UPDATE: On June 19, Gov. Jeff Landry signed SB 355 into law. The final legislation will put in place limitations on foreign litigation funding, increase transparency in Louisiana courts, and prohibit any funder control or manipulation of litigation.
There is a secretive multibillion-dollar global industry that operates with no oversight, impacting Louisiana’s civil justice system. It’s called third party litigation funding (TPLF), and the practice allows billboard trial lawyers to fund lawsuits with money from multinational hedge funds without telling their clients, the defendants, or the judges overseeing the lawsuit. In exchange, these hedge funds get paid large amounts from any settlements or awards—even before the plaintiff sees a cent. The funding can come from anywhere, including foreign governments and sovereign wealth funds.
Louisiana has no laws on the books requiring transparency of these litigation funding agreements. This means plaintiffs are left in the dark, unaware if their lawyer or an outside hedge fund is making strategic decisions about their case or even if their cases are funded with money by foreign governments that want to undermine Louisiana’s economy.
Fortunately, Louisiana policymakers have an opportunity to address the problems this shadowy industry causes in its lawsuit system. The Legislature has passed SB 355, which would increase transparency and oversight of TPLF agreements in all civil cases before Louisiana courts, including when a funder has the right to receive sensitive information that impacts national security. The bill would also bar any funders from controlling lawsuits in Louisiana and prevent hostile funding by foreign powers, which was recently highlighted in Bloomberg Law.
This legislation would protect Louisiana courts from foreign influence and prevent adversarial governments or actors from receiving sensitive information that could undermine Louisiana’s economic and security interests and comes at a critical time. A recent Bloomberg Law report found that an investment firm tied to Russian billionaires secretly poured money into U.S. lawsuits to evade sanctions. While these lawsuits were filed in New York, Louisiana courts would be a natural target for such activity, given the state’s thriving energy industry.
Transparency is key to finding out who is funding lawsuits and if they are controlling litigation decisions. It’s worked in Delaware, where, after the Chief Judge issued a standing order requiring all funding agreements to be disclosed, it was revealed that a Chinese-based firm funded four intellectual property lawsuits.
And while Louisiana has a role to play to protect its judicial system, so do federal lawmakers. Thankfully, two of the state’s congressional leaders, Sen. John Kennedy and Speaker Mike Johnson, have co-sponsored The Protecting Our Courts from Foreign Manipulation Act of 2023, which would, among other things, ban foreign governments and sovereign wealth funds from investing in U.S. litigation.
Last year, the Louisiana Legislature passed similar TPLF legislation, but it was vetoed by former Gov. John Bel Edwards. Now, the state has a new governor and a second chance to rein in TPLF to preserve the integrity of the Louisiana civil justice system and ensure access to justice for claimants who may not know a funder is controlling and profiting from their lawsuit. The sooner SB 355 is enacted into law, the sooner Louisiana can strengthen its defenses against potential threats to its civil justice system.
