General Counsel and Legal Officers Ask for Litigation Funding Transparency

07th Feb 2019

Hedge funds investing in lawsuits for a cut of any judgment or settlement is reportedly at least a $100 billion industry – yet this financing goes unregulated in the major economic centers of the world.

The practice is known as third party litigation funding (TPLF), and it is a booming industry on booth sides of the Atlantic. The practice raises multiple issues and ethical concerns. TPLF can put investors’ interests ahead of claimants, leads to more lawsuits in our over-sued society, and unnecessarily prolongs litigation. Last year a major funder told The Wall Street Journal, “We make it harder and more expensive to settle cases.”

This week, a group of 30 general counsel and senior litigators from major companies sent a letter to the United States Advisory Committee on Civil Rules asking them to take action on TPLF. The letter supports a petition to the Committee, led by the U.S. Chamber Institute for Legal Reform (ILR) and co-signed by 29 other trade associations, advocating a rule requiring transparency for these funding agreements in federal civil lawsuits.

In the letter, the 30 senior litigators state that defendants and courts “have a right to know who has a stake in a lawsuit and to assess whether they are using illegal or unethical means to bring the action.” The group also notes that defendants in litigation must disclose insurance agreements “which some funders have described as a defense-side form of funding.”

The letter also pushes back on a central claim by funders: that the business community supposedly widely uses litigation funding itself. In response, the 30 senior litigators note “no evidence has been proffered to support that assertion,” “nor is it consistent with our experience.”

The next opportunity for the Advisory Committee to take further action on a potential rule requiring transparency for TPLF will be at its meeting in April 2019.

In-house counsel signed onto today’s letter include those from:

  • Allstate
  • AT&T
  • Bayer U.S.
  • BP America Inc.
  • Charles Schwab
  • Chevron
  • Comcast Corporation
  • CVS Health
  • Eli Lily and Company
  • Ford Motor Company
  • General Electric
  • GlaxoSmithKline LLC
  • Google
  • Home Depot
  • Honeywell
  • ITT Inc.
  • Johnson & Johnson
  • Liberty Mutual Insurance
  • MassMututal
  • Merck & Co., Inc.
  • Microsoft
  • Phillips66
  • RiverStone Group
  • RPM International, Inc.
  • Shell Oil Company
  • State Farm Mutual Automobile Insurance Company
  • Verizon Wireless
  • Westfield
  • Zurich North America