On October 31, 25 companies submitted a letter urging the House Committee on Oversight and Accountability to support disclosure and oversight of third party litigation funding (TPLF). As you may know, TPLF allows hedge funds and other financiers to invest in lawsuits in exchange for a percentage of any settlement or judgment. TPLF is a growing threat to the national economy, the federal judiciary, the U.S. business community, and even national security.
The letter outlines one of the core problems with TPLF, which is the industry’s tendency to operate in secrecy. In typical lawsuits, neither the court, nor the defendant, and sometimes even the plaintiff, knows if the matter is sponsored by third party investors. This lack of transparency allows hidden TPLF players to manipulate civil litigation for their own purposes, evading oversight dedicated to other financial services.
TPLF has various negative effects on U.S. civil litigation, including the encouragement of non-meritorious lawsuits and serious ethical issues that threaten lawyers’ independent judgment. The clandestine nature of TPLF also denies defendants the right to know their accusers. Furthermore, funders often prioritize their own profit goals, harming the interests of the actual plaintiffs.
Ultimately, TPLF diverts resources from the development of innovative products and undermines the positions of U.S. companies on the global stage. The letter calls for increased transparency and oversight of TPLF. Congress must expose the many problems with TPLF and bring this secretive industry to light.View PDF