As lawsuits draw more outside investors, state lawmakers are taking a closer look at who’s bankrolling litigation – and at what cost.
The Owner-Operator Independent Drivers Association says truck drivers – along with the companies that hire, represent, or insure them – are often hit with expensive and unnecessary personal injury lawsuits. These cases can drive up costs across the entire supply chain.
OOIDA says some of these lawsuits are fueled by outside investors looking to profit. That can make cases more costly and drag them out longer. At a minimum, the group wants plaintiffs to disclose when a lawsuit is backed by outside funding.
So far this year, at least six states have passed laws to regulate litigation funding.
Litigation funding happens when outside investors pay for a lawsuit they think will win. In return, they receive a share of the settlement or award.
This arrangement can make fair settlements harder to reach because a third party is focused on profit.
These investors back many types of cases, including truck crashes and other trucking-related disputes.
New York
New York lawmakers passed a bill to regulate consumer litigation funding.
Assemblyman Bill Magnarelli, D-Syracuse, said the industry is not regulated in the state.
“As a result, a number of ‘bad actors’ entered the business, who often acted in bad faith and charged exorbitant fees for the services provided and engaged in other bad practices,” Magnarelli said in prepared remarks.
His bill, A804, would set clear rules for contracts and require full disclosure so consumers understand the terms before agreeing.
The bill would also limit how much a funding company can collect. A company’s share of the gross recovery in a case would be set at 25%.
In addition, funders would have to register with the state. They would also be required to provide all information needed for the Department of State to check the company’s “character and fitness.”
Supporters say the bill would hold funders accountable, punish misconduct, and help ensure victims get fair settlements.
A804 is on Gov. Kathy Hochul’s desk.
Ohio
A bill advancing in the Ohio statehouse would change how third-party litigation funding is handled.
Ohio law does not currently require parties to disclose litigation funding agreements during a lawsuit.
House lawmakers approved a bill that would require those agreements to be disclosed. It would also ban foreign entities from taking part in litigation funding deals.
Supporters say the bill would increase transparency, create fairer negotiations, and better protect consumers.
“The business of nonrecourse litigation funding has operated without guidelines for too long,” stated Rep. Meredith Craig, R-Smithville. “House Bill 105 protects our judicial system from outside influence, guards against interference, and will ensure that justice in Ohio is never for sale to foreign actors.”
HB105 is awaiting assignment to a Senate committee.
Michigan
A bill in the Michigan House targets litigation funders.
Sponsored by Rep. Mike Harris, R-Waterford, HB5281 aims to increase transparency in litigation funding. Lawsuit funders would be required to register with the state. The bill would also bar funders from influencing how cases are handled.
How much funders can earn would be limited. “A foreign entity of concern” or a foreign country would also be banned from funding lawsuits.
Harris called the changes “common-sense guardrails.”
His bill is in the House Judiciary Committee.
Missouri
A new Missouri Senate bill focuses on litigation funding agreements.
SB881 would make litigation funders jointly responsible for any court-ordered costs or monetary penalties tied to a funded civil case.
The bill would also bar anyone involved in litigation funding from having ties to a foreign entity. Violations could result in felony charges.
SB881 is awaiting committee assignment for the session that begins Jan. 7.
New Hampshire
In New Hampshire, a House bill would regulate third-party litigation funding.
HB1384 sets rules for disclosure, oversight, and limits on litigation funding companies and attorneys.
The bill would require litigation funding agreements to be disclosed and would ban certain types of agreements.
Agreements with foreign entities of concern would also be banned.
HB1384 can be reviewed during the session that starts Jan. 7.
Wisconsin
Identical Wisconsin bills were introduced this month to protect consumers from costly financing deals.
The bills, AB715/SB705, would regulate nonrecourse civil litigation funding.
Finance charges and contract terms would be capped. Clear disclosures would also be required.
They would ban referral fees to lawyers and health care providers. Foreign entities would also be barred from funding lawsuits.
The bills are in committees. LL
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