Litigation Funding Disclosure in New York: What Lituma v. Liberty Coca-Cola Means for Both Bars — and for Injured Clients

Last reviewed: June 2026

Key Takeaways

• For the first time, a New York appellate court has affirmed an order compelling a personal injury plaintiff to produce discovery into third-party litigation funding. In Lituma v Liberty Coca-Cola Beverages LLC, 243 AD3d 504 (1st Dept 2025), decided November 20, 2025, the First Department unanimously affirmed a Bronx County order vacating the note of issue and ordering funding-related discovery.
• The standard is the ordinary one — CPLR 3101(a) “material and necessary.” The court held that litigation funding materials were discoverable because they could reveal a financial motive for fabricating the accident. No special funding-disclosure rule was created; the existing discovery standard did the work.
• The holding is fact-bound — for now. Defendants in Lituma had pleaded a fraud counterclaim and affirmative defense, alleging a staged rear-end collision, and supported the motion with an affidavit connecting plaintiffs, medical providers, and participants in other suspicious accidents. Whether courts extend funding discovery to garden-variety injury cases without a fraud predicate is the open question.
• Settlement dynamics shift when the defense can see the funding terms. A funding agreement shows the advance amount, the accrual rate, and — by simple arithmetic — the plaintiff’s burn rate and net-recovery pressure. That is leverage.
• A parallel statute is about to reshape the consumer side. New York’s Consumer Litigation Funding Act (A804-C/S1104-A), signed December 19, 2025, takes effect June 17, 2026 — the day after this article publishes — with a 25% cap on funder recovery, Department of State registration, plain-language contracts, and a 10-day rescission right.
• Plaintiffs’ counsel should treat funding files as presumptively reachable in any case where a fraud defense is plausible, and should manage what flows to funders accordingly. Privilege protection for funder communications in New York is not squarely settled — assume less protection than you would like.
• Claimants should understand pre-settlement funding before signing. It is a non-recourse advance against case proceeds — not a loan, not an assignment of the claim itself — and the effective cost can be substantial. The new statute helps, but it does not apply to agreements signed before June 17, 2026.

On November 20, 2025, the Appellate Division, First Department did something the New York defense bar had been requesting — and the plaintiffs’ bar had been resisting — for the better part of a decade: it affirmed an order compelling a personal injury plaintiff to open up his third-party litigation funding file in discovery. The case is Lituma v Liberty Coca-Cola Beverages LLC, and when the New York Law Journal covered it on January 5, 2026, the headline was blunt: the appellate court had “cleared a path” for disclosure of third-party litigation funding in personal injury lawsuits.

I litigate New York injury cases from both sides of the table — plaintiffs’ work and insurance defense — so I have spent time on both ends of this exact discovery fight. This article is the practitioner-level read of what Lituma actually held, where its limits are, how it changes settlement math, and what it means in combination with the Consumer Litigation Funding Act that takes effect the day after this article publishes. The last section is written for injured clients deciding whether to take a pre-settlement advance at all.

What Third-Party Litigation Funding Is — and How Big It Has Gotten

Third-party litigation funding comes in two distinct flavors, and conflating them causes most of the confusion in this debate.

Commercial litigation finance is institutional capital invested in commercial claims or law-firm portfolios in exchange for a share of recoveries. According to Westfleet Advisors’ 2024 Litigation Finance Market Report, 42 active U.S. funders managed approximately $16.1 billion in assets dedicated to commercial litigation finance, though new capital commitments contracted to about $2.3 billion in 2024 — down roughly 16% year-over-year and nearly 30% below 2022 levels.

Consumer pre-settlement funding — the kind at issue in most New York personal injury cases — is much smaller per transaction and much more personal. A funder advances money to an injured plaintiff against the future proceeds of the case, on a non-recourse basis: if the case recovers nothing, the plaintiff generally owes nothing. The U.S. Government Accountability Office’s 2022 report on third-party litigation financing found that consumer funders typically advance relatively small amounts — commonly in the $1,000 to $10,000 range — that plaintiffs use for rent, medical bills, and living expenses while their cases are pending. The GAO also found something else important: comprehensive data on the consumer side is scarce, because until recently almost no jurisdiction required these companies to register or report anything.

Why does the defense bar care so much? Because in New York, the growth of consumer funding has coincided with the exposure of organized fraud operations — networks of recruiters, clinics, and serial claimants generating staged-accident and inflated-treatment claims. This firm has litigated against exactly that ecosystem; our RICO injunction work in the Yan Moshe no-fault fraud litigation is one public example. The 2026 state budget added a criminal complement, extending staged-accident criminal liability beyond the driver to the organizers behind the scheme. Funding sits adjacent to that world in an uncomfortable way: an advance against a case that doesn’t exist yet is, in the fraud-ring model, seed capital. That is the theory Lituma let defendants test in discovery.

To be fair to the other side of the argument — my plaintiffs’-side clients live it — the overwhelming majority of funded plaintiffs are legitimately injured people using a $3,000 advance to avoid eviction while an insurer slow-walks their case. Funding exists because injured people cannot wait out a three-year litigation timeline on an empty bank account. Both things are true, and Lituma is the court system starting to sort one from the other.

What the First Department Actually Held in Lituma

The facts matter, because they define the holding’s reach.

Lituma arose from a rear-end collision in the Bronx involving a Liberty Coca-Cola vehicle. The defendants did not simply deny negligence — they pleaded an affirmative defense and counterclaim sounding in fraud, alleging the accident was deliberately staged: that the plaintiff sped up, cut in front of the truck, and braked hard to manufacture the impact. And they backed the pleading with evidence, including an insurance investigator’s affidavit connecting the plaintiffs to medical providers and individuals involved in other suspicious accidents with similar patterns. This was not a bare allegation of malingering; it was a documented systemic-fraud theory.

Against that record, Supreme Court, Bronx County granted the defense motion to vacate the note of issue and ordered further discovery — including materials related to the funding of the plaintiffs’ litigation. The First Department unanimously affirmed on November 20, 2025.

The doctrinal move is what makes the case important. The court did not invent a litigation-funding disclosure rule. It applied CPLR 3101(a) — the command that there shall be “full disclosure of all matter material and necessary in the prosecution or defense of an action” — and held, as defense-side analyses at Harris Beach Murtha, Hurwitz Fine, and Goldberg Segalla have all emphasized, that the funding materials were material and necessary because they could reveal a financial motive for fabricating the accident. New York courts have read “material and necessary” liberally since Allen v Crowell-Collier Publishing Co., 21 NY2d 403 (1968) — anything bearing on the controversy that will assist trial preparation. Once a fraud defense was properly in the case, funding evidence bore on it. Discovery followed.

The court also disposed of the plaintiffs’ procedural objection — that fraud counterclaims don’t belong in a personal injury action — by noting the plaintiffs had not timely challenged the amended answer. Practice point on both sides of that one.

The honest read on scope

Defense commentators are calling Lituma precedent-setting, and it is: the first Appellate Division affirmance of funding discovery against a PI plaintiff. But read the decision for what it required: a pleaded fraud defense plus an evidentiary showing of systemic fraudulent conduct. The First Department blessed funding discovery as relevance-driven, not as a categorical entitlement. The next eighteen months of motion practice will be about how much predicate is enough — does a low-impact collision plus extensive treatment get you there? A prior claims history? Or does it take Lituma-grade investigator work tying the plaintiff to a pattern? Trial courts will not apply this uniformly, and the Second Department (where my Long Island cases live) has yet to weigh in. Expect forum-by-forum variation before the Court of Appeals ever sees the issue, if it does.

Timeline: How New York Got Here

How Funding Disclosure Changes Settlement Dynamics

Here is the part the client alerts mostly gloss over, and the part that matters most in ordinary cases: a funding agreement is a window into the plaintiff’s financial clock.

A defense lawyer who obtains the funding file learns three things no bill of particulars ever reveals:

1. The advance amount and date — how much the plaintiff has already spent against the recovery, and when the meter started.
2. The accrual terms — how fast the funder’s repayment figure compounds. Pre-CLFA consumer agreements commonly priced in semi-annual compounding tiers; the effective annualized cost of older agreements can be steep, which is precisely why the legislature capped total recovery at 25% of gross proceeds going forward.
3. The plaintiff’s net-recovery floor — by arithmetic. Funder payoff plus attorney’s fee plus liens, subtracted from any offer, equals what the plaintiff actually takes home. A defense adjuster who can compute the plaintiff’s walk-away number at every offer level holds a real advantage in negotiation.

In plain terms: the defense learns the plaintiff’s burn rate. A plaintiff whose funding payoff grows every month has a structural incentive to settle sooner, and a defendant who knows the payoff figure can calibrate offers to land just above the plaintiff’s pain threshold rather than at the case’s fair value. That asymmetry is why plaintiffs’ counsel fought funding discovery for years — and it operates in every funded case, not just the allegedly staged ones. I have negotiated against adjusters who plainly had the payoff figure; you can feel it in how the offers are timed. We model how offers translate into net recovery in our guide to how much a car accident settlement is worth in New York, and the funding payoff line item changes that math more than most clients expect.

There is a defense-side caution here too, which I will state because I sit on that side of cases as well: a funding agreement is not proof of fraud. Legitimate plaintiffs take advances because they are injured, out of work, and waiting. A defense team that treats every funded plaintiff as a fraud target will burn credibility with trial judges fast. Lituma worked because the investigative predicate was real.

The CPLR Discovery Framework: Why Lituma Was Doctrinally Easy

Strip away the litigation-funding politics and Lituma is a conventional application of New York’s discovery architecture — which is exactly why it is durable.

CPLR 3101(a) requires “full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof.” Since Allen v Crowell-Collier, “material and necessary” has meant relevance in the broad, trial-preparation sense — New York’s standard is generous by design. We have written about how CPLR 3101 operates in practice, including the disclosure-and-preclusion mechanics that trip up litigants who treat discovery obligations casually.

But 3101 generosity has always had limits, and they are the same limits that will constrain funding discovery going forward. The leading example in the injury context is medical records: a plaintiff who sues for a shoulder injury does not open his entire lifetime medical history — only the conditions placed in controversy. Our analysis of the limits on medical record discovery in New York personal injury cases walks through that doctrine. The structural parallel is exact: discovery follows the issues actually in the case. In Lituma, fraud was an issue in the case — pleaded, supported, unchallenged. The funding file was therefore material to a live defense. In a case with no fraud issue, the materiality argument has to be built some other way (credibility? bias? claimed financial hardship as damages?), and courts have rejected funding discovery where the demanding party could not articulate one.

That is also the practice lesson hiding in Lituma’s procedural footnote: the plaintiffs lost partly because they never moved against the amended answer that added the fraud counterclaim. The discovery ruling was downstream of a pleading they let stand. Discovery fights are won at the pleading stage more often than the discovery stage.

What Plaintiffs’ Counsel Should Do Now

Treat November 20, 2025 as the date the assumptions changed. Concrete adjustments, several of which echo the professional-liability analyses now circulating:

One more, for the negotiation table: if the defense has your client’s funding file, price it into your demand strategy. Assume the adjuster knows the payoff figure and is timing offers against it. The counter is the same as it has always been for financially pressured clients — build the case for trial readiness so the burn-rate leverage has less to bite on, and get the serious-injury and damages proof locked down before the note of issue rather than after.

For Injured Clients: What to Know Before Taking Pre-Settlement Funding

This section is for the people the rest of the article talks about. If you are waiting on a New York injury case and a funding company is offering you money, here is the both-sides-of-the-table view.

What it is. Pre-settlement funding is a cash advance against your future settlement or verdict. It is structured as a purchase of a piece of your future proceeds, not a loan — and not a sale of your claim itself. New York law (General Obligations Law §13-101) has long prohibited assigning a personal injury claim to someone else; the funding industry exists in the space that rule leaves open. Because the advance is non-recourse, if your case recovers nothing, you generally repay nothing. That is the genuine consumer benefit, and it is why these products are lawful where a loan with equivalent pricing might not be.

What it costs. The repayment figure grows over time, and under agreements signed before the new law’s effective date, it can grow quickly. An advance taken early in a case that settles three years later can consume a painful share of your recovery. Every dollar of funder payoff comes out of your net — after your attorney’s fee and your medical liens, as we explain in our settlement-value guide.

What changes June 17, 2026. For agreements signed on or after that date, the Consumer Litigation Funding Act requires funders to register with the Department of State, caps the funder’s total recovery at 25% of your gross recovery, requires plain-language contracts, gives you 10 days to cancel without penalty, and prohibits the funder from influencing your settlement decisions or your lawyer’s strategy. Agreements signed before June 17, 2026 are not covered — the statute is not retroactive — so the date you sign matters enormously.

What Lituma adds. Understand that in some cases — particularly where the defense in a car accident case claims the accident was staged or the treatment was inflated — your funding paperwork can now end up in the defendant’s hands. Everything you write on a funding application should be as accurate as what you tell your doctor and your lawyer, because it may be compared against both.

Talk to your lawyer first. Not after. A short conversation can establish whether you actually need the advance (sometimes there are alternatives), whether the case timeline justifies the cost, and whether the funder is registered. If you are weighing an advance in a pending injury case and want a straight answer about whether the math makes sense, call (516) 750-0595 — the consultation is free, and our personal injury practice handles these questions every week alongside the underlying cases. Background on how injury claims and insurance interact is in our New York no-fault insurance guide.

Frequently Asked Questions

Is litigation funding discoverable in New York personal injury cases?

Yes, where the funding materials are material and necessary to a claim or defense under CPLR 3101(a) — that is the holding of Lituma v Liberty Coca-Cola Beverages LLC, 243 AD3d 504 (1st Dept 2025). In Lituma itself, defendants had pleaded a fraud counterclaim alleging a staged accident and supported it with investigative evidence; the First Department held the funding file was discoverable because it could reveal a financial motive for fabricating the incident. There is no automatic disclosure rule in every case: without a materiality showing, funding demands have been and can still be denied.

What was the Lituma v. Liberty Coca-Cola decision?

A November 20, 2025 decision of the Appellate Division, First Department — the first appellate decision in New York affirming an order that a personal injury plaintiff produce discovery into third-party litigation funding. The court affirmed a Bronx County order vacating the note of issue and compelling fraud-related discovery, including funding materials, in a case where the defense alleged the rear-end collision was deliberately staged as part of a broader pattern of suspicious accidents.

Does a defendant automatically get my litigation funding agreement now?

No. Lituma applied the ordinary CPLR 3101(a) material-and-necessary standard to unusual facts: a properly pleaded fraud defense supported by an investigator’s affidavit tying the plaintiffs to other suspicious accidents. A defendant still has to articulate why your funding file matters to an actual claim or defense in your case. Expect defendants to try more often after Lituma — and expect courts to demand a real predicate before ordering disclosure.

Is pre-settlement funding a loan in New York?

No. It is a non-recourse advance against your future case proceeds: if you recover nothing, you generally owe nothing. It is also not an assignment of your claim — New York General Obligations Law §13-101 prohibits transferring a personal injury claim itself. Because it is not a loan, traditional usury limits have not governed its pricing, which is why the Consumer Litigation Funding Act’s 25% cap on funder recovery (effective June 17, 2026) is significant consumer protection.

What does New York’s Consumer Litigation Funding Act do?

Signed December 19, 2025 and effective June 17, 2026, the Act (A804-C/S1104-A) requires consumer litigation funders to register with the Department of State and post a bond, caps a funder’s total recovery at 25% of the gross recovery, mandates plain-language contracts, provides a 10-day rescission right, and prohibits funders from influencing settlement decisions, legal strategy, or case timing. It applies to agreements signed on or after the effective date — earlier agreements are not covered.

Should I tell my lawyer before taking pre-settlement funding?

Yes — before you sign anything, not after. Your lawyer can check whether the funder is registered under the new law, whether the pricing fits the 25% cap, how the payoff will affect your net recovery, and whether you need the advance at all. After Lituma, there is an additional reason: in some cases your funding paperwork can be obtained by the defense, so what you state in a funding application needs to match your pleadings and your medical history exactly.

Counsel-to-Counsel

If you are plaintiffs’ counsel facing a Lituma-style funding demand or a fraud counterclaim you need briefed against, or defense counsel evaluating whether your record supports the predicate showing the First Department required, the Law Office of Jason Tenenbaum, P.C. handles this fight from both chairs. We work with referring counsel across New York on per-diem appearances, motion practice, appeals, and co-counsel arrangements — including discovery motion practice under CPLR 3101 and 3124, note-of-issue vacatur applications, and the fraud-pleading battles that decide these cases before the discovery motion is ever made. I have appeared in over 1,000 New York appeals; the firm’s practice is built on exactly this kind of procedural leverage. Call (516) 750-0595 — attorney inquiries answered same day.

Injured New Yorkers can call the same number for a free consultation about a pending case, a funding decision, or both.

Primary Sources

• Lituma v Liberty Coca-Cola Beverages LLC, 243 AD3d 504 (1st Dept, Nov. 20, 2025): Decision (Justia) · FindLaw
• New York Law Journal coverage (Jan. 5, 2026): “New York Appellate Court Clears Path for Disclosure of Third-Party Litigation Funding in Personal Injury Lawsuits”
• Consumer Litigation Funding Act (signed Dec. 19, 2025; effective June 17, 2026): A804-C bill page · S1104-A bill page · NYLJ signing coverage
• CPLR 3101 (scope of disclosure): Statute text
• General Obligations Law §13-101 (non-assignability of personal injury claims): Statute text
• U.S. GAO, Third-Party Litigation Financing: Market Characteristics, Data, and Trends (GAO-23-105210, Dec. 2022): Report page
• Westfleet Advisors, 2024 Litigation Finance Market Report (Mar. 2025): Report PDF
• Defense-bar analyses: Harris Beach Murtha · Hurwitz Fine · Goldberg Segalla

This article is attorney advertising and general legal information, not legal advice for any specific case. Every case differs; settlement values, discovery outcomes, and funding economics depend on facts and forum. Decisions interpreting Lituma are developing — this analysis will be updated as the Second Department and trial courts weigh in.