Senators Reintroduce LFTA Bill on Litigation Funding Industry

Senators Reintroduce LFTA Bill on Litigation Funding Industry

by | Feb 14, 2019 | Lawsuit Lending, Lawsuits

Billions of dollars are being invested in lawsuits by sophisticated hedge funds that, according to some of these firms, yield huge money for them. Yet neither the defendant, nor in many cases the actual plaintiffs, have any idea that this is happening.

That’s why today, Sens. Chuck Grassley, John Cornyn, Thom Tillis, and Ben Sasse reintroduced the Litigation Funding Transparency Act (LFTA), a groundbreaking bill that will help bring sunshine to this fast-growing industry that operates in the shadows.

The LTFA mainly addresses the third-party litigation funding (TPLF) industry, whose business model relies on backing big-dollar litigation in order to take large amounts of cash out of lawsuit settlements. The bill would require plaintiffs’ lawyers to disclose outside funding agreements in class action lawsuits and federal multi-district litigation.

The U.S. Chamber Institute for Legal Reform (ILR) has long warned that third-party funding is a practice that threatens to undermine justice in our courts, is expanding at an alarming rate, and occurs around the world almost entirely in secret. An executive for one of the largest funders even admitted to The Wall Street Journal last year that they “make it harder and more expensive to settle cases.”

The LFTA would also help rein in lawsuit lending, where lenders provide “up-front” cash to individual plaintiffs to cover immediate living or medical expenses during litigation. The loans typically contain sky-high interest rates—sometimes as high as 200 percent—that can leave borrowers with little to no recovery. The questionable tactics of this industry were highlighted in a front-page New York Times story last year.

Courts also should know when funders are involved to weigh potential conflicts of interest when assessing discovery requests and settlements. And since some states already prohibit investing in lawsuits under “champerty and maintenance” laws, the LFTA would help bolster legal defenses based on those laws.

The litigation funding and lawsuit lending industries have long fought against any transparency, including before the Advisory Committee on Civil Rules for the U.S. Courts. They’ve also routinely claimed that corporations also embrace TPLF, though they’ve done little to support this claim. To the contrary, a group of 30 general counsel and senior litigators from major U.S. companies recently sent a letter to the Advisory Committee supporting a petition that would require transparency for funding agreements in federal lawsuits.

The introduction of the LFTA signals that Congress also sees the dangers that secretive lawsuit funding deals pose to fairness and justice in our courts.

It’s time for the lucrative business of betting on other peoples’ lawsuits to get examined in the light of day, and the Litigation Funding Transparency Act will do just that.

Source:  U.S. Chamber Institute for Legal Reform
Author:  Lisa A. Rickard; President, U.S. Chamber Institute for Legal Reform
Originally Published:  February 13, 2019

Want new articles directly to your inbox?
Subscribe to our Publishing Service.

15 + 8 =

TCJL Files Amicus in Toyota Case

TCJL Files Amicus in Toyota Case

TCJL has filed an amicus curiae brief in a case pending at the Texas Supreme Court that threatens to undermine protective orders that guard a business’s sensitive confidential commercial information, including information identifying and disclosing details about their data base infrastructure. The case, In re Toyota Motor Sales (No. 19-0845), arose from a Dallas trial court’s decision…

Gov. Abbott Sets Date for Texas Special Runoff Elections 

Gov. Abbott Sets Date for Texas Special Runoff Elections 

Governor Greg Abbott today issued proclamations setting Tuesday, January 28, 2020 as the date for special runoff elections to fill three vacant Texas House District seats. The early voting period for these runoff elections will begin Monday, January 21, 2020. The following Texas House Districts are included in the special runoff election date: House…

Gov. Abbott Sets Date for Texas Special Runoff Elections 

Gov. Abbott Appoints Geoffrey Puryear to 460th Judicial District Court

Governor Greg Abbott has appointed Geoffrey Puryear to the 460th Judicial District Court in Travis County for a term set to expire on December 31, 2020, or until his successor shall be duly elected and qualified. Geoffrey Puryear of Austin is an assistant district attorney for the Travis County District Attorney’s Office, and previously served as an…

Pin It on Pinterest

Share This