The first half of the year is the busiest time for ILR’s state advocacy team as state legislative sessions kick into high gear for either a few weeks or a few months. Legal reforms are usually on the agenda, and the 2024 session was no exception.
In recent years, ILR has been on a mission to bring transparency and fairness to the civil justice system, particularly concerning the shadowy practice of third party litigation funding (TPLF). This year, we saw important legislative victories in Indiana, Louisiana, and West Virginia that mark a substantial step forward in protecting businesses and consumers as well as ensuring transparency in our legal system. These efforts are part of our broader strategy to address the challenges posed by TPLF and to promote a more equitable legal environment across the states.
Understanding TPLF
TPLF is a multibillion-dollar global industry where hedge funds and other outside financiers invest in lawsuits in exchange for a portion of any award or settlement. It often leads to hidden control over litigation decisions, leaving plaintiffs, defendants, and judges in the dark about who is truly in charge of a case.
Indiana
Indiana enacted HB 1160, a series of significant reforms to bring transparency to the TPLF industry. This third party litigation funding legislation mandates the disclosure of funding, prohibits funders from accessing proprietary data, and bans them from influencing or controlling lawsuits. A noteworthy example of funders taking control is the Sysco v. Burford case, where Burford, arguably the largest litigation funder in the world, vetoed their client’s settlement decision. The new law in Indiana prevents such scenarios, maintaining the integrity of the judicial process.
Louisiana
Gov. Jeff Landry signed SB 355 into law, which aims to protect Louisiana’s courts from foreign influence and prevent adversarial governments from accessing sensitive information that could undermine the state’s economic and security interests. The bill, which will go into effect on August 1, will limit foreign litigation funding, prohibit funder control or manipulation of litigation, and ensure that plaintiffs are aware of any outside influences on their cases.
West Virginia
In another significant victory, West Virginia expanded the scope of its existing consumer litigation finance laws with SB 850. Originally enacted in 2019, these laws provided transparency in litigation-related loans and protected consumers from funder misconduct. SB 850 extends these protections to large-scale litigation funding models, safeguarding both individual consumers and businesses. By enforcing transparency and accountability, West Virginia is leading the charge in shielding its legal system from foreign manipulation and undue influence. This third party litigation funding legislation is a critical step in ensuring a fair and transparent legal environment.
The Broader Impact of These Wins
These legislative wins are more than just victories for state legal environments; they are a testament to the power of collective action in preserving the integrity of our civil justice system. By demanding transparency and accountability, Indiana, Louisiana, and West Virginia are setting a precedent for other states to follow.
Why Transparency Matters
Transparency in TPLF is a fundamental aspect of a fair legal system. When all parties are aware of who is funding and potentially controlling a lawsuit, it ensures that decisions are made in the best interest of justice, not profit. For businesses, this means a level playing field, where legal battles are resolved based on merits, not pressure from outside investors.
Protecting National Security and Economic Interests
The lack of transparency in TPLF also poses significant risks to U.S. national security and economic interests. There have been multiple examples of foreign governments and sovereign wealth funds investing in U.S. litigation, potentially to undermine American businesses. With the new third party litigation funding legislation in place, states like Indiana, Louisiana, and West Virginia are fortifying their defenses against such threats.
What This Means for Businesses
These reforms are a big win for businesses and consumers. When third party funding arrangements are transparent, it becomes more difficult for funders to support cases solely for financial gain without a legitimate legal basis, thereby promoting a more equitable legal environment.
This is just the beginning. ILR continues to advocate for similar reforms across the country, aiming to create a legal landscape where balance and fairness are the top priority.
