Lawmakers in Mont. and La. Pass Bills to Require Disclosure of Litigation Funding

Lawmakers in two states passed bills this year to require disclosure of litigation funding contracts. Business groups are pushing for similar rules in federal courts nationwide.

Montana Gov. Greg Gianforte on May 2 signed into law Senate Bill 269, which requires parties who file lawsuits to disclose any litigation financing agreement, limits fees to 25% of the judgment or settlement and makes financers liable for any costs and fees assessed if they end up on the losing side.

The Louisiana Legislature approved a similar bill, which cleared the state Senate on Tuesday and now awaits a signature by Gov. John Bel Edwards.

In the meantime, the US Chamber of Commerce’s and other business and insurance groups are trying to persuade the US Judicial Conference’s Committee on Rules of Practice and Procedure to adopt a disclosure requirement for US District Courts. Some districts already require disclosure of litigation funding contracts under certain conditions. The Chamber is hoping to replace a hodgepodge of rules with a blanket disclosure requirement.

“Judges have a right to know whether these non-merits-related interests are driving the litigation in their courtrooms,” the groups said in a May 8 letter to the judicial rules committee. “And the proposed mandatory disclosure rule would effectuate that right by requiring all funding agreements to be disclosed as a matter of course.”

The American Property and Casualty Insurers Association is among the organizations that signed on to the Chamber’s letter. The organization says litigation funding leads to higher damage awards and increased settlement costs.

The US Chamber’s Institute for Legal Reform first asked for a federal litigation funding disclosure rules in 2017, but a report by the Government Accountability Office report released in January generated renewed interest in the issue. The GAO reported that the amount of money invested in litigation funding is increasing, but there is lack of data about the number of funders, their rate of return and the amount of money available.

The GAO report cited an analysis by Westfleet Advisors that said 47 active litigation funders had a total of $12.4 billion in assets and committed $2.8 billion to new litigation finance agreements in 2021.

Nathan Morris, senior vice president for legal reform advocacy at the Chamber, said disclosure about Burford Capital’s involvement in antitrust litigation filed by Sysco Corp. provides a cautionary tale.

Burford, a publicly traded company that bills itself as the world’s largest litigation funder, in 2019 provided $140 million to fund a Sysco lawsuit that accused poultry and pork providers colluding to support high prices. Although Burford has long said that it does not intervene in the legislation it funds, the company intervened in arbitration proceedings to prevent Sysco from sharing the proceeds of its settlement agreement with its customers, the Chamber alleges.

Morris said before Buford filed a motion to block the Sysco settlement, Burford Chief Executive Officer Christopher Bogart told CBS News’ Lesley Stahl on the 60 Minutes program that its clients “are free to run their litigations as they see fit.”

Bogart said in an email Wednesday that his company intervened in the lawsuit only because Sysco breached its contract.

“The Chamber exists to create an unlevel playing field skewed in its favor, even while its members happily take hundreds of millions of dollars of litigation funding capital from Burford,” Bogart said. “Its hypocrisy is truly a marvel to behold, and it has lost any credibility it might have had in the past with its internal corruption and its rejection by both political parties.”

Morris said disclosure of litigation funding agreements would give the courts and the parties involved a better understanding about where interests lie.

The Chamber has been backing litigation funding bills in statehouses across the nation. The bills introduced in Montana and Louisiana this year passed both chambers of the state legislatures by wide margins.

Louisiana’s Senate Bill 196 would require parties to disclose litigation funding agreements within 60 days of a lawsuit being filed, but would allow redaction of the specific amount of money provided. The Louisiana bill, unlike Montana’s measure, would not cap the amount that funders can charge for their service and would not make funders liable if they lose and the court awards fees and costs to the winner.

Although Gov. Edwards was a trial attorney before he was elected to office, Morris said he is optimistic the governor will sign the bill. He said Edwards has approved other tort reform measures that are typically opposed by trial lawyers.

Montana joins Wisconsin and West Virginia among the states that require disclosure of litigation funding agreements. The chamber also supported measures introduced in the Florida and Nevada legislatures this year that failed to pass.