowing from English Chancery traditions. Former Equity Rule 48 permitted representative litigation where a common or general interest affected a class so numerous that joinder was impracticable. Courts used these bills in equity to cluster related claims, creating an early—if imperfect—form of aggregation. These tools, however, were ill-suited to large-scale disputes. Among other things, they offered no uniform standard for representation, limited mechanisms for managing individualized issues, and little guidance for balancing efficiency against fairness, including whether absent parties would be bound. As collective harms grew larger and more complex, these limitations became more pronounced. The Adoption of Rule 23 and the Birth of the Class Action The adoption of Federal Rule of Civil Procedure 23 in 1938 marked a turning point. Rule 23 replaced ad hoc equitable practices with a codified framework defining when a small number of plaintiffs could litigate on behalf of many. Rule 23 introduced a new codified framework in 1938, later refined by the 1966 amendments into today’s familiar certification requirements—numerosity, commonality, typicality, adequacy, predominance, and superiority—meant to ensure that aggregation serves both efficiency and fairness. Rule 23 works best where common questions truly drive the case. But as mass disputes expanded—particularly in products liability and antitrust—its limitations became apparent. Variations in exposure, injury, causation, damages, and governing law strain the class model. Under Rule 23(b)(3), courts certify a class only if common questions predominate—a demanding standard that frequently defeats certification in mass torts. Beyond doctrine, this mismatch raises fairness and due-process concerns, as aggregation risks resolving individualized questions of liability and damages through procedural shortcuts ill-suited to protect either side’s substantive rights. The Creation of the JPML and the Rise of the MDL Congress responded in 1968 by creating the Judicial Panel on Multidistrict Litigation. That structure authorizes transfer of civil actions with common factual questions to a single federal court for coordinated pretrial proceedings. Unlike class actions, MDLs preserve the separateness of each plaintiff’s case while centralizing work that benefits from scale, including motions to dismiss, summary judgment, and Daubert proceedings. In practice, transferee judges appoint leadership counsel, coordinate discovery, resolve common dispositive and evidentiary motions, conduct bellwether trials, and facilitate global settlement discussions. The MDL’s central innovation is procedural coordination without substantive consolidation. Each plaintiff formally retains an individual claim, remedy, and trial right, while the system avoids duplicative rulings and inconsistent outcomes and preserves Article III adjudication of individual disputes. Amchem, Ortiz , and the Limits of Settlement-Only Class Actions Supreme Court decisions in Amchem Products, Inc. v. Windsor and Ortiz v. Fibreboard Corp. sharply limited the availability of settlement-only mass tort class actions . The Court held that Rule 23’s requirements apply with full force even when certification is sought solely to effect a global settlement, emphasizing rigorous scrutiny of adequacy, predominance, and intra-class conflicts in heterogeneous litigations. In other words, settlement convenience could not cure structural mismatches between the class device and the individualized nature of mass tort claims. These decisions did not eliminate class actions. But they underscored why mass torts rarely fit comfortably within them—and why MDLs emerged as the system’s primary alternative. Their practical import was to effectively close the door to using Rule 23 as a vehicle for mandatory, one-shot global peace in tort, channeling resolution toward MDL-based private ordering—bellwethers, negotiated matrices, and opt-in inventory settlements—while preserving each plaintiff’s trial right. They also shifted innovation elsewhere: toward issue classes under Rule 23(c)(4) , parens patriae actions by sovereigns, and, in some instances, bankruptcy or “Texas two-step” strategies to obtain non-class global resolutions—developments that further entrenched the MDL as the central forum for mass tort resolution. Why MDL Endures MDL’s durability reflects institutional alignment rather than doctrinal accident. For plaintiffs, MDLs offer scale—shared discovery, coordinated motion practice, and settlement leverage—without forfeiting individual claims or trial rights. For defendants, they provide predictability and efficiency by centralizing pretrial proceedings, reducing duplicative costs, and mitigating inconsistent rulings across jurisdictions. For courts, MDLs conserve scarce judicial resources while preserving adjudicatory limits by restricting consolidation to the pretrial phase. For the justice system, MDLs supply a flexible framework that absorbs heterogeneity without collapsing into either unmanageable fragmentation or overinclusive aggregation. That convergence explains why the MDL has become the default architecture for modern mass tort litigation—and why it has proven resilient despite critique. The Design Challenge That Endures Modern practice selects among procedural tools based on fit. Class actions remain essential where common issues predominate. MDLs dominate where common facts justify coordination but individualized harms demand separation. Together, these mechanisms keep the civil justice system workable—and meaningful—when harms scale beyond the individual case. The enduring challenge is deploying these tools with discipline, judiciously retaining the benefits of individual justice, while capitalizing on the benefits of aggregation.
Litigation funding is no longer novel, but for many law firms it remains unfamiliar. A significant number of the firms we work with— including large and sophisticated practices—are engaging with a litigation funder for the first or second time. When firms ask how best to navigate these relationships, our guidance consistently centers on three principles: Confidentiality, Conflicts of Interest, and Control . Addressed early and thoughtfully, these issues help preserve the integrity of the lawyer-client relationship while allowing funding arrangements to function as intended. Confidentiality To get your case funded, you’ll likely need to share certain confidential case information with a funder. (For an overview of what you’d want to include in a memo requesting funding, see this article with helpful tips.) Before sharing confidential information, lawyers must ensure they have their client’s informed consent. Ethical rules—including ABA Model Rules of Professional Conduct, Rule 1.6 and its state analogues—generally prohibit disclosure of client confidential information absent client authorization or implicit authorization arising from the representation. Once client consent is obtained, counsel should enter into a non-disclosure agreement with each funder before sharing substantive information. While the absence of an NDA does not mean that a defendant can obtain information shared with a funder—and courts generally deny discovery into litigation funding—NDAs remain an important tool for protecting confidentiality and reducing the risk of later discovery disputes. For an overview of what’s in an NDA, see this article on the subject). Best Practice Tip: Consider addressing litigation funding explicitly in engagement letters, including advance authorization to share confidential information with funders at the client’s direction. Conflicts of Interest Litigation funding should not create conflicts between a law firm and its client. While the lawyer-client relationship is paramount, it often overlaps with economic arrangements—hourly fees, contingency fees, or hybrid structures—whether or not funding is involved. For that reason, many claimholders elect to retain independent deal counsel to negotiate funding agreements. These negotiations frequently involve corporate, tax, and financial issues that fall outside the core expertise of trial counsel. Separating deal negotiation from litigation strategy can help preserve alignment and avoid conflicts. Best Practice Tip: Claimholders should consider using independent counsel—rather than litigation counsel—to negotiate funding agreements. Control In funded cases, claimholders retain control over litigation strategy and settlement decisions. Many regulatory proposals and court disclosure rules focus on whether a funder has approval rights over such decisions, reflecting the principle that third-party funding should not compromise attorney independence. For example, court rules in the District of New Jersey and disclosure requirements imposed by Chief Judge Connolly in the District of Delaware require disclosure of whether a third party has approval rights over litigation or settlement decisions. While funders are entitled to information about case developments—and may retain limited termination rights in circumstances such as fraud or material breach—they do not direct litigation or settlement strategy. Best Practice Tip: Clearly memorialize the funder’s lack of control rights in both the funding agreement and the engagement letter, using language that mirrors applicable disclosure rules where appropriate. Beyond the Basics: Building Successful Partnerships Beyond these core principles, successful partnerships between law firms and litigation funders depend on: Early Engagement: Involving funders early in case evaluation can provide valuable insights and streamline the funding process. Transparency: Regular conversations among counsel, client, and funder create alignment without compromising control. Realistic Expectations: Understanding the typical funding process timeline and requirements helps manage client expectations.
Litigation is inherently complex, dynamic, and increasingly expensive. Outcomes are difficult to predict, shaped by variables ranging from jurisdiction and judge to opposing counsel, discovery disputes, and motion practice that often unfolds in unexpected ways. In a volatile economic environment, forecasting the cost of a case can feel more like art than science. Yet budgeting remains one of the most important—and most overlooked—components of successful litigation. In the litigation finance context, budgets do more than estimate costs. They establish the financial architecture of a case. Funders commit a capped amount of capital for legal fees and case expenses. Law firms allocate resources within that constraint—and are typically responsible for any legal fees incurred above the budget. Meanwhile, claimholders are typically responsible for case expenses incurred above the budget, while their ultimate recoveries may depend on how closely spending tracks expectations. A budget that is too optimistic risks early depletion of funds. A budget that is overly conservative may deter funding altogether or unnecessarily suppress a client’s net recovery. Sound budgeting, by contrast, allows a case to be litigated through key inflection points—and, if necessary, to conclusion—without surprises that undermine strategy or alignment. Why Litigation Budgeting Is Hard—and Essential Despite its importance, budget creation is rarely taught in law school and is often learned only through experience. Most lawyers work on an hourly fee without a capped budget. Thus many excellent litigators have spent years trying cases without ever being required to forecast costs across an entire lifecycle. Litigation finance forces that discipline early. A funding request typically requires counsel to articulate not only the merits of a claim, but also the cost required to prosecute it and the relationship between spend, risk, and expected recovery. A commonly used rule of thumb is that expected damages should substantially exceed the amount of requested funding. While a 10:1 ratio is often the proposed rule of thumb, a meaningful spread between potential recovery and projected spend helps ensure that funders can achieve target returns, clients can realize meaningful net recoveries, and law firms can be compensated for their work without undue financial strain. What a Litigation Budget Typically Covers In funded matters, budgets generally distinguish between legal fees and case expenses , often with separate caps for each. Legal fees reflect hourly rates and anticipated staffing across phases of the case. Funders may cover a portion of those fees up to a cap, with law firms responsible for the balance and for any spend exceeding agreed limits. Expenses typically include items such as expert witnesses, discovery vendors, travel, local counsel, and court costs. These expenses are often funded at a higher percentage, again subject to caps. Clear allocation of responsibility above those caps is essential to avoid disputes later in the case. Core Questions That Drive Realistic Budgets Effective budgets begin with a clear understanding of the case itself. Among the most important questions: Scope of the case. How many claims are asserted? Are they tightly focused or sprawling? Nature of the claims . Certain claims—such as antitrust or patent matters in federal court—are typically more resource-intensive than straightforward commercial disputes. Jurisdictional considerations . Venue, procedural rules, and potential jurisdictional challenges can materially affect cost and duration. Damages theory and collectability . How will damages be proven? Are there risks to collection? Are non-monetary outcomes possible? Expected defense strategy . Will the defendant pursue aggressive motion practice or discovery tactics designed to increase cost and delay? Staffing model . What mix of partners, associates, and specialists is optimal at each stage? Time to resolution . Is the case likely to resolve early, or should it be budgeted through trial and appeal? Discovery: The Largest Variable Discovery is often the single largest expense—and the hardest to predict. When budgeting for discovery, it is critical to consider: The scope of discovery permitted in the jurisdiction The volume and sources of potentially relevant documents The complexity of collection, review, and production The number and location of depositions The need for expert testimony, often among the most expensive components of a case The availability and accessibility of key witnesses Thoughtful planning at this stage can materially reduce cost without compromising litigation objectives. The Role of Funders in Budget Discipline Experienced funders can play a constructive role in budget management—not by directing litigation strategy, but by helping track spend against expectations and flagging deviations early. Regular reporting and periodic check-ins allow counsel and clients to address emerging issues before they become financial problems. Funders also bring cross-case experience across jurisdictions, industries, and claim types that can inform contingency planning and resource allocation. Tips for Creating and Sticking to Budgets Effective litigation budgets are not static documents. They are management tools—designed to impose discipline, anticipate inflection points, and align incentives as cases evolve. In practice, several mechanisms can help law firms and clients create budgets that are both realistic and durable: Budget precedents . Where available, budgets from comparable matters—whether maintained by the law firm or the funder—can provide a valuable reality check. Historical data from similar cases often reveals cost drivers that are easy to underestimate in the abstract. Monthly flat-fee structures . Some firms have moved away from pure “fees-as-incurred” models in favor of monthly flat fees. When appropriately calibrated, this approach can smooth cash flow for the firm during slower periods while reducing the risk of budget overruns during more intensive phases of litigation. Staged funding . Staging capital by phase—such as through a motion to dismiss, summary judgment, or trial—can help ensure that spending remains tied to progress and performance. Phase-based caps encourage early reassessment without forcing premature strategic decisions. Reallocation flexibility . In some cases, budgets permit limited reallocation between categories, such as legal fees and expenses. When used carefully, this flexibility can accommodate unforeseen developments without requiring wholesale renegotiation of the budget. Taken together, these tools reinforce what effective budgeting is ultimately about: creating a financial structure that supports the litigation strategy, rather than constraining it.
The American civil justice system is premised on the existence of real and enforceable rights. Yet for a significant category of harm—injuries that are widespread in aggregate but modest when considered individually—this premise often fails in practice. Rights without practical remedies are rights in name only. And when the gap between entitlement and enforcement operates at scale, the consequences are not just individual—they are systemic. In a prior post , I traced the procedural evolution of mass actions from their equitable origins, through Rule 23, to the modern dominance of the MDL. That article explained how the American legal system developed tools to aggregate claims. This post asks why those tools matter. Consider a consumer injured by a defective product. If the injury is catastrophic, the economics of litigation may justify individual pursuit. But if the injury is less severe, or the causal chain complex, the calculus changes. The costs of prosecution (with lawyers billing hundreds if not thousands of dollars an hour) regularly exceed the potential recovery. In that common situation, the economically rational response is to do nothing—even when the claim is valid and the defendant culpable (e.g., 3M Combat Arms earplug litigation where claim value was as low as $5,000). This is not a doctrinal failure; it is a structural failure: Bilateral litigation assumes rough proportionality between claim value and litigation cost. When that proportionality breaks down, the system produces under-enforcement at scale. Mass tort aggregation mechanisms exist precisely to solve this problem. Contrary to the arguments of repeat defendants and their lawyers, mass torts are not procedural innovations designed to manufacture litigation where none should exist . They are a structural response to a structural deficiency—and a key way to ensure that the American civil justice system lives up to its core premise of equal access to justice. The Economics of Under-Enforcement Three categories of expense drive the access problem in complex litigation. First, discovery in product liability cases can generate millions of pages of documents requiring substantial attorney time and technology to analyze. Combined with related motion to compel and deposition practice, this is the billable-hour lifeblood of many defense firms. While extremely profitable for the well-placed defense lawyer , it is essentially unaffordable for most injured plaintiffs, pricing them out of justice. Second, expert witness expenses add another layer of cost. As background, establishing defect and causation in pharmaceutical, toxic exposure, and product defect cases demands specialists whose development, report drafting, and testimony can easily reach six or seven figures in hourly fees. In such situations, it is economically irrational for an individual plaintiff to hire an expert to opine on their injury given the anticipated ratio of cost to recovery. This reality is complicated by the fact that the class action mechanism, and its concomitant sharing of costs, is generally unavailable for personal injury mass torts . Third, time horizons exacerbate everything. It is not unusual for certain torts to run from five to ten years, with Talc being a key example . This means that attorney time (or funding) is advanced without guarantee of return with significant duration risk. These economic considerations are further aggravated by informational asymmetries between plaintiffs and defendants. Institutional defendants maintain in-house expertise, established relationships with specialized counsel, and the documents and data plaintiffs must obtain through discovery. They are repeat players who approach each case with experience accumulated over frequent litigation of the same issues. Individual plaintiffs, by contrast, are one-shot participants dependent on attorneys who often themselves face tremendous informational disadvantages. The result is a collective action problem. If pursuing a claim costs more than its expected value, rational actors will not sue—even when aggregate harm is substantial. Free-rider dynamics compound the problem: If one plaintiff invests in developing evidence, others benefit without bearing costs, reducing everyone’s incentive to act first. Defendants who cause diffuse harm face reduced liability exposure, and the incentive to invest in safety diminishes accordingly (e.g., the Opioid crisis where defendants ignored obvious safety risk). Crucially, the erosion of deterrence is not merely an individual injustice—it is a public welfare concern that compounds with every claim that goes unfiled. How Aggregation Restructures Litigation Economics The MDL process addresses these dynamics by restructuring litigation economics to make otherwise impractical individual claims economically rational. Shared discovery is perhaps the most significant efficiency. Corporate document productions occur once, not thousands of times. Depositions of key witnesses are taken for the consolidated proceeding and made available to all parties. The marginal cost of discovery for any individual plaintiff thus drops dramatically once centralized infrastructure is in place. Common motion practice produces similar efficiencies. Legal issues that recur across cases (e.g., preemption, general causation) are resolved through consolidated briefing. Coordinated expert development addresses the expense problem directly: plaintiff leadership invests in scientific evidence that benefits every plaintiff in the litigation. An individual whose claim could never justify a $500,000 expert investment can benefit when costs are shared across thousands of claimants. The cumulative effect is cost reduction. Claims that would be economically irrational to pursue individually become viable when aggregated. The collective action problem is solved, not by changing substantive law or lowering evidentiary standards, but by restructuring the economics of claim pursuit. Bellwethers and Informational Efficiency The economic efficiencies of the MDL process are mirrored by their informational efficiencies. Bellwether trials (representative cases selected for full trial proceedings) serve critical functions in this structure. They generate information that disciplines settlement negotiations. Before bellwethers, both sides operate with imperfect knowledge about litigation value. Bellwether outcomes provide hard data on how claims perform in actual adjudication, allowing both sides to update their assessments and negotiate from common informational foundations. Bellwethers also serve a quality-control function. Claims that cannot survive trial are revealed as such, and plaintiffs with similar claims must adjust expectations or withdraw. The process operates as a filter separating viable claims from those that cannot withstand adjudication. Addressing the Overreach Critique Critics contend that aggregation inflates claim values, coerces settlements regardless of merit, and manufactures litigation where none should exist. While ultimately outweighed by the benefits, these concerns deserve thoughtful engagement. The critique rests on an implicit comparison to bilateral litigation as baseline. But as the preceding analysis shows, bilateral litigation systematically under-enforces valid claims when harms are diffuse. If critics call aggregation “inflation,” we should recognize bilateral under-enforcement for what it is: deflation. If we accept that the bilateral baseline is itself distorted—producing under-enforcement rather than accurate enforcement—then aggregation’s effects look different. Enabling claims that would otherwise be impractical is not inflation; it is correction. The concern about settlement pressure similarly assumes defendants are coerced into paying for weak claims. But settlement in mass litigation is heavily mediated by information and procedural safeguards. Daubert motions screen expert reliability, summary judgment tests legal sufficiency, and bellwether losses expose plaintiff theories that cannot withstand adjudication. Defendants facing weak claims have ample opportunity to expose that weakness before settlement pressure materializes. Finally, the critique conflates access with abuse. That aggregation enables more claims does not mean it enables more frivolous claims . Centralized proceedings concentrate scrutiny on claim quality in ways bilateral litigation disperses. A transferee judge managing thousands of cases has strong incentives to identify deficient claims. MDL structure provides quality-control mechanisms bilateral litigation lacks. Conclusion Mass tort aggregation restructures litigation economics to make diffuse-harm claims practical. It does this by correcting asymmetries that would otherwise favor institutional defendants (with deep pockets and, at times, questionable judgment ). And by solving collective action problems that would otherwise produce under-enforcement. The alternative to aggregation is not a pristine bilateral system. The alternative is under-enforcement of rights and a free pass for corporate negligence . In that world, valid claims go unfiled, wrongdoing goes unaddressed, deterrence erodes, and the civil justice system serves institutional defendants more effectively than the common citizen consumer. Ignoring this dynamic—and its political ramifications—is dangerous. As Judge Learned Hand warned : “If we are to keep our democracy, there must be one commandment: Thou shalt not ration justice.”
Law.com recently interviewed and quoted Certum Group’s William Marra in an article examining a proposal by the Pennsylvania Civil Rules Committee that would permit discovery into litigation finance agreements. In the article, Marra explained that most courts have recognized that litigation funding agreements generally are not the proper subject of discovery. Courts have often concluded that these agreements are protected by the work product doctrine and are not relevant to the merits of the underlying dispute. The debate over litigation finance disclosure continues to evolve across federal and state courts. While some jurisdictions have adopted narrow disclosure requirements designed to identify potential conflicts of interest, courts have frequently rejected broader attempts to obtain litigation funding agreements through discovery. Marra emphasized that any disclosure rules should remain narrowly tailored to address legitimate concerns without creating strategic advantages for defendants. “Cases should be decided on the merits and any rules that we have in this regard, I would recommend should ensure that the parties are going to focus litigation on the merits rather than on potential expensive sideshows about the terms of someone’s financing agreements,” Marra told Law.com. Certum has previously addressed this issue in its recently-published model brief opposing discovery into litigation funding agreements, which highlights the doctrinal and policy reasons courts have declined to compel disclosure of funding arrangements. The Law.com article is available here .
Above the Law, a leading blog focused on the legal industry, recently highlighted Certum Group’s litigation finance fellowship, noting the opportunity for law students and business students to gain “a four-week, hands-on immersion in what it actually looks like when capital meets complex litigation.” “To succeed, lawyers need to understand not only doctrine but also finance. Law schools are beginning to reflect that shift, and students want to understand it,” Certum’s William Marra told Above the Law. “Our Summer Fellowship is about opening that door for both law and business students, and giving them meaningful exposure to the capital side of litigation.” Applications for the fellowship are due on March 31, 2026, and should include a resume, law school transcript, and a brief 250-word statement of interest. Applications should be sent to SummerFellowship@CertumGroup.com . Above the Law’s coverage is available here , and Certum’s application page for the fellowship is available here .
For the third consecutive year, Certum Group will host one or more summer fellows, introducing accomplished law students and business students to the growing field of litigation finance. The Certum Group Litigation Finance Fellowship provides top law students with an opportunity to gain hands-on experience in the rapidly growing fields of litigation finance and litigation insurance. Fellows will evaluate litigation funding submissions, draft memoranda analyzing legal and damages issues, help structure and negotiate funding agreements, and contribute to marketing and business development initiatives. They will work closely with Certum’s experienced team of litigation finance, litigation insurance, and investment professionals. Throughout the program, Fellows will develop a practical understanding of how claimholders, law firms, insurers, and capital providers assess litigation risk — and how capital can be deployed as a strategic tool in complex disputes. Further information about the fellowship and instructions about how to apply are available here.
Columbia Law School’s blog on corporations and the public markets, The CLS Blue Sky Blog, recently featured the scholarly work on litigation finance written by Indiana University Business School Professor Suneal Bedi and Certum’s William C. Marra. In their blog post, Bedi and Marra discuss their article Litigation Finance in the Market Square , which was recently published in the Southern California Law Review. Their work reframes litigation finance as a capital markets innovation rather than solely a civil justice mechanism. While much of the public debate has centered on questions of disclosure, control, and settlement incentives, Bedi and Marra emphasize that legal claims often represent significant but illiquid contingent assets on a firm’s balance sheet. When policymakers regulate litigation finance, they are regulating not just the legal business but the capital markets. And they are regulating capital markets in a way that is more likely to harm small and medium-sized enterprises (SMEs) while protecting large companies from competition. The full blog post is available here.
You signed an NDA and shared case materials with your funder. Then you negotiated and signed a term sheet . Now it’s time to negotiate the litigation funding agreements. Funding agreements sit at the intersection of law, finance, and business. They’re not equity transactions, and they’re not debt transactions either. For most people, they’re new: Most funded parties we encounter—even the most experienced operators—have never before negotiated or signed a funding agreement. Here are some tips as you navigate the funding agreement process. Make Sure the Funding Agreement Tracks the Term Sheet The term sheet sets the commercial deal, but the funding agreement is the binding contract. The funding agreement should accurately reflect the economics and key terms you agreed to. Pay close attention to ensure the return structure, waterfall, and budget closely track what was agreed to in the term sheet. Small deviations from the term sheet can have big economic consequences. Confirm that the final agreement memorializes the deal you negotiated. Control and Decision-Making Litigation funders do not control litigation strategy or settlement decisions. Some court rules, including those in the District of New Jersey , request a disclosure that a funder’s approval is not necessary for case strategy or settlement. Certum’s contracts expressly disclaim control. Consider whether an express disclaimer of control, frequently tracking the language of the District of New Jersey rule, is appropriate. As repeat players in the litigation space , litigation funders can and do still provide valuable advice to funded parties, who are often involved in their first and only litigation. Thus although funders cannot control litigation, funded parties typically consult with funders for advice during the course of the litigation. Define “Case Proceeds” Clearly Litigation funding agreements are typically non-recourse, which means the funder recovers only if there are case proceeds. So the definition of “case proceeds” is quite important, and it’s something you should pay close attention to. Cash recoveries are straightforward, but not all litigations resolve solely or exclusively for cash. What happens if there is a non-cash settlement—for example, if the funded party receives stock, real estate, IP rights? What happens if the settlement is structured as a payment over time? Or if there is a sanctions award entered against the defendant? It’s best to address all these issues ex ante at the time of the funding agreement. Funding agreements typically provide a mechanism for valuing consideration other than an immediate payment of cash from the defendant to the plaintiff. Resolving this issue today can help avoid ambiguity tomorrow. Address Other Customary Provisions Several boilerplate provisions deserve attention: Representations and warranties: As with all financial transactions, the recipient of funds needs to provide certain customary representations and warranties. Make sure you study those reps and warranties, to ensure you can stand behind them. Termination rights: When can the funder withdraw? Funders typically have termination rights, for example in instances where the funded party commits a material breach of the agreement. Make sure you understand the consequences of a termination. Consider Hiring Experienced Deal Counsel Litigation funding agreements are specialized contracts. They combine elements of finance, litigation, and insurance. Most generalist lawyers—and even many litigators—have never negotiated one. Certum typically recommends that funded parties retain an independent deal counsel who understands the funding market. Experienced advisors can streamline the process and increase the likelihood that the deal will close. And you can typically negotiate with the funder to have the deal counsel’s fees covered as a closing cost of the investment.
When Americans think about civil litigation, we tend to imagine its bilateral form: Company A sues Company B, or John Roe sues Jane Doe. That model works when disputes are discrete, parties are evenly matched, and harms are easily traced. It breaks down, however, when injuries are widespread, claims are too small to justify individual pursuit, and thousands of plaintiffs confront a single, well-resourced defendant. Those conditions gave rise to what we now call mass actions—procedural mechanisms that aggregate claims without extinguishing individual rights. This post traces the evolution of American mass actions from their equitable origins, through Rule 23 class actions, to the modern dominance of multidistrict litigation (“MDL”). Its purpose is to explain how, across each stage of its development, the system moved and evolved in order to tackle the same core problem: how to capture the efficiencies of collective adjudication while preserving individualized justice. The Equitable Origins of Mass Actions For roughly the first 150 years of American civil practice, what we would now recognize as class actions existed in equity, borrowing from English Chancery traditions. Former Equity Rule 48 permitted representative litigation where a common or general interest affected a class so numerous that joinder was impracticable. Courts used these bills in equity to cluster related claims, creating an early—if imperfect—form of aggregation. These tools, however, were ill-suited to large-scale disputes. Among other things, they offered no uniform standard for representation, limited mechanisms for managing individualized issues, and little guidance for balancing efficiency against fairness, including whether absent parties would be bound. As collective harms grew larger and more complex, these limitations became more pronounced. The Adoption of Rule 23 and the Birth of the Class Action The adoption of Federal Rule of Civil Procedure 23 in 1938 marked a turning point. Rule 23 replaced ad hoc equitable practices with a codified framework defining when a small number of plaintiffs could litigate on behalf of many. Rule 23 introduced a new codified framework in 1938, later refined by the 1966 amendments into today’s familiar certification requirements—numerosity, commonality, typicality, adequacy, predominance, and superiority—meant to ensure that aggregation serves both efficiency and fairness. Rule 23 works best where common questions truly drive the case. But as mass disputes expanded—particularly in products liability and antitrust—its limitations became apparent. Variations in exposure, injury, causation, damages, and governing law strain the class model. Under Rule 23(b)(3), courts certify a class only if common questions predominate—a demanding standard that frequently defeats certification in mass torts. Beyond doctrine, this mismatch raises fairness and due-process concerns, as aggregation risks resolving individualized questions of liability and damages through procedural shortcuts ill-suited to protect either side’s substantive rights. The Creation of the JPML and the Rise of the MDL Congress responded in 1968 by creating the Judicial Panel on Multidistrict Litigation. That structure authorizes transfer of civil actions with common factual questions to a single federal court for coordinated pretrial proceedings. Unlike class actions, MDLs preserve the separateness of each plaintiff’s case while centralizing work that benefits from scale, including motions to dismiss, summary judgment, and Daubert proceedings. In practice, transferee judges appoint leadership counsel, coordinate discovery, resolve common dispositive and evidentiary motions, conduct bellwether trials, and facilitate global settlement discussions. The MDL’s central innovation is procedural coordination without substantive consolidation. Each plaintiff formally retains an individual claim, remedy, and trial right, while the system avoids duplicative rulings and inconsistent outcomes and preserves Article III adjudication of individual disputes. Amchem, Ortiz , and the Limits of Settlement-Only Class Actions Supreme Court decisions in Amchem Products, Inc. v. Windsor and Ortiz v. Fibreboard Corp. sharply limited the availability of settlement-only mass tort class actions . The Court held that Rule 23’s requirements apply with full force even when certification is sought solely to effect a global settlement, emphasizing rigorous scrutiny of adequacy, predominance, and intra-class conflicts in heterogeneous litigations. In other words, settlement convenience could not cure structural mismatches between the class device and the individualized nature of mass tort claims. These decisions did not eliminate class actions. But they underscored why mass torts rarely fit comfortably within them—and why MDLs emerged as the system’s primary alternative. Their practical import was to effectively close the door to using Rule 23 as a vehicle for mandatory, one-shot global peace in tort, channeling resolution toward MDL-based private ordering—bellwethers, negotiated matrices, and opt-in inventory settlements—while preserving each plaintiff’s trial right. They also shifted innovation elsewhere: toward issue classes under Rule 23(c)(4) , parens patriae actions by sovereigns, and, in some instances, bankruptcy or “Texas two-step” strategies to obtain non-class global resolutions—developments that further entrenched the MDL as the central forum for mass tort resolution. Why MDL Endures MDL’s durability reflects institutional alignment rather than doctrinal accident. For plaintiffs, MDLs offer scale—shared discovery, coordinated motion practice, and settlement leverage—without forfeiting individual claims or trial rights. For defendants, they provide predictability and efficiency by centralizing pretrial proceedings, reducing duplicative costs, and mitigating inconsistent rulings across jurisdictions. For courts, MDLs conserve scarce judicial resources while preserving adjudicatory limits by restricting consolidation to the pretrial phase. For the justice system, MDLs supply a flexible framework that absorbs heterogeneity without collapsing into either unmanageable fragmentation or overinclusive aggregation. That convergence explains why the MDL has become the default architecture for modern mass tort litigation—and why it has proven resilient despite critique. The Design Challenge That Endures Modern practice selects among procedural tools based on fit. Class actions remain essential where common issues predominate. MDLs dominate where common facts justify coordination but individualized harms demand separation. Together, these mechanisms keep the civil justice system workable—and meaningful—when harms scale beyond the individual case. The enduring challenge is deploying these tools with discipline, judiciously retaining the benefits of individual justice, while capitalizing on the benefits of aggregation.
