What Should Plaintiffs Know About Funding A Data Breach Claim? A Practical Guide For Plaintiff Attorneys

What Should Plaintiffs Know About Funding A Data Breach Claim? A Practical Guide For Plaintiff Attorneys

Data breach claims can take time to investigate, litigate, and resolve. During that period, a plaintiff may face ordinary living expenses or costs connected to the disruption caused by a suspected breach. Data breach lawsuit funding may be one option to discuss with counsel, but it should be evaluated carefully and never treated as a guaranteed result.

What Is Data Breach Lawsuit Funding?

Data breach lawsuit funding is non-recourse funding connected to a pending claim involving the unauthorized exposure, theft, or misuse of personal information. In a typical arrangement, a funding company provides money before the case resolves, and repayment is tied to the outcome of the claim. If the case does not produce a recovery, the agreement may not require repayment, depending on its terms.

This is different from a conventional loan. The funding decision is generally based on the merits and expected value of the claim rather than a plaintiff’s credit score or employment income. The written agreement controls, so plaintiffs and attorneys should review its terms before accepting an offer.

Which Data Breach Claims May Be Considered?

Depending on the facts, a reviewer may consider claims involving exposure of names, account information, health information, financial information, Social Security numbers, or other sensitive data. A reviewer may also consider the available evidence, the defendant’s response, the procedural stage of the case, applicable claims, the potential class or individual recovery, collectability, and the likely timing of resolution.

Eligibility is not automatic. A data incident, investigation, or proposed class action does not by itself mean funding is available. The plaintiff’s attorney should evaluate the legal and factual issues, and funding is not a substitute for legal advice.

How Can Funding Support A Plaintiff During A Data Breach Claim?

A plaintiff may consider funding to help manage essential expenses while a claim is pending. Depending on the plaintiff’s circumstances, that could include housing, transportation, medical costs, or other ordinary bills. More financial stability may help a plaintiff evaluate case decisions without feeling forced to accept an option because of immediate financial pressure.

Funding cannot guarantee a faster resolution, a particular settlement, or a specific amount of money. Plaintiffs should consider the total potential repayment and how it could affect the net recovery before signing an agreement.

What Should Plaintiff Attorneys Review First?

Before discussing a data breach lawsuit funding option with a client, counsel should review:

• Case status: Identify whether the matter is at investigation, pre-suit, pleadings, discovery, settlement, or another stage, along with upcoming deadlines and a realistic resolution timeline.
• Evidence and data impact: Assess the evidence of the incident, the information allegedly exposed, notice materials, causation issues, damages theories, and any uncertainty in the recovery.
• Claim structure: Determine whether the matter involves an individual claim, a proposed class action, a certified class, a multidistrict proceeding, or another structure, and explain what that means for timing and recovery.
• Funding terms: Explain the amount advanced, the repayment formula, any fees, how the balance changes over time, and what happens if the case does not recover.
• Client understanding: Give the client time to ask questions and make an informed decision without pressure.
• Conflicts and professional duties: Consider confidentiality, privilege, control of the litigation, settlement authority, and duties that apply in the relevant jurisdiction.
• Net recovery: Estimate how repayment could affect the client’s eventual proceeds after attorney fees, case costs, liens, and other obligations.

Questions To Ask Before Accepting Data Breach Lawsuit Funding

Plaintiffs and attorneys can use these questions to compare an offer:

• Is the funding non-recourse, and when would repayment be required?
• How is the repayment amount calculated?
• Does the balance increase while the claim is pending?
• Are there application, origination, servicing, or other charges?
• What happens if the claim is dismissed, loses at trial, or resolves for less than expected?
• Does the agreement affect settlement decisions or the attorney’s control of the case?
• Who can answer questions about the agreement before it is signed?

How Nonprofit Funding Can Differ

The Milestone Foundation is a 501(c)(3) nonprofit litigation funding company. Its nonprofit mission is intended to keep the focus on expanding access to justice and supporting plaintiffs, while the funding agreement still needs to be reviewed on its own terms.

As with any funding option, plaintiffs should understand the costs, repayment terms, eligibility requirements, and possible effect on their recovery. Nonprofit status does not remove the need for careful review or legal advice.

What Is The Next Step?

If a plaintiff and counsel believe funding may be appropriate, they can gather the case information and review the available options before making a decision. To learn more about requesting assistance, visit Apply for Funding. Attorneys can also review the For Attorneys resources, read the Frequently Asked Questions, or contact The Milestone Foundation with questions.

Frequently Asked Questions

Is data breach lawsuit funding the same as a conventional loan?

Not necessarily. Data breach lawsuit funding is commonly structured as non-recourse funding tied to a potential recovery, while a conventional loan generally requires repayment under its loan terms regardless of the case result. The written agreement controls, so the plaintiff and attorney should review it carefully.

Does applying guarantee funding?

No. An application does not guarantee approval, a particular funding amount, or a particular case result. Eligibility depends on the facts of the claim, the available information, the funding terms, and the review process.

Should an attorney review the agreement?

Yes. A plaintiff should have an opportunity to understand the agreement and discuss it with counsel. The attorney can help the plaintiff consider confidentiality, professional responsibilities, settlement authority, repayment, and the possible effect on the plaintiff’s net recovery.