The U.S. Chamber of Commerce Institute for Legal Reform (ILR) advocates for federal legislation mandating transparency in third-party litigation funding (TPLF), a rapidly expanding practice where outside investors finance lawsuits in exchange for a share of any recovery. The ILR highlights that TPLF has become especially prevalent in patent litigation and mass torts, with billions of dollars now fueling claims and aggressive client recruitment through advertising. Despite its growth, TPLF arrangements typically remain secret due to the absence of a nationwide disclosure requirement, raising concerns about hidden conflicts of interest, ethical issues, and the influence of foreign investors in the U.S. legal system.
The statement details how the lack of transparency in TPLF can compromise the integrity of the civil justice system. It cites examples where funders have exerted significant control over litigation strategy and settlement decisions, sometimes to the detriment of plaintiffs and the efficient resolution of cases. The ILR warns that foreign sovereign wealth funds and entities with potential adversarial interests have become active in U.S. litigation funding, posing risks to national and economic security. The document also notes that while some courts have adopted local disclosure rules, these efforts are inconsistent and insufficient to address the broader risks.
To address these challenges, the ILR urges Congress to enact a uniform federal disclosure law requiring parties to reveal the existence and terms of TPLF agreements, the identities of funders (including foreign sources), and the production of the underlying contracts. Such transparency, the ILR argues, is essential for courts and litigants to identify conflicts of interest, ensure ethical compliance, assess who controls litigation, and facilitate fair settlements. Ultimately, the ILR contends that comprehensive disclosure will safeguard the fairness, efficiency, and security of the U.S. civil justice system.
