Congressional attention on the third party litigation funding (TPLF) industry is heating up. We reported last week on a bipartisan bill introduced in the House and Senate to tackle the problems of foreign-sourced money pouring into the U.S. litigation system. The day before the bill was introduced, the House Oversight and Accountability Committee held a first-ever congressional hearing on TPLF.
“Unsuitable Litigation: Oversight of Third-Party Litigation Funding” explored key questions about the secretive industry and the influence outside funding has on civil litigation. Before the hearing, Neil Bradley, the Chamber’s chief policy officer, sent a letter to Oversight Chairman James Comer (R-KY) and Ranking Member Jamie Raskin (D-MD), commending them for looking at this issue.
In part, the letter said, “[f]or too long, the litigation funding industry has been hiding in the shadows as it actively supports and funds crippling litigation against the American business community. Furthermore, the practice of ’sue and settle’—whereby secretive organizations sue and then work with federal agencies to change policy—is extremely problematic. This week’s hearing is an important effort to shine a spotlight on these troubling practices and their negative impact on the American economy and legal system.”
In his opening remarks, Chairman Comer outlined how third party funding in mass tort litigation could lead to ethical concerns, like whether attorneys are acting in the best interest of their clients and whether litigation funders have a seat at the settlement table, among other concerns.
In pointing out the problems with current mass tort litigation, Chairman Comer cited ILR’s economic tort costs study, which found that only 53 cents of every dollar paid into the U.S. tort system goes to plaintiffs. The remainder goes towards litigation and other administrative costs.
Committee members heard from a panel of experts, including Aviva Wein, Johnson & Johnson assistant general counsel, and Maya Steinitz, Boston University School of Law professor, who addressed the problems posed by TPLF and “sue and settle” litigation. They also shared how the secretive nature of litigation funding means judges, defendants, and sometimes even the plaintiffs often do not know who is funding or even controlling the litigation.
For years, ILR has advocated for commonsense reforms to bring transparency to TPLF. Last week’s hearing was an important first step by Congress to expose the myriad problems posed by this opaque industry and to try to uncover how much influence outside funders have on the U.S. litigation system.