Republican Senators reintroduce bill pushing for disclosure of litigation funding

The bill would require disclosure of third-party litigation funding for class actions and multidistrict litigation.

Senator Charles Grassley (R-IA) during a Senate Judiciary Committee confirmation hearing, Nov. 15, 2017. Photo: Diego M. Radzinschi/NLJ

A group of Republican U.S. Senators have reintroduced legislation that would require plaintiffs to disclose when they’ve secured third-party funding in litigation.

Sens. Chuck Grassley of Iowa, John Cornyn of Texas, Thom Tillis of North Carolina, and Ben Sasse of Nebraska reintroduced the Litigation Funding Transparency Act (LFTA) on Wednesday. The bill would require disclosure of third-party litigation funding for class actions and multidistrict litigation within 10 days of a case being filed, or 10 days after the closure of a funding deal. The bill, likewise, would require disclosure of financing to provide cash for plaintiffs.

Grassley, Cornyn and Tillis proposed a prior version of the bill last year after a less extensive bill that called only for disclosure only in class actions passed out of the U.S. House of Representatives in 2017 — before Democrats took a majority of House seats in the November 2018 elections.

Dangers of secretive lawsuit funding

Lisa A. Rickard, the president of the U.S. Chamber Institute for Legal Reform, said in a statement supporting the bill 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,” she said.

Liz Bigham, the chief marketing officer of funder Burford Capital said in an email that the only thing that has changed since an identical version of the bill was introduced last year “is an increase in lobbying efforts by narrow and well-funded special interests. ”

‘Layer of unnecessary regulation, delay and expense’

“Forced disclosure would add a layer of unnecessary regulation, delay and expense to an already overburdened legal system, hurting American businesses both large and small, and would quickly become weaponized as an end-run around legal privileges and other confidentiality rules to harass private parties,” she said.

The reintroduction of the bill comes as a group of 30 current and former in-house counsel at major companies have backed a proposal to amend Federal Rules of Civil Procedure to require full disclosure of third-party funding in litigation.

“We believe the reasons for requiring full disclosure are strong and well documented in the record before the Advisory Committee,” wrote the group, which included top lawyers at Google, GlaxoSmithKline plc, Verizon Wireless, AT&T Inc. and others. “When litigation funders invest in a lawsuit, they buy a piece of the case; they effectively become real parties in interest. Defendants (and courts) have a right to know who has a stake in a lawsuit and to assess whether they are using illegal or unethical means to bring the action.”

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