The hearing investigated how outside capital is funding litigation against companies and agencies to achieve policy goals and examined the lack of oversight in this area.
This week, the U.S. House Committee on Oversight and Accountability held a hearing titled “Unsuitable Litigation: Oversight of Third-Party Litigation Funding (TPLF)."
The hearing investigated how outside capital is funding litigation against companies and agencies to achieve policy goals and examined the lack of oversight and rules of ethics to prevent these financiers from meddling in and controlling the outcome of lawsuits.
Surprisingly, TPLF firms are not required to disclose their activities, even in the very cases they are funding. Westfleet Advisors, a litigation finance advisory firm, found investments in U.S. litigation financing was $13.5 billion in 2022, with new capital commitments growing by nearly 16% year over year. One leading financier of litigation, Burford Capital, has seen its assets increase 355% over the last several years, including the addition of nearly $1 billion by an unknown, foreign sovereign wealth fund.
TPLF contributes to higher awards, longer cases and greater legal expenses. This combination increases claim costs via higher legal expenses and compound interest on the litigation finance, which is contributing to the hard market. Given its growing presence and impact, states have begun to take steps to require disclosure of TPLF in litigation.
Lawmakers in Congress have been working on legislation to shine a light on the financial interests or potential conflicts involving TPLF. In 2021, Sen. Chuck Grassley (R-Iowa) and Rep. Darrell Issa (R-California) introduced the “Litigation Funding Transparency Act."
This legislation would create a uniform rule that would apply to all class actions and multi-district proceedings in federal courts. It would require counsel to disclose in writing to the court and to all named parties to the case the identity of any commercial enterprise that has a right to receive payment that is contingent on the receipt of monetary relief in the case.
The Big “I" believes the reintroduction of this legislation will happen during this Congress and will continue to advocate for litigation reform to prevent these abuses. Look out for updates in the weekly News & Views e-newsletter.
Raaed Haddad is Big “I" director of federal government affairs.