States crack down on secret money behind lawsuits

Small businesses are fighting to stay afloat, and one nasty lawsuit could sink everything.

The massive cost of fighting a lawsuit pushes many small businesses to settle quickly just to survive. Trial lawyers know that pressure works.

Now, lawmakers nationwide are digging into who is really paying for these lawsuits. They’re also looking at the damage the cases can do to businesses, including trucking operations.

The Owner-Operator Independent Drivers Association says truck drivers are being hammered by expensive, often unnecessary personal injury lawsuits. The trucking companies that hire, defend or insure them are getting hit, too.

And the fallout doesn’t stop with one business. It can shake the entire supply chain.

OOIDA says some lawsuits are being fueled by outside investors looking to cash in. That can push costs even higher and keep cases dragging on even longer. At the very least, the Association wants plaintiffs to disclose when outside money is backing a lawsuit.

Litigation funding happens when investors bankroll lawsuits they think will win. If money is awarded or a settlement is reached, the investors get a cut.

That setup can make fair settlements tougher because an outside group is chasing profits instead of a quick resolution.

These investors back many different types of lawsuits, including truck crash claims and other trucking-related disputes.

More and more states are taking action to rein in litigation funding. Mississippi and Utah are two of the most recent to act. More states could soon follow.

Michigan

Michigan House lawmakers voted 60-45 to pass a bill targeting lawsuit financiers.

Rep. Mike Harris, R-Waterford, said the state currently has no guardrails for what he called “shadow cash.” The term is used to describe money flowing through the court system.

Harris described third-party litigation funding as a growing threat to Michigan’s courts.

“My legislation addresses the worst part of this industry: the fact that outside investors can pour money into lawsuits without telling a soul,” Harris said.

His bill would force disclosure of lawsuit funding deals. Litigation funders would also have to register with the state.

Another rule would ban funders from paying commissions to attorneys, healthcare providers or medical professionals. They would also be barred from paying referral fees or offering other incentives.

Funders also would not be allowed to collect commissions or kickbacks from attorneys, healthcare providers or medical professionals.

Foreign countries, people or entities considered a concern would also be banned from funding lawsuits.

Harris warned that without oversight, foreign actors could use these deals to influence the legal system, hurt the economy or gain access to sensitive information.

HB5281 is now in the Senate Regulatory Affairs Committee.

Ohio

Ohio lawmakers are also trying to expose who is funding lawsuits behind the scenes.

Right now, state law doesn’t require anyone to reveal litigation funding deals during a lawsuit.

That could soon change.

A bill moving through the statehouse would require those agreements to be disclosed.

Rep. Meredith Craig, R-Smithville, said HB105 would bring more transparency to people stuck in difficult financial situations during legal fights.

Foreign governments, corporations and investors would also be banned from taking part in litigation funding deals.

Craig said nonrecourse litigation funding has operated for too long without real rules or oversight.

She said the bill is designed to protect Ohio’s judicial system from outside influence, stop interference and make sure justice is not up for sale.

House lawmakers approved the bill. It is now in a Senate committee.

Louisiana

Time is running short at the Louisiana statehouse for another attempt to regulate lawsuit financing.

In 2025, House lawmakers approved a bill described as a major reform effort to improve transparency and fairness in third-party litigation funding. But the bill died in the Senate.

This year’s version is identical.

HB240 would block financiers from collecting more money than the plaintiff or claimant receives from a civil lawsuit settlement or award.

The rule would also apply to administrative proceedings, legal claims and other legal disputes.

Any attorney entering into a litigation financing agreement would also be required to tell their client within 30 days of either being hired or signing the financing agreement – whichever happens first.

The bill is still sitting in a House committee with less than two weeks left in the regular session. LL