UPDATE: On March 27, West Virginia’s Governor Jim Justice signed into law SB 850. On March 13, Indiana’s Governor Eric Holcomb signed into law HB 1160.
Indiana and West Virginia have taken significant steps to bring transparency to the secretive third party litigation funding (TPLF) industry. Recently, both states’ legislatures advanced reform proposals with strong bipartisan support.
TPLF is a multibillion-dollar global industry that allows hedge funds and financiers to invest in lawsuits and law firms, and potentially control litigation, in exchange for a cut of any award or settlement. Since there are not uniform disclosure requirements, defendants, judges, and often even plaintiffs don’t know if a case has outside funding. It also means that foreign governments could be investing in U.S. litigation against American businesses. According to ILR research, the lack of safeguards in TPLF provides a clear path for foreign adversaries to infiltrate the American litigation system and undermine U.S. national economic and security interests.
Indiana
HB 1160 will introduce much-needed transparency to TPLF in Indiana courts. It will prevent foreign adversaries from influencing the litigation process, prohibit funders from accessing proprietary data, and ban funders from influencing or controlling lawsuits. It also requires funding to be disclosed during litigation.
While funders publicly claim they do not control or dictate litigation decisions, there is evidence to the contrary. HB 1160 will prevent Burford and other big, transnational funders from exerting control over civil lawsuits in Indiana courts.
ILR has spotlighted examples where funders controlled key litigation decisions, including developments in the Sysco v. Burford lawsuit, where a funder claimed a right to block a settlement that the named plaintiff and defendants all wanted to accept. In Feb. 2024, a magistrate judge in Illinois criticized the funder, Burford Capital, for attempting to assume control over that litigation. The judge stated he would not “allow a financier with no interest in the litigation beyond maximizing profit on its investment to override decisions made by the party that actually brought the suit.”
West Virginia
SB 850 would expand the scope of an existing West Virginia law on consumer litigation finance. West Virginia’s legislature took action in 2019 to provide for transparency when loans are linked to litigation and protect individual consumers from funder misconduct and control. If enacted, SB 850 will extend this transparency and protection to encompass developing large-scale litigation funding models. This wider scope will protect West Virginia businesses, as well as individuals.
If the governors of Indiana and West Virginia sign these bills into law, they will serve as powerful examples for other states looking to implement disclosure rules to enhance transparency of TPLF and prevent funders from manipulating litigation to maximize their own profits at the expense of actual litigants and to the detriment of our legal system.
