The U.S. Chamber of Commerce (via the affiliated Institute for Legal Reform) and more than two dozen other business groups are once again petitioning the federal judiciary to adopt a nationwide disclosure requirement for third-party litigation funding.
The proposal is similar to a 2014 proposal that failed to gain traction during litigation finance's "formative" years before the rapid expansion of the industry into a multibillion-dollar business in the U.S. Here, the Chamber seeks to add a provision to the Federal Rules of Civil Procedure that would require disclosure of all compensation agreements that are "contingent on, and sourced from, any proceeds of the civil action, by settlement, judgment or otherwise."
The news, and the potential ramifications have sparked quite a bit of discussion:
Of course, some litigation funders argue the measures are antithetical to the pro-business, pro-innovation goals of the Chamber: Bentham IMF Argues that U.S. Chamber of Commerce Undermines Business Interests in Pushing for Mandatory Disclosure of Litigation Funding
Even if it does come to pass, though, such rules wouldn't be adopted for a long time. By some accounts, it could take effect no sooner than Dec. 1, 2019: Lit Funding Opponents Play Long Game in Bid for Transparency. Nobody ever accused these committees of moving faster than a glacial pace!
While insurance products have long existed in legal areas such as antitrust or intellectual property to cover the cost of defending a lawsuit, plaintiff-side litigation insurance products, which can similarly defray the cost of attorney fees and expenses for companies filing suits or law firms taking cases on contingency, are less widespread. If the insured case is unsuccessful, the insurer pays out a substantial sum of money and collects no premium, but if the insured litigation is successful, the insurer will pay out zero and will be entitled to a premium.
The adoption of rules by many states regulating litigation finance and the abolishment or narrowing by many courts of the champerty defense are signs that U.S. states and courts are recognizing that the financial wherewithal of a litigant should not be the determining factor in the outcome of a litigation and that the growth of the litigation finance industry promotes a fundamental principle of our justice system to allow disputes to be decided on their merits.
Duke Law and Contemporary Problems Journal: Consumer Litigation Funding: Just Another Form of Payday Lending?
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