Historically, litigation funders have expressed concerns over the risk of public disclosure about their role in financing lawsuits. These concerns have emerged due to the request filed by a group of defense lawyers named “Lawyers for Civil Justice” to change the rules of procedure and mandate a cash-strapped plaintiff in need of financial assistance in a court to disclose information about the funding received from third-party lenders.
The existing rules, applicable in most states, do not mandate the disclosure of any case information about the arrangement between third-party litigation funding companies and claimants.
The Lawyers for Civil Justice claim that the present rules are failing to provide information to circuit court judges about the funding received by victims to a case, which can result in a conflict of interest. In view of this, they are requesting an amendment to the rules.
It is not the first time that defense attorneys representing multi-billion dollar insurance companies and corporations have come with the demand for disclosing information from financially burdened victims.
Defense attorneys have been making these demands for a long time now, but their demands have failed to achieve any substantial consideration among the relevant stakeholders.
Reports have indicated a rise in the demands for disclosure with time as the market share of lawsuit funding companies is also expanding each year, and companies are gaining popularity among the general public.
The proponents of the disclosure argue that litigation finance companies such as Burford Capital and Longford Capital provide funding in advance to claimants to bring action, and in return, they earn a portion of the settlement awards granted by the courts to the claimant. According to them, with the expansion of the industry market share, it is imperative for the courts to ensure transparency and change rules regarding the disclosure of information about the industry.
According to Bloomberg Law, the GAO, which provides information based on research to Congress, is arranging a conference to meet with litigation finance participants to gain insights into the industry. This conference was arranged at the request of lawmakers who want information about the working of the litigation financing industry. Some of the information includes the number of requests received by lenders, the number of cases that have received legal funding, the threshold and criteria for successful loans, and the types of returns generated by the investment.
Lawmakers making such a request include Senator Chuck Grassley and Representative Darrell Issa, who has proposed greater disclosure numerous times. Similarly, Representative Andy Barr has also requested to address the data gap in the market.
Although the request for greater disclosure of information about the litigation funding industry has arisen from lawmakers and defense side lawyers, these demands have failed to materialize, and the courts of law have shown little interest in making rules for the mandatory disclosure of information.
The arguments of these groups that the existing rules keep courts in the dark have no substantial basis, and the courts can easily handle any conflict of interest and discovery issues under the current legal proceedings.