Longtime readers know third-party litigation funding (TPLF) is a multibillion-dollar global industry that could turn our courtrooms into casinos by allowing hedge funds to secretly ‘gamble’ on lawsuits in exchange for a large cut of any settlement or award.
For the past few years, the Federal Rules Advisory Committee has studied the impact litigation funding has on the civil justice system. ILR has led the charge to encourage the Committee to take action and bring sunshine to the litigation funding industry.
Now, ILR and 27 other organizations, including NFIB and the Small Business & Entrepreneurship Council, are asking the Committee to consider implementing a TPLF pilot program. The program would put into effect a TPLF disclosure rule in selected forums on an interim basis to see how it works. It would also equip the Committee with vital information to evaluate certain “myths” being promoted by the funding industry.
The letter, in part, reads:
“There is a fundamental dispute over whether a TPLF disclosure rule would give rise to burdensome, collateral discovery disputes. While the funding industry has pressed this argument, we disagree. Defendants would have to justify any requests for additional TPLF-related disclosure, which courts would be well-positioned to adjudicate, similar to any other discovery-related dispute. Being able to monitor lawsuits in which a party is required to disclose any funding agreements would go a long way toward resolving this question,”
“There is also a fundamental dispute over whether a TPLF disclosure rule will force federal courts to make policy about TPLF-related issues. We believe that federal courts are already having to deal with such issues, particularly with regard to ethics issues in a variety of litigation contexts. However, a real-world implementation of a TPLF disclosure requirement would either validate or debunk that view.”
The Committee should take this proposal seriously and bring some much needed sunshine to a secretive industry.
The full letter can be read here.