Rachel McCarthy on Nonprofit Plaintiff Funding, Industry Reform, and the Fight for Access to Justice

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Welcome to Raising the Bar with RebuttalPR, the podcast where we elevate the stories of the plaintiff's bar and dive into the key trends shaping the civil justice system today. I'm your host, Ray DeLorenzi, and in each episode, we'll bring you insightful interviews with leading attorneys, expert perspectives on current legal events, and in-depth discussions on the issues that matter most. Now, let's jump in.

What we're doing is we're giving funding for basic living expenses. It's someone's about to be evicted if they don't pay their rent this month. You would assume, oh, this person's case is already settled. But if their rent is due in two days and they're not getting the money until, you know, a month or two from now, they need help in that little space.

Ray: Hey, everyone, welcome to a new episode of Raising the Bar with RebuttalPR. I'm your host, Ray DeLorenzi, and today I'm honored to be joined by Rachel McCarthy, who's the executive director of the Milestone Foundation. For those of you unfamiliar with the Milestone Foundation, they are a nonprofit organization that helps people, plaintiffs specifically, who have suffered a catastrophic accident or injury in their financial time of need. Milestone Foundation is that lifeline for many of these plaintiffs. Founded in 2016, they've extended millions of dollars in funding to nearly a thousand plaintiffs at this point, working with hundreds of law firms, again, helping these individuals get that bridge to when their case gets resolved. So, with that introduction, Rachel, thanks for being on the podcast today.

Rachel: Thank you so much for having me, Ray.

Ray: So, Rachel, I always like to talk to the people behind the work before we get into the work. Tell me, you know, Rachel, growing up, and how did you get to the Milestone Foundation?

Rachel: You know, I was always really interested in issues of justice, like social justice. And I went to a Jesuit college that I guess sort of further ingrained in me this idea of helping other people, of serving others, you know, getting involved with social justice issues and realizing that it's important for us as individuals to do whatever is within our power to help make the world a better place. Sounds cliche, but it's just something that I've always been really interested in. So I graduated at a time where the economy was terrible. And I got a job as an AmeriCorps member with a nonprofit here in Buffalo, New York, which is where I'm located. So I did the nonprofit thing a little bit after college, and then I thought about law school. So I went and became a paralegal at a firm in New York. And I spent three, four years as a paralegal before deciding I didn't want to go to law school. So I do love the legal industry, but I was so terrified of law school debt for some reason that I was like, I don't think I can make this commitment. So then I moved to San Francisco. I did the tech startup scene for a few years and I moved back to Buffalo at the beginning of 2017.

I was still working for one of my tech startups back in the Bay, but I started looking here for something and a friend of mine connected me with John Baer. So John is the founder of the Milestone Foundation. He's also the founder of Milestone, which is a settlement administration company. And at that point, the Milestone Foundation literally was just being birthed as an idea, as an organization. There was a board, and that was about it. So my friend said, I don't even know if they're looking to hire anyone full-time. I don't know what's going to happen, but you should meet John and have a conversation with him. So I met with John and we created this hybrid role for me where I would start the foundation, you know, get it off the ground, get its 501c3 status. And I would also do some marketing for Milestone for-profit. That way I could ensure I had enough to do on a daily basis. We didn't know what was going to happen with the foundation, so it wasn't like a full-time thing at the time.

So I did both of these roles. I was half in each world for a couple of years. And then by the end of 2019, we realized you got to pick a lane, Rachel. You can't do both. We need a full-time person for both of these things. So at the time, I went the for-profit route and I went over to Milestone and I got involved with marketing there and business development. And I did that up until this past April, last year. So April, almost a year ago, actually, John was looking for a new executive director, and he reached out to see if I would be interested in coming back to the foundation. And it was just the right time. I was really interested in a new challenge, and it was cool to see how far the foundation had come since my first term. And, you know, back then it was just me. I did everything. We got our 501c3 status. We got things off the ground. But now returning, you know, there's a team of four, five of us now. It's more like a mature organization, so it's been fun.

Ray: Let's go back to 2016 when the idea of the foundation, as you said, was being birthed. Think back to that, and what was the sort of nugget, the idea that was essentially there's a need here, and we should create a foundation to fill that need?

Rachel: So at the time, John Baer was a structured settlement consultant. He was a settlement planner. He was working with plaintiffs and their attorneys when a settlement was coming to help them plan for the, you know, the financial plan for the settlement. And he continually noticed that these plaintiffs would owe a significant portion of their settlement back to these funding companies. And he was like, how is this allowed? And also, how is there no alternative to this? You know, if a plaintiff is in need, they don't really have any options other than these traditional funding companies. So that's where the idea came from. And so he and his wife Amy had multiple conversations about it, decided we're going to attempt to do this as a nonprofit and see if it can work. And so, I mean, here we are 10 years later. So it works. It's not without its challenges, but it's working.

Ray: I want to take a minute to sort of define the market. People hear litigation funding, the term gets thrown around a lot, and it means a lot of different things. You know, on sort of one hand, you have commercial litigation funding where you have lenders loaning money to law firms. And that's not what we're talking about here. There's a second arm of the litigation funding world in which money is loaned to plaintiffs, and their cases are reviewed, and there's essentially an estimate of the chances of them recovering, and therefore the lender getting a recovery. And just to put a point on it, my view of most of these companies is that they are predatory lenders, essentially. These loans are awful. And at the same time, they are working with people who may be desperate and for whom this is the only option, but that desperation also breeds really awful incentives. So, yeah, why don't you walk through it from your lens? But I also want to put a stake in the ground as to where, morally, I view the commercial side, the for-profit side, and the consumer side.

Rachel: So you mentioned commercial litigation funding, which a lot of attorneys and firms are familiar with. This is consumer litigation funding. So you're funding the consumer. You're funding the plaintiff. You're essentially advancing a portion of their future recovery. It's dependent on them recovering. So, if there's no settlement in the end, they don't have to pay anything back. So, it's called non-recourse funding. There's no recourse for the funder if the plaintiff is unable to pay it back. That is sort of what's justified the traditional funding industry to charge the interest rates that they do, because they're taking on a lot of risk. There's a chance that your case might not succeed, or maybe you'll recover, but you'll only recover a small portion of what you and your attorney hoped to recover. So, the way that the industry traditionally has been is: yes, there's these for-profit companies that help plaintiffs who need just a little bit of funding to get through to the end of their lawsuit. And once the settlement is received, then they pay the advance back plus interest, etc.

So you're not alone. Many, if not most, attorneys that I speak with initially just really dislike this industry. And they dislike consumer litigation funding because they've seen how it has negatively affected their clients. They've seen how much of the settlement at the end of the day goes toward the traditional funder and then how much goes to the plaintiff. So there are a lot of attorneys that I speak with who will say right off the bat, I never recommend it to my clients. Or, you know, I tell my clients I won't agree to it, et cetera. And I get it, because they've seen the way that traditional companies have charged interest rates that would make your jaw drop. They're crazy numbers that you can't even understand how they're allowed to get away with it, but there's just very little regulation in non-recourse funding. So, but then once we kind of explain how we're different, people tend to get on board and appreciate that there is an alternative.

Ray: So why don't you explain a bit how the Milestone Foundation is different? And also just to put a number on it, and maybe you've seen different numbers, a lot of these for-profit ones charge 2% to 3% interest monthly, which sounds like, oh, not a lot, but then that's like 40% APR. It's just astronomical fees. Explain to me the pitch you give to a lawyer when they have an allergy to the whole concept, understandably, but then you explain how the foundation really is a differentiator.

Rachel: Yeah. So, given that our MO is to help people and not turn a profit from them, I mean, we do still charge some interest, but it's just to keep the lights on. And so our pre-settlement funding is 15% simple interest. That means it never compounds. It doesn't compound monthly. It doesn't compound biannually. That's another thing you'll see sometimes. The traditional funders intentionally use very confusing language, so plaintiffs don't understand. I mean, I don't even understand sometimes when I'm looking at contracts that we've been forwarded from other attorneys or from plaintiffs themselves. I really have to sit down and do the math to figure out what someone might owe. And I think that I pretty much have a good handle on this industry. So, if it's difficult for me to understand, I think that it could be complicated for the average person to understand.

So we offer simple interest, 15% for pre-settlement funding. For post-settlement, which means there's already a settlement agreement out there, it might be a few more months until all the liens are resolved, or it might be a couple months or even a couple weeks until the plaintiff is actually receiving the money, but they need some money now. If it's post-settlement, it's 10% simple interest. So it's significantly lower than what you would see if you go to a traditional funding company. It's significantly lower than if you were to take out a credit card to pay for some of those needs that you might have. And a lot of the times, what we're doing is we're giving funding for basic living expenses. It's not something crazy. It's someone's about to be evicted if they don't pay their rent this month. And that's where the post-settlement stuff is interesting because you would assume, oh, this person's case is already settled. But if their rent is due in two days, and they're not getting the money until, you know, a month or two from now, they need help in that little space. And that's why it's tough when attorneys have a hard line, like, no, I don't do this. But what else is your client supposed to do? You know, where are they supposed to go? You don't want them going somewhere worse to get the money or, you know, getting creative.

So it's a little bit of bridge funding. The average advance that we provide is six to $7,000. It's for utility bills. Your vehicle broke down, and you need to get to your doctor's appointments because you had this tragic accident happen, and you just need a couple thousand dollars to buy a new vehicle. So, it's really just to cover the basics. It's nothing more than that, at least for us. I can't speak to all the traditional funding companies, but we try to have conversations with every plaintiff that applies, and we try to really assess what they need because we don't want to have them take out more than they need and then owe more. I don't know that that's the case with traditional funding companies. I think a lot of them will give you whatever you ask for. So if you are a plaintiff and you ask for 30,000, they might just say sure because at the end of the day, that's more profit for them. So we really try to keep it as simple as possible and figure out exactly what the plaintiff needs and give them that little bit to help them get through to the rest of their lawsuit. So, it's really just supposed to be a little stopgap solution, you know.

Ray: So you mentioned earlier how lawyers often have a hard line no. And to put myself in their shoes for a moment, it's easy to understand where that may have come from when they've heard from a lot of for-profit lenders who, again, are taking their clients' pretty much entire recovery. What's been the education process for you in speaking to law firms? Are they familiar with the foundation? Are they sort of in disbelief that what you're telling them is too good to be true? Is it industry awareness that they need? What is that like for you?

Rachel: Yeah, I mean, we definitely suffer from an awareness issue right now. I think that we're a best-kept secret of the industry. We work with, at this point, over 400 law firms, but you know how many law firms there are across the country. I think that a lot of people wouldn't know to look for a nonprofit plaintiff funding company if you're searching for something on the internet, because we're the only one in the whole country and probably the whole world that does this. So it's not something that people might think to Google search. And so, really, you're only going to find out about us if you hear about us from an attorney friend of yours or a conference that you're at or a listserv or, you know, some podcast, because it's just a very niche service that we're offering.

And it's just hard for people to understand how we're a nonprofit, especially because they do hear those numbers: 10% simple interest, 15% simple interest. And the key there is that all of the advances that get paid back to us, all the money that gets returned to us, it just goes back into the pool of funds that we can give out to future people. So nobody is making a profit, no one is turning a profit. That's the nonprofit piece of it. It just comes in the door and it goes out the door. And that's the same thing with our donations too. I mean, if someone was to donate to us, or a corporate sponsorship, that money just goes to helping us advance our mission and do more work. So, to answer your question, people are a little bit hesitant at first, because, like I said, they generally have their guard up about consumer funding. But when they understand what we're saying and that we're a nonprofit and we're different, they're super receptive to it. You know, the negative thing is it requires me having a lot of individual conversations, and there's only so many of us, me or anyone on my team. So we try to tell as many people as possible. But I still think there's a huge portion of the trial lawyer community that is not aware of what we do and the service we provide and that we're an option for their clients. So that's our number one goal: just getting the word out more.

Ray: I'm curious about the limits of the foundation in the sense of: is your ceiling a product of the fact that you are a nonprofit, you can't lend to hundreds or thousands of plaintiffs at any one time? Is that the ceiling, or is it a lack of education where there's probably way too many plaintiffs going to commercial funders? You know, what are those levers?

Rachel: Yeah. Well, so it is the awareness piece, but it's more so the funding and the way that it all ebbs and flows, because you never know when cases are going to settle and you're going to be paid back. So at some point in time, you know, this week particularly, we've received a lot of payoffs from a certain type of litigation. And so we feel, I don't want to say we feel flush with cash because that's never the case with a nonprofit, but we feel a little bit in a better position. So, some of it is timing. If we get 10 plaintiff requests this week and we have a lot of funds, it's easier for us to say yes. We try to say yes as much as possible. So, even if that means, like, you know, moving things around or trying to see if we can give someone a little less than they originally asked for, we hate to turn anybody down.

But we are, you know, on the flip side, we are a little more strict with the funding requests that we will fulfill, because we don't have those interest rates that allow us to take on a high risk. So we almost need what attorneys would consider like slam dunk cases, where they feel fairly confident that there will be a recovery. Because for a nonprofit, every loss is just money out the door, you know? And so we have a little bit of a higher standard than some of the other companies that are out there. With some of the other funding companies, you don't have to provide very much information for them to approve you. We speak with every plaintiff, we speak with every attorney or at least a paralegal in the firm's office before we move the request for funding along to our commission. So, our process is a little bit slower. I mean, it takes a couple of days. And I do tell attorneys who have relationships with traditional funding companies that they might feel some sort of loyalty to for some reason, that there's still a need for those relationships because those companies sometimes can turn money around in 24 hours, and we typically can't. I mean, we can, if there's a really urgent need and we can make it work, we'll try to.

And there's also a threshold that we don't give more than $25,000 per person, because our thought process is we would rather help five plaintiffs with $5,000 advances each than one person with $25,000. We want to do as much good for as many people as possible. And so, in some instances, a client will need $40,000 or $100,000. That scale is just too big for us. So, in those cases, there is definitely still a need for the traditional industry. So, attorneys can keep those relationships, and we'll never be able to take over the industry, but we try to do as much good as we can.

Ray: I want to go back to the network of 400 attorneys and firms that you've been able to create over these years. Has that been through, you know, one-on-one outreach? Is it attorneys talking to other attorneys who've had a positive experience, saying, hey, you need to be calling the Milestone Foundation? Or also plaintiffs finding you and educating their own lawyer about what you're about? Curious how that has come to be.

Rachel: Yeah, it's more rare for a plaintiff to find us on their own. It does happen. I mean, Google search and it'll come up hopefully. But it's more rare that we get to a plaintiff first. Usually they come to us by way of their attorney recommending us. And I will say, a lot of the attorney relationships have come, like you said, someone referring us to their friends or maybe co-counsel or something like that. We are lucky to have some attorneys who are huge advocates for us and will tell their firm and the associations that they're parts of, and you know, they'll help us get the word out. We go to a lot of conferences, we try to sponsor things when we can. Obviously, being a nonprofit, it's hard to justify a lot of marketing spend and sponsorship spend, but sometimes you gotta do it. So we get out there.

And I will say, our founder, John Baer, had started with a really wide network of trial lawyers when he started the foundation. And it was originally called the Baer Foundation after him and his wife Amy's last name. And he was able to tap into his existing relationships with different groups like AAJ and MTMP and WEM and Injury Board, organizations where he had established a reputation from his years in the industry before he started the nonprofit. So we were able to leverage those preexisting relationships when we launched. And then we've just kind of grown on it since then.

Ray: I want to pivot a little bit to talking about the industry at large and what the Milestone Foundation has been doing in terms of seeking reform or trying to educate others about the need to reform an industry that, you know, in my view, should reform itself before others come in and try to do it for them. So, anyway, what's been your work on that?

Rachel: So, we would love to do more of this. And this is one area where we're always just like, man, I wish we had more bandwidth for lobbying work or more policy work, but it is something we're really interested in. And the timing is right because there have been statewide trends for more regulation and more consumer protection with respect to litigation funding lately, so in the past year and even this upcoming year, and particularly in New York State, which is where our headquarters is. So, it's been interesting to see because New York passed the Consumer Litigation Funding Act at the end of last year, which is going into effect in June of this year. And more states are following suit. So, back to the point of this industry being where the traditional funding companies are able to sort of charge whatever interest rates they want, it's because it's a largely unregulated industry. And it has come onto the states' responsibilities to be more protective of their people.

At this point, there are certain states that are already more protective than others. So, Colorado, for instance, Arkansas, Maryland, these are states that have more strict rules and regulations in order to be a funder there. And so, in those states, you won't find as many options. The nice thing about us is that since we're a nonprofit and since our rates are so low, we are able to fund across the country. But, you know, we're still subject to changes and rules and regulations, too. So when New York or California changes rules about how things have to be worded in your contracts or your agreements, we have to follow those as well. But ultimately there have been more protocols put in place with respect to the language included in the documents. You know, per my earlier point where it's super confusing to folks what they're signing up for and what their payment schedules might look like. New York and other states are asking for clearer language in the agreements, clear identification of the repayment schedules, and certain timelines have to be disclosed.

One thing that is omitted from the New York Act, and I think is the biggest piece of the puzzle, is that there are no caps on the interest rates that these funding companies can charge. So while it sounds great, the Consumer Litigation Funding Act, the biggest problem, which is the interest rates, is still unchecked. So it's almost like a hollow bill, where it sounds like you're doing a lot to protect consumers, but at the end of the day, it's not enough. And I hope that other states, when they're crafting their bills, will recognize that and will implement some caps. You know, a lot of the traditional funding companies will cap at two or three times the amount that was taken out, but a lot won't. And there just needs to be more attention paid to these interest rates. So, like you said, it can be 40%, 50%, 100%. Sometimes it's 100%. It's just insane.

And then there's arbitrary fees, too. And I think that that's something that the bills need to include, is better disclosure on the fees that are being charged. Because if you look back at these agreements, sometimes they'll throw in a paper filing fee or an admin fee or an origination fee or a contract review fee or who knows? And then at the end of the day, those fees. I saw an agreement recently where the plaintiff was asking for $3,000 and the fee was $1,000. Well, it was $990. So it was almost a third of what they were being lent, just for a fee. So it was like, that's just insane.

Ray: So with the Milestone Foundation celebrating its 10th anniversary this year, what's in store to mark that? And what are you thinking about for the next 10 years?

Rachel: So we are having our celebration in July during AAJ's convention. It will be both a 10-year anniversary celebration as well as our annual fundraiser, the Compassionate Counsel Awards, where we recognize attorneys who embody the values that we focus on: being ethical, being a leader, being a true advocate for your clients, caring about your clients' long-term success and their financial well-being. So, we do this annual Compassionate Counsel Awards, and this year we're going to turn it into a 10-year celebration as well. And it will be in Chicago in July. So hopefully, we can capture a lot of attorneys who are already in town for the AAJ convention.

But for the long run, for the next 10 years, well, policy, you know, getting more involved in helping to influence consumer protection laws would be wonderful. And we want to increase our reach and grow our work and expand the mission so that we don't ever have to say no to anybody, and we don't have to have thresholds like maximums in place. And we can help fund more families and just increase the attorney awareness about what we're doing. I think that the first 10 years we grew, but there's just so much opportunity for us to grow faster. So, with the right support from the trial lawyer community, we can certainly do that. It really is an appreciated service, even if you are an attorney who hates it. The plaintiffs that we work with are so grateful and so appreciative for the support. And, you know, it really is niche, but it's definitely needed.

Ray: I want to wrap up on two different notes here. First, I'd like you to tell me the story of a plaintiff that you helped, an individual you helped. You said you speak to all of them. When you're done doing this work, you'll never forget this person. Is there someone that stands out to you?

Rachel: There's one from my early days that I remember, from my first term. He was a veteran, but he wasn't hurt in combat or anything like that. He was back in the States and he was in an accident, but it was a product liability case. There was something wrong with the vehicle that he was in, and he became a quadriplegic as a result. So, somebody who has already dealt with a lot of trauma being a serviceman overseas comes back to the States and then has this tragedy happen, probably a freak accident, you know, and became a quadriplegic. And we helped him out to give him money to transform his home so that he could adapt to his new lifestyle. And he is actually a super positive person to this day, like the type of person who has not allowed this to turn him into a negative person. I mean, I'm sure at some points, but he's just super positive and trying to make the most of what he's got. And he was so appreciative. And I'll always remember that.

Ray: Again, as you mark a 10-year anniversary, I assume part of that celebration is also encouraging the trial lawyer community to step up and support the foundation. I will say RebuttalPR is a supporter of the foundation.

Rachel: Yes. It's really important.

Ray: And we like to support organizations that align with having a strong civil justice system, that care about the Seventh Amendment and are doing right by the people they serve. So, I'd like you to end this. What's the pitch to the trial bar, the trial lawyer community, as to why they should be supporting the Milestone Foundation? Although I've sort of just said it for you, I think you can probably do a bit better than I can.

Rachel: It's like, you're in PR! I think it's about access to justice. I mean, the people that we help for the most part are low to moderate income folks. They don't have a safety net. They don't have a lot of savings. They're going through the worst time, probably the worst time in their lives because they're dealing with some tragedy or trauma. And it's an access to justice issue. If they don't receive a little bit of help now, they might not be able to see their lawsuit through to its just end. And so, if you want to do best by your clients, empower them to stay the course with their lawsuit so that as an attorney, you're able to get them the justice they deserve. If all they need in the meantime is a little bit of help for some financial stability so they can see their lawsuit through, that's the piece where it's about access to justice. These defendants might have unlimited resources when it comes to time and money and the ability to fight cases. And they know that the longer they draw these cases out, the less a plaintiff will accept. And that's a whole David and Goliath thing. So it's about empowering your client and giving them the resources to get to the justice that they deserve. And that's true for any of the companies in this industry, but just being mindful that we are doing it as a nonprofit and that we're the only ones doing it as a nonprofit, we are appreciative of any support because whatever we get from the trial lawyer community allows us to keep doing this work.

Ray: With that, Rachel McCarthy of the Milestone Foundation, thank you so much for joining the podcast today. Really appreciate the conversation.

Rachel: Thanks, it was fun.

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