The litigation finance industry, valued at $15.2 billion, is under increased scrutiny as Representative Darrell Issa (R-Ca.) is set to propose new federal legislation that mandates the disclosure of third-party funding in civil lawsuits. The proposed bill would compel all named parties in a lawsuit to identify individuals or entities entitled to payment contingent upon the lawsuit’s outcome, along with sharing any related funding agreements with all parties involved. This initiative addresses concerns about transparency within an industry where outside investors fund legal battles in exchange for a share of the potential reward or settlement.
This forthcoming proposal from Issa marks the fourth attempt at introducing federal legislation aimed at regulating litigation finance. Prior iterations include initiatives from Senators Joe Manchin (I-W. Va.) and John Kennedy (R-La.) as well as proposals by Senator Chuck Grassley (R-Iowa), none of which advanced beyond committee stages. Within Issa’s proposal, exceptions exist for loan repayments, including loans with interest limits up to 7% and attorney fees.
While the bill is expected to face hurdles in a divided Congress, particularly with looming elections, it was precipitated by a House judiciary committee hearing led by Issa in June. The discussions revolved around how litigation finance transparency could address concerns, including national security issues and the potential influence of external funders in litigation strategy.
Some U.S. states, such as Louisiana, Indiana, and West Virginia, have already enacted rules this year governing litigation funding, often backed by the U.S. Chamber of Commerce. These state-level actions are part of a broader effort to mitigate what critics argue could lead to an uptick in frivolous legal actions due to the availability and influence of third-party financial backing.
For further details, you can read the full article on Bloomberg Law.