Third party litigation funding (TPLF) is a multi-billion-dollar industry that little is known about, and even less is disclosed.
A bill to put sunshine on the industry was introduced at the Nevada Senate Judiciary Committee on Tuesday.
Senate Bill 179 involves third party litigation funding disclosure as well as certain lawsuit advertising.
Proponents of SB-179 say TPLF investor groups are pouring millions of dollars into financing litigation, and these investor groups are swaying settlement cases based purely on their motivation to make big returns.
Las Vegas Republican Senator Scott Hammond is sponsoring the bill.
"These investors will front money to a law firm or party in exchange for a predetermined percentage of any award or settlement. This sophisticated industry is multi-faceted, but it includes funders investing in individual cases, or with increasing frequency, an entire portfolio of particular cases at a law firm. TPLF can increase the number of lawsuits of questionable standing or frivolous in nature to be filed,” explained (R) Las Vegas Senator Scott Hammond.
“Third party litigation funding can also be used as a vehicle for making an advanced loan often with high interest for plaintiffs. They may accept a high interest loan in advance of their expected settlement. What we have seen in some instances is that after the interest accrues, the plaintiff requires an even larger settlement so that they can pay back this loan to the law firm,” said Hammond.
Page Faulk is the Vice President of the United States Chamber of Commerce Institute of Legal Reform. She spoke in support of SB-179
“Litigation funding leads to the filing of speculative lawsuits, and the funders presence can unreasonably elongate cases and frustrate settlement. The presence of third-party litigation funding can change what is essentially a two party into a multi-party settlement with a behind the table constituent,” said Page Faulk
Proponents of SB-179 want third party litigation firms contracts to be disclosed for public scrutiny.
They say the practice operates with little transparency, making it difficult for judges and other parties to know who all has an interest in the outcome.
Faulk says a new concern for third party litigation is foreign financers who could be exploiting the lack of transparency in the U.S. litigation system, in regard to TPLF, to weaponize the courts for strategic goals and to gain intelligence.
In other words, foreign adversaries may fund lawsuits in the U.S. to weaken critical industries.
However, Senate Judiciary Committee Chair Melanie Scheible questioned the validity of that point.
“This committee does maintain the ability to ask you to back that up with some kind of evidence, some kind of proof, some kind of factual basis for that, so please keep your comments to things that we actually know about,” said Scheible.
As for some factual evidence, in 2022, 14 state Attorneys General sent a letter to U.S. Attorney General Merrick Garland demanding the Department of Justice regulate third party litigation funders from foreign adversary countries.
The Nevada Justice Association stands in opposition to SB-179.
From what we understand, one of their main arguments is that the industry is already heavily regulated and the true intent behind the bill is to help the insurance industry.
We have reached out to the Nevada Justice Association, and are waiting to hear back.
Previous coverage can be found here: Bill calls out third party lawsuit lending firms | News | 2news.com
Full text of SB-179 below:
