Rep. Darrell Issa announced the introduction of the Litigation Transparency Act of 2024, which requires the disclosure of third-party litigation financing agreements at the start of civil lawsuits. The bill mandates that investors entitled to receive payment based on the case's outcome be identified early in the legal process.
According to a press release by House.gov, civil litigation funding comes from various undisclosed sources, such as hedge funds, commercial lenders, and sovereign wealth funds. Potential for large settlements and the involvement of patent-assertion entities lead to issues in Intellectual Property. Recently, there have been rising concerns about national security, particularly in cases where Chinese-backed investors are financing IP litigation against U.S. firms. This issue has been raised by 14 State Attorneys General, former Director of National Intelligence John Ratcliffe, Senator Marco Rubio, and Senator John Kennedy.
"This legislation is a breakthrough measure that will target serious abuses in our litigation system and achieve long-overdue transparency," said Issa according to a press release by House.gov. "If a third-party investor is financing a lawsuit in federal court, it should be disclosed at the onset of the case. Awareness by all parties will help ensure fair and equal treatment by the justice system and deter bad actors from exploiting our courts."
The Insurance Information Institute (III) stated that third-party litigation funding is a form of "legal system abuse" and is making insurance more expensive for policyholders, according to a press release. "The price of insurance is the effect, not the cause of risk, and there must be more work done to curb legal system abuse, as auto insurers – both personal and commercial – are seeing significant increases in claims costs when attorneys enter into the picture," said III CEO Sean Kevelighan.
Nationwide, the cost of car insurance has risen 19.5% over the last year, according to the U.S. Bureau of Labor Statistics.