Unstoppable Force?

Momentum, optimism builds for key TPLF transparency initiatives

CCO CONNECT EXCLUSIVE Photo

Representatives from over 100 major companies throughout the business and insurance communities recently signed a letter calling for the U.S. Judiciary to adopt a nationwide rule requiring disclosure of third-party litigation funding (TPLF) in lawsuits. The companies, which include Amazon, Google, Cisco, Meta, Comcast, Exxon, Eli Lilly, Bayer, Ford, Pfizer, and Novartis, submitted the letter on Oct. 2 to the federal courts’ Advisory Committee on Civil Rules in advance of its hearing, which took place on Oct. 10.

The effort may pay off, as, according to Reuters, the committee agreed to form a subcommittee to examine the issue and study whether a nationwide rule is necessary. Reuters quotes U.S. District Judge Robin Rosenberg, a Florida-based judge who chairs the committee, as stating, “I agree it is an important issue, and I agree it’s an issue that is not going away.”

In August 2023, CLM ran a CCO Connect feature on TPLF that highlighted the importance of an all-hands-on-deck approach to raising awareness about the issue to help drive reforms. The Oct. 2 letter appears to be an example of that approach, as dozens of insurance companies joined major companies across a variety of industries.

Main Arguments of the Letter

The four main arguments presented in the letter were:

  1. It is unfair to deny parties information about who controls the litigation.
  2. Disclosure of TPLF agreements is essential to the function of key federal rules of civil procedure (FRCP) and witness safeguards.
  3. Inadequate practices such as ex parte conversations should not be the standard means of inquiry about TPLF.
  4. Defendants need TPLF disclosure for the same reasons the FRCP provide plaintiffs with our insurance agreements.

“We urge the Advisory Committee to propose a straightforward, uniform rule for TPLF disclosure to remedy the current imbalanced and inconsistent litigation dynamic that is prejudicial and frustrates civil justice,” the letter states. “The FRCP should require disclosure of TPLF agreements that provide non-parties a direct interest in the outcome of the case. Absent such a rule, the continued uncertainty and court-endorsed secrecy of non-party funding in our cases will further unfairly skew federal civil litigation.”

Meanwhile, the Inventors Defense Alliance—which describes itself as a nonpartisan advocacy organization working to build support for inventors’ rights, safeguard justice, and protect access to capital—sent a competing letter on Oct. 9 urging the committee to “see big businesses’ calls to restrict litigation finance for what it is: an effort to squash their smaller competitors and maintain market dominance.”

The IDA letter states, “Large corporations claim they are only trying to advance ‘transparency’ and ‘fairness’; yet their true motivation is to undercut competitors and boost their profits. Mandatory disclosure rules would reinforce the unfair advantages big businesses already have in the justice system.”

When, Not If

Commenting on the significance of so many major companies and insurers coming together to push for TPLF reform, Matt Webb, senior vice president of legal reform policy, U.S. Chamber of Commerce Institute for Legal Reform, tells CLM, “I think it will definitely be helpful, and the reason why is it shows there is a very broad base level of support within this community for disclosure of [TPLF]. And whether or not it’s through the rules process, legislation, or a combination of the two, I think it’s a clear indication that this community strongly wants more broad-based third-party litigation funding disclosure. I think it’s indicative of how broadly based the concern is within the business community about litigation funding. It’s not just an insurance issue, it’s not just a business or non-insurance business issue…it’s the entire business community that is expressing concerns about it.”

Furthermore, Webb believes there is a significant level of interest regarding third-party litigation funding on Capitol Hill. “We’ve seen multiple bills introduced this Congress,” he explains. “We’ve seen bills introduced at previous congresses. We’ve seen multiple efforts at oversight in the industry, as well as outreach efforts to the federal judiciary regarding issues. So, I think this is…an issue that the level of interest and concern is only growing in Congress at this point. I think…something is going to happen in this space. It’s not a question of ‘if,’ it’s a question of ‘when.’”

Webb indicates that the appetite among legislators to pass a Litigation Funding Transparency Act is strong, as there have been several efforts to bring greater transparency to litigation funding. For instance, he offers, “there’s the ‘Protecting Our Courts From Foreign Manipulation Act,’ that was introduced in the Senate by [Sens. John Kennedy, (R-La.) and Joe Manchin, (D-WV)]. There’s also the House companion that Speaker [Mike] Johnson introduced.... In prior Congresses, [Sen. Chuck Grassley (R-Iowa)] issued the Litigation Funding Transparency Act; Congressman [Darrell Issa (R-Calif.)] introduced the House companion of that. But he’s done [a] new version, the ‘Litigation Funding Transparency Act.’ So, I think those are the main ones out there right now as far as legislative efforts; [however,] there is always room for more." 

Dale Porfilio, chief insurance officer, Insurance Information Institute (Triple-I), says to CLM, “Triple-I supports mandatory disclosure of [TPLF] in any insurance claim. Disclosure is a necessary first step so we can provide data-driven research on the impacts of TPLF on insurance claims and consumer costs. Mandatory disclosure requirements could originate from four sources: legislative vs. judicial, federal vs. state. Triple-I does not lobby, so we are supportive of disclosure requirements via any path."

Commenting on the prospect of a judiciary rule stemming from the work of the Advisory Committee on Civil Rules vs. legislation at the federal level, Porfilio says, “A federal requirement is advantageous to set a consistent standard across all states and jurisdictions. Federal legislation has been proposed, but the probability of this passing is low given current partisan behaviors. So, a judiciary rule may be the more likely option for a federal standard. That said, Triple-I is supportive of state legislation and individual judicial requirements for TPLF disclosure as positive steps toward mandatory disclosure everywhere.”

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About The Authors
Angela Sabarese

Angela Sabarese, Associate Editor of CLM. angela.sabarese@theclm.org

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