While an Arizona state lawmaker is proposing legislation this session to increase the transparency around third party litigation funders, a new bill on Capitol Hill seeks to do the same at a federal level.
Sponsored by U.S. Rep. Darrell Issa (R-CA) and cosponsored by Rep. Mike Collins (R-GA) and Scott Fitzgerald (R-WI), the bill would require disclosure of all parties receiving proceeds from civil litigation.
What is third party litigation funding?
Third-party litigation funding (TPLF) is when an entity or individual finances a lawsuit in return for a portion of the settlement or awarded damages.
These entities are not parties to the lawsuit and can range from private institutions to publicly traded companies and foreign nations’ sovereign wealth funds.
What the business community is saying:
“Rep. Issa recognizes the major risk third-party litigation funding poses to America’s economic and national security. His legislation will help protect the integrity of our judicial system by ensuring that outside financiers are not secretly directing or profiting from litigation they are funding,” the U.S. Chamber of Commerce said. “It is common sense that defendants, plaintiffs, and judges should know who is seeking to profit off litigation. The U.S. Chamber of Commerce thanks Rep. Issa for his continued leadership and strong work on this important issue.”
“Trucking is essential to our economy, delivering the items Americans need every day and supporting quality jobs. When the plaintiffs’ bar perverts civil litigation into a casino game of ‘jackpot justice,’ the costs are borne by everyone—not just trucking companies, but consumers too in the form of higher insurance rates and higher prices for goods. The secretive nature of these predatory loans can even surprise plaintiffs when they learn they must pay back the lenders at usurious rates,” said American Trucking Associations Senior Vice President of Legislative Affairs Henry Hanscom. “We commend Congressman Issa for leading this effort to shine a light on third-party financiers seeking to exploit the judicial system to make a quick buck. This reasonable reform would protect hardworking truck drivers and ensure justice and fairness drive accident litigation outcomes, not profits.”
Sen. Leach seeking reforms in Ariz.
State Sen. Vince Leach (R-SaddleBrooke) recently introduced S. 1215, a bill that would standardize disclosures for litigation funding across the state, requiring that all agreements must be disclosed to the court and all parties involved.
The bill would preserve consumer control by ensuring that funders cannot influence the outcome of decisions, nor will they be able to receive more of the proceeds than any of the involved parties.
This is the second consecutive session that legislation to shine a light on lawsuit financing has been introduced in the Arizona state Legislature.
Third party litigation funding reforms have been adopted recently in Indiana, Louisiana, Montana, and West Virginia.