As we embark on a new year, trial lawyers continue to employ their well-worn tricks. In 2024, many concerning legal trends are on the horizon. Here are three troubling trends that have captured our attention.
The first is third party litigation funding (TPLF). As you may know, TPLF is a multibillion-dollar global industry where hedge funds and other financiers invest in lawsuits in exchange for a percentage of any settlement or judgment. This industry operates almost completely in the shadows. In typical lawsuits, neither the court nor the defendant is aware if outside investors are funding the case, and due to a lack of transparency laws, investors are not obligated to disclose their involvement. This system thrives on secrecy and allows hidden TPLF players to manipulate civil litigation for their purported gain. TPLF continues to be a growing threat to the national economy, the federal judiciary, the U.S. business community, and potentially U.S. national security.
In 2023, there was momentum in trying to shine some light on the industry. This was accomplished through the passage of transparency laws in some state legislatures, high-profile cases where funders were identified and brought to court, and most significantly, the introduction of the bipartisan bill, The Protecting Our Courts from Foreign Manipulation Act of 2023. This bill would require disclosure to courts, to the parties, and to the Department of Justice when foreign persons and entities invest in U.S. litigation and would prohibit foreign governments and sovereign wealth funds from investing in U.S. litigation. These initiatives and others have provided a strong foundation to push for further changes to the TPLF industry in 2024. ILR will continue to expose the many problems with TPLF and bring this secretive industry to light.
A second issue on ILR’s radar for 2024 is how trial lawyers are abusing the arbitration system and creating what are known as “mass arbitrations.” Research indicates that consumers and employees win more money, more often, and more quickly in traditional arbitration than in litigation. Plaintiff lawyers, who hope to make large profits through class action litigation, are greatly disappointed by this. Consequently, mass arbitrations have emerged, wherein plaintiffs’ lawyers file thousands of identical arbitration claims—often without proper vetting. This triggers substantial upfront costs for businesses because it is the businesses, not the claimants, who pay the arbitration fees. American businesses are thus burdened with the immediate obligation to either pay these incredibly high fees, settle the mass of potentially meritless claims, or abandon the arbitration process altogether and be forced into the problematic class action world.
The threat of mass arbitrations has skyrocketed in the last few years. In 2024, ILR will continue to highlight the dangers of mass arbitrations and push for solutions that would prohibit or limit such exploitation. Some of these solutions include:
- Encouraging businesses facing mass arbitrations to consider incorporating the use of bellwether arbitration agreements to efficiently and fairly reach a global resolution of all claims by allowing companies to test the merits of the claims.
- Urging state bar authorities to consider scrutinizing mass arbitrations for potential violations of the Rules of Professional Conduct.
Third, troubling legal trends are not only constrained to the U.S. Our neighbors across the Atlantic in the European Union (EU) and United Kingdom (UK) are dealing with rapid growth in class and mass action litigation that is expected to accelerate this year. These projections are based in part on the impact that the ongoing implementation of the Representative Actions Directive (RAD) and the introduction of new liability clauses in several pieces of key EU legislation, including the revised Product Liability Directive (PLD), will have on Europe. Other factors, like the rapid growth of unregulated third party litigation funding and the arrival of U.S. based plaintiffs firms, are a clear indicator that companies in Europe will face a litigation onslaught.
The RAD requires each Member State to have a collective/class action law in place to allow consumers to sue for damages for breaches of over 60 EU consumer protection laws. The RAD, unfortunately, does not offer enough safeguards to protect consumers and businesses from speculative litigation. It also gives too much flexibility to the Member States, which can decide in many consequential ways how much protection from speculative litigation they want their national class action rules to have. While the RAD was supposed to be fully implemented in the 27 Member States by the end of 2023, several Member States are late, and ILR will continue to engage in countries, like France and Austria, that have yet to adopt the RAD. Once fully effective in the 27 Member States, the RAD will fundamentally reshape the EU’s civil litigation environment and make it far more litigious.
Several other pending EU legislation proposals, which have yet to be fully adopted in the Member States, like the revised Product Liability Directive (PLD), will also contribute to the degradation of the liability environment and an increase in tort costs in the EU. The existing PLD has provided a largely effective compensation mechanism for those who suffer damage caused by defective products in the EU. The proposed revisions to the PLD would update the Directive’s definitions and provisions for emerging technologies. However, the amendments being considered, like the reversal of the traditional burden of proof and the introduction of loose discovery rules, would go too far against defendants and hamper companies’ ability to innovate, develop and offer new products and services. ILR is engaged in Brussels and in key Member States to propose reasonable solutions to improve EU legislative proposals, like the PLD.
This year is sure to be an action-packed time for the legal reform community. ILR is taking proactive measures to combat these issues, safeguard the business community from frivolous litigation, and foster the development of a more equitable civil justice system.