Two bills intending to put checks on the rapidly expanding litigation finance industry have made progress through the initial stages in Louisiana, as legislators attempt to capitalize on the shift in governorship following last year’s vetoed effort.
The first bill mandates parties to disclose litigation finance agreements within a span of 60 days following the filing of a civil action. Gaining approval from the state House, the bill is currently pending with the Senate Judiciary Committee.
The second piece of legislation requires parties to disclose the existence of litigation finance in lawsuits if the financing originates from a foreign entity. This bill has been cleared by the state Senate and the House Committee on Civil Law and Procedure and is awaiting approval by the full House.
These bills form part of a wider movement happening across several states to limit financial investors from covering the costs of lawsuits in return for a share of the proceeds in successful cases. The US Chamber of Commerce is actively pushing for such legislation, arguing that the $15.2 billion litigation finance industry is a facilitator of frivolous lawsuits.
However, last year, Democratic Governor John Bel Edwards vetoed similar legislation put forth by Republican-controlled House and Senate in Louisiana. Edwards argued that the bill requiring disclosure of litigation financing favored big corporations in civil suits. This year, with Republican Jeff Landry as the governor, Republican lawmakers are hopeful of a different outcome.
Jeremy P. Stine, the State Senate Majority leader, introduced the second bill (SB355), which requires disclosure of litigation financing from foreign governments that concern the state Attorney General, such as China, Russia, and Iran. This mirrors federal legislation introduced last year by Senator John Kennedy (R-La.) and House Speaker Mike Johnson (R-La.).
The outcomes of similar litigation finance bills have been mixed across state legislatures. For instance, earlier in the year, Indiana successfully enacted legislation that blocks foreign entities from funding lawsuits. On the other hand, legislation requiring disclosure of litigation finance agreements and foreign investments failed to proceed ahead in the House in Florida.
As per a post by Matt Webb, a senior vice president for the Chamber’s Institute for Legal Reform, plaintiffs face minimal risk in bringing forward claims, legitimate or not, with the aid of outside funding. He argued that such a dynamic often pressures businesses to settle out of court to avoid the costs and uncertainties of protracted litigation, even when the claims against them lack merit. Find his full statement here.
In Louisiana, though the Chamber supports Representative Chenevert’s bill, it labels Senator Stine’s proposal as “underinclusive”, suggesting that it only addresses foreign funding, despite the plethora of ways foreign investments could be funneled into US investment vehicles to influence litigation.
Despite the opposition, there are defenders of litigation finance at the state level. Dai Wai Chin Feman, a director at funder Parabellum Capital, accused the Chamber of targeting states without litigation financing such as Louisiana with bills aiming to lead the charge towards national regulation.
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