ILR’s newly released research, Grim Realities: Debunking Myths in Third-Party Litigation Funding (TPLF) helps to shine some light on this shadowy—and growing—industry. The research argues that TPLF, despite claims of increasing access to justice, operates with minimal transparency and often at the expense of the people it claims to help.
TPLF is a multi-billion-dollar industry that allows litigation funders to line their own pockets. The lack of transparency requirements for TPLF means that, oftentimes, funders can make agreements directly with lawyers while the courts and the opposing parties are left unaware of a funder’s involvement in a case. This opens the door to serious problems, including:
- Funders Bleed Off Recovery Intended for Litigants: Litigation funders are not benevolent entities looking to support justice. Their primary goal is to maximize their own profits, often at the expense of the plaintiffs they fund.
- Funders Can Exercise Immense Control Over Cases: Funders frequently exert significant control over the litigation process, including strategic decisions and settlement negotiations, which can undermine the interests of the actual parties involved.
- Funding Can Be Exploited by Foreign Adversaries: There is growing concern that foreign adversaries can (and do) use TPLF to undermine U.S. national security and economic interests by funding litigation against American companies.
The paper disputes the industry’s claim that it is a positive influence on civil justice systems and highlights real and recent examples of how TPLF investors abuse litigation. One example is a dispute involving Burford Capital, one of the largest TPLF firms. Sysco, the food marketer and distributor filed a lawsuit against Burford last year. In a nutshell, Sysco alleged that the litigation funder prevented the company from accepting reasonable settlements in its antitrust litigation, turning the company into a “litigation hostage forced by a greedy funder to keep litigating cases that it [Sysco] wants to resolve.” Sysco also accused Boies Schiller, the law firm it hired to handle the antitrust cases, of secretly working with Burford by encouraging the company to continue the lawsuits to increase the amount of money the law firm and Burford could make. Burford then counter-sued Sysco. The research discusses many other examples of the sort where third-party litigation funders were controlling the purse strings for their own benefit.
However, recent years have seen growing scrutiny and calls for courts, legislators, and regulators to take action on TPLF. The research notes that several states in the U.S. have recently enacted laws requiring disclosure and other safeguards in TPLF arrangements, such as in West Virginia, Indiana, and Louisiana, and there is momentum in international jurisdictions to take similar measures as recognition of the scale of the problem becomes more widespread.
ILR continues to advocate for robust reforms to address the issues associated with TPLF and to bring funding out of the shadows. There is a great need for increased transparency and oversight to ensure that the interests of litigants are protected and that the civil justice system is not compromised by third-party funders only motivated by profit.
