Montana has taken a significant step in bringing transparency to the secretive third party litigation funding (TPLF) industry. Recently, Gov. Greg Gianforte signed into law SB 269, which, among many things, will require disclosing TPLF agreements in all civil cases before Montana courts. Both of the state’s legislative chambers unanimously voted in favor of the bill.
TPLF is a multibillion-dollar global industry that allows hedge funds and other financiers to invest in lawsuits and law firms, and potentially control litigation, in exchange for a cut of any award or settlement. Since there are no disclosure requirements, defendants, judges, and often even plaintiffs don’t know if a case has outside funding.
The new law will bring much-needed transparency to Montana courts by publicly disclosing who might be funding a lawsuit and if they’re controlling it. As a result, mandatory disclosure will significantly help to reduce conflicts of interest related to possible TPLF schemes and will incentivize funders (and attorneys) to behave ethically by bringing the TPLF agreements and litigation funders to light.
In addition to requiring disclosure of litigation agreements, the new law also:
- Requires litigation funders to register with the Montana secretary of state.
- Makes litigation funders jointly liable for costs.
- Establishes a 25 percent cap on the amount that a funder may receive or recover from any judgment, award, settlement, verdicts, or other form of monetary relief obtained from the lawsuit.
Businesses want to invest in states with a fair and balanced legal system and want to know that if they invest in a state’s economy, they won’t be spending time and money fighting excessive and frivolous litigation from plaintiffs’ lawyers who are secretly receiving funding from outsiders. Every dollar a business spends fighting lawsuits is one less dollar they can spend to hire more people, expand to new locations, and create new products. Montanans also see the effects of excessive litigation through higher prices on goods and services and higher tort costs. According to ILR’s recent report, Tort Costs in America, which was also referenced during the bill’s hearing, every household in the state bore $3,000 of tort system costs on average in 2020.
This is a significant moment for legal reform in the Mountain State. Thanks to Gov. Gianforte and the legislature, Montana can be a model for other states in adopting mandatory disclosure rules to bring much-needed transparency to TPLF.
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