Have you ever scrolled through social media or turned on the TV and wondered who is funding all of those lawsuits over prescription drugs and household products? Many times, no one knows—not the company being sued or even the judge who is supposed to make sure the litigation process is fair. The only ones who know are the plaintiffs’ lawyers who signed the secret deals with hedge funds to fund the lawsuit in exchange for a cut of the settlement or award. This is called third party litigation funding, and it’s a rapidly growing, multibillion-dollar industry turning our courtrooms into casinos. In most cases, litigation funding doesn’t need to be disclosed, which raises ethical questions of who is controlling a lawsuit.
That’s why Sens. Chuck Grassley, John Cornyn, Thom Tillis, and Ben Sasse, and Rep. Darrell Issa introduced the Litigation Funding Transparency Act (LFTA). The bill will require plaintiffs’ lawyers to disclose outside funding agreements in class action lawsuits and federal multi-district litigation. The LFTA will also help shine a spotlight on lawsuit lending, where lenders give up-front cash to individual plaintiffs to cover immediate living or medical expenses during litigation. These loans typically contain sky-high interest rates, sometimes as high as 200 percent, leaving borrowers with little to no recovery even when they win their case.
The introduction of the LFTA signals that Congress sees the problems litigation funding pose to fairness and justice in our courts. It’s time to shine a spotlight on the lucrative business of betting on other peoples’ lawsuits, and the Litigation Funding Transparency Act will do just that.
ILR applauds Sens. Grassley, Cornyn, Tillis, and Sasse, and Rep. Issa for introducing the bill and urges the Senate and House Judiciary Committees to consider the bill immediately.
To learn more about third party litigation funding, watch a short explainer video from ILR’s Faces of Lawsuit Abuse HERE.
