Assignment of Proceeds

An assignment of proceeds is the contractual mechanism underlying a plaintiff cash advance, under which the claimant assigns the funding company a defined interest in the proceeds of a specified claim — up to the funded amount plus accrued fees — rather than assigning the claim itself or any control over it. The assignment attaches only to money recovered from the claim (settlement, judgment, or verdict proceeds) and is drafted to be non-recourse, meaning the funding company's right to collect exists only against those proceeds and does not create personal liability for the claimant if the case produces nothing. Most funding agreements pair the assignment with an irrevocable instruction to the claimant's attorney to pay the funder directly out of the settlement disbursement before any funds reach the client, which the attorney separately acknowledges. Because the claimant — not the funder — remains the real party in interest and retains full control over case strategy and settlement decisions, a properly drafted assignment of proceeds is structured to avoid the transfer-of-control problems that concern courts and state bars evaluating whether a funding arrangement crosses into champerty or unauthorized claim ownership. The precision of the assignment language — what proceeds it reaches, what it excludes, and how it is extinguished if the claim resolves for less than expected — is among the most heavily negotiated drafting points in consumer funding agreements.

The assignment's scope determines what a funder can actually collect if a case underperforms, so funders draft it to reach gross proceeds before deductions rather than the claimant's net take, and require the attorney's separate acknowledgment specifically because an assignment alone does not bind counsel to honor payment instructions at disbursement.

Disputes over whether an assignment created an ownership interest in the claim itself — rather than a mere contractual right to proceeds — are a primary vector by which courts have invalidated or reformed funding agreements, so funders keep the language narrowly proceeds-based and avoid any provision suggesting control over the underlying litigation.