US lawmaker calls for litigation funding disclosures
By Sara Merken
Oct 7 (Reuters) -A federal lawmaker has introduced legislation that would require the disclosure of third-party funding in civil lawsuits.
U.S. Republican Representative Darrell Issa of California on Friday introduced a bill that calls for parties in civil litigation to tell the court and other named parties the identity of third-party that has the right to receive payment that is contingent on the outcome of a case or group or cases.
The bill comes as the litigation funding industry faces continued calls for increased oversight. Critics have long argued the practice promotes unnecessary litigation and undermines transparency in the legal system. The U.S. Chamber of Commerce and others have said disclosures can help determine if financial backers are influencing decisions in cases or have conflicts of interest.
The industry's backers counter that it can level the playing field by covering at least some litigation expenses and promote access to justice.
The measure, which is co-sponsored by Republican Representative Scott Fitzgerald of Wisconsin, would also require the parties to provide a copy to the court and named parties of any agreement creating the contingent right. A copy of the bill, which does not reference litigation was provided to Reuters by Issa's office on Monday.
Litigation funders invest in lawsuits or other legal claims in exchange for a cut of any recoveries. The U.S. litigation funding industry has grown over the past decade to become a $15.2 billion dollar industry.
Several other pieces of federal legislation that have been introduced in recent years that would have required litigation finance disclosure in certain cases did not progress.
A few U.S. states, including Louisiana, Indiana and West Virginia, have recently enacted laws governing the litigation finance industry. Measures in states including Florida and Kansas stalled in their legislatures this year.
More than 100 major companies including Amazon.com, Google, Cisco, Meta, Comcast, Exxon, Zurich, Eli Lilly, Bayer, Ford, Pfizer and Novartis urged the U.S. judiciary last week to adopt a nationwide rule requiring litigation funding disclosure. The group's letter came in advance of a hearing by the judiciary's civil rules committee this week.
The International Legal Finance Association, a Washington, D.C., group, was founded in 2020 to advocate for the commercial funding industry.
"Courts already have the authority to order the disclosure of financing agreements and are in the best position to determine the relevancy of any financing agreement to the merits of the litigation," an association spokesperson said in a statement on Monday.
The bill was referred to the U.S. House of Representatives Judiciary Committee.
Reporting by Sara Merken
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