Litigation financing raises a number of ethical concerns, such as a threat to a lawyer’s ability to exercise independent judgment in cases where the funder can influence litigation or settlement decisions. The presence of an unknown third-party with a stake in the outcome of a lawsuit can change what is essentially a two-party negotiation into a multi-party process with a “behind-the-scenes” influencer. As one litigation funding company executive has acknowledged, third-party litigation financing “make[s] it harder and more expensive to settle cases.”
Our legal system is intended to achieve fair and just resolution – not to generate profits for investors.
If third-party litigation financing continues to be allowed, there must be regulations in place to ensure that investors are held accountable for their actions and that the integrity of the legal system is preserved.
Regulations should include transparency surrounding third-party litigation financing agreements. Disclosure of such arrangements at the outset of litigation or upon entering a funding agreement would provide parties and courts with vital information to assess the influence of funders on the litigation.
Proponents of lawsuit financing argue that third-party litigation financing provides access to justice for those who might not otherwise be able to afford it, but the reality is that it can create serious problems for the legal system as a whole.
Montana – 2023
Subjects TPLF to the maximum usury interest rate or a 25% fee cap, requires automatic disclosure of the agreement in litigation and requires registration with the state as well as disclosure of the officers of the company engaging in litigation financing in Montana. The legislation explicitly applies to class actions and subjects lenders to joint liability for costs and sanctions.
Indiana – 2023
Amends the law concerning civil proceeding advance payment (CPAP) transactions to provide that in a civil proceeding in which a consumer claimant has entered into a CPAP contract, the consumer claimant or the consumer claimant’s attorney is required to provide to: (1) each of the other parties in the civil proceeding; and (2) each insurer that has a duty to defend another party in the civil proceeding; written notice that the consumer claimant has entered into a CPAP contract with a CPAP provider. Provides that in a civil proceeding in which a consumer claimant is a party, the existence and contents of the CPAP contract are subject to discovery under the Indiana Rules of Trial Procedure by: (1) a party other than the consumer claimant; or (2) an insurer that has a duty to defend another party in the civil proceeding. Provides that a written notice concerning a CPAP contract with a CPAP provider is not admissible in a court proceeding.
