On October 4, 2024, Reps. Darrell Issa (R-CA) and Scott Fitzgerald (R-WI) introduced “the Litigation Transparency Act of 2024,” which would require the disclosure of third-party litigation funding in federal lawsuits.
The bill requires the disclosure to the court and named parties of “the identity of any person (other than counsel of record) that has a right to receive any payment or thing of value that is contingent on the outcome of the civil action” or a portfolio of cases including the action. It also requires the production of the litigation funding agreement to the court and named parties.
There are some narrow exceptions to these requirements, namely if payment is repayment for the principal of a loan and/or interest on a loan not exceeding a set amount or is for the reimbursement of attorneys’ fees.
These disclosures must be made at the time the case is filed, or within 10 days of executing the litigation funding agreement, and there are ongoing obligations for supplemental disclosures if a party “learns that the disclosure is or has become incomplete or incorrect in some material aspect.”
Per Rep. Issa in a recent press release, the legislation “targets serious and continuing abuses in our litigation system and achieves a level of transparency that people deserve, and our standard of law requires.” He goes on to say: “We believe that if a third-party investor is financing a lawsuit in federal court, it should be disclosed rather than hidden from the world and left absent from the facts of a case. When we achieve a lasting measure of awareness by all parties, it will advance fair and equal treatment by the justice system and deter bad actors from exploiting our courts.”
Notably, as a state legislator, Rep. Fitzgerald helped pass the 2018 Wisconsin law mandating disclosure of third-party litigation funding in that state’s courts.
The potential for national security concerns in third-party litigation funding is also highlighted in the press release, which notes statements made by Sen. Marco Rubio, Sen. John Kennedy and state attorneys general, as well as the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet’s June 2024 hearing “The U.S. Intellectual Property System and the Impact of Litigation Financed by Third-Party Investors and Foreign Entities.”
Several organizations have come out in favor of the bill, including the National Association of Mutual Insurance Companies, The U.S. Chamber of Commerce, American Property Casualty Insurance Association, High Tech Inventors Alliance, and US MADE. The bill was introduced just days after over 120 companies signed onto a letter to the Advisory Committee on Civil Rules advocating for the amendment of the Federal Rules of Civil Procedure to provide a uniform procedure for disclosing third-party litigation funding in civil cases in federal court.
Caroline Parker-Beaudrias, Investment Counsel, USA
+1 (888) 334 4187
As part of Erso’s investment team, Caroline handles all aspects of the assessment process, from due diligence of new investment opportunities through to deal execution and ongoing investment monitoring.
Prior to joining Erso, Caroline was a litigator at Hughes Hubbard & Reed LLP, widely regarded as having a leading disputes practice in North America. During her time at Hughes Hubbard, Caroline represented both foreign and domestic clients in all phases of complex business litigation. Caroline’s extensive experience was primarily on the defense side, including frequent engagements for Fortune 500 and Global 500 companies.