Litigation Funding's Influence on Cases Prompts Call for Disclosure Rule

What's Happening?

Third-party litigation funding (TPLF) is a significant industry where companies finance lawsuits in exchange for a portion of any judgment or settlement. Despite claims from funders that they do not control the cases they finance, recent analyses of TPLF contracts reveal that funders often have substantial control over litigation decisions. This includes the ability to reject settlement terms and influence the selection of legal counsel. The Advisory Committee on Civil Rules is being urged to adopt a rule requiring the disclosure of TPLF contracts to ensure transparency and fairness in the legal system. This call for disclosure is supported by a letter from over 100 companies across various industries, highlighting the need for courts to be aware of non-party influences in litigation.

Why It's Important?

The influence of TPLF on litigation raises concerns about the integrity and transparency of the legal process. When funders have control over litigation decisions, it can disrupt the ability of parties to resolve disputes based on facts. This control can also skew the outcomes of cases, potentially undermining court orders and affecting the remedies available to plaintiffs. The call for disclosure of TPLF contracts aims to ensure that all participants in litigation are identified and that their roles are transparent. This is crucial for maintaining public trust in the legal system and ensuring that litigation is conducted fairly. The push for disclosure is seen as a step towards greater accountability and could impact how litigation is financed and conducted in the future.

What's Next?

If the Advisory Committee on Civil Rules adopts a disclosure rule for TPLF contracts, it could lead to significant changes in how litigation is financed and managed. Courts may begin to require the disclosure of these contracts as part of the litigation process, allowing for greater scrutiny of funders' roles. This could also lead to changes in how funders structure their agreements, as they may need to be more transparent about their involvement in cases. Companies and legal professionals will need to adapt to these changes, potentially altering their strategies for financing and managing litigation. The move towards disclosure could also prompt further discussions about the ethical implications of third-party funding in the legal system.

Beyond the Headlines

The push for TPLF contract disclosure highlights broader ethical and legal questions about the role of non-parties in litigation. The influence of funders on legal decisions raises concerns about the potential for conflicts of interest and the impact on the independence of legal counsel. As the legal industry grapples with these issues, there may be increased scrutiny of the relationships between funders, plaintiffs, and legal professionals. This could lead to new regulations or guidelines aimed at ensuring that litigation is conducted in a manner that is fair and transparent. The debate over TPLF also reflects broader concerns about the commercialization of the legal system and the need to balance financial interests with the pursuit of justice.