A federal judicial rules-making panel, the U.S. Judicial Conference’s Advisory Committee on Civil Rules, has decided to investigate the potential need for a nationwide rule mandating disclosure of third-party litigation funding. This move comes after sustained pressure from major companies, business groups, and Republican lawmakers.
During a meeting in Washington, D.C., on October 10, the committee agreed to establish a subcommittee to examine whether such disclosure rules should be uniformly applied across the U.S. judiciary. Judge Robin Rosenberg, who chairs the committee, acknowledged the growing importance of the issue, noting that litigation finance is “not going away.”
Pressure from Corporations and Lawmakers
More than 100 large corporations, including Amazon, Google, Meta, Cisco, and Ford, recently signed a letter urging the judiciary to take action. These companies are concerned about the lack of transparency regarding who is funding lawsuits against them. Several Republican senators, such as John Cornyn and Thom Tillis, also called for greater transparency, citing concerns about potential conflicts of interest and the influence financiers may have on litigation outcomes.
Existing Disclosures and Calls for Uniformity
Currently, some federal courts, including New Jersey’s, require parties to disclose litigation funding agreements. However, these requirements are not consistent nationwide. Proponents of a uniform rule argue that defendants have a right to know who is financing lawsuits to make informed decisions regarding litigation strategy and settlements.
The Process Ahead
While the creation of the subcommittee, chaired by Chief U.S. District Judge R. David Proctor, marks a significant step forward, any potential rule is still years away. The subcommittee will gather input from legal experts, participants in the litigation funding industry, and other stakeholders before making any recommendations.
The U.S. Chamber of Commerce has long advocated for mandatory disclosure of litigation financing, warning of the risks posed by what it describes as a “secretive, multi-billion-dollar global industry.” In contrast, the International Legal Finance Association, representing the commercial funding industry, argues that a nationwide disclosure rule is unnecessary and that individual courts should decide the relevance of such agreements on a case-by-case basis.
The Growing Influence of Litigation Finance
Litigation finance, in which third parties provide funding for lawsuits in exchange for a share of the settlement or judgment, has become a significant player in the U.S. legal system. Last year alone, commercial lawsuit financiers committed $2.7 billion to new deals. As the industry grows, concerns about its impact on the fairness and integrity of the civil justice system are mounting.
The panel’s decision to examine litigation finance disclosure signals a growing recognition of the need for greater oversight and transparency in this evolving field. However, it remains to be seen whether new rules will emerge and how they will shape the future of litigation finance in the U.S.
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