Louisiana has enacted a new bill to regulate the growing litigation funding industry, joining a small group of other states that have implemented or considered similar laws. Republican Governor Jeff Landry signed the bill on June 19, 2024.
Disclosure Requirements for Foreign Funding
The legislation mandates that any funding in civil actions by litigation funders from a “foreign country of concern” must be disclosed to the state attorney general. This measure is designed to enhance transparency and address national security concerns.
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Influence Restrictions on Third-Party Funders
Under the new law, third-party litigation funders are prohibited from influencing or directing the parties in cases in which they invest. Additionally, the existence of a litigation funding contract is now subject to discovery in civil actions. These provisions aim to ensure that litigation funders do not exert undue influence on the legal process. The law is set to take effect on August 1, 2024.
Growth of the Litigation Funding Industry
Litigation funders invest in lawsuits or other legal claims in exchange for a portion of any recoveries. Over the past decade, the U.S. litigation funding industry has seen significant growth, with funders investing in commercial litigation reaching a combined $15.2 billion in assets under management in 2023.
Criticisms and Support for the Industry
Critics argue that litigation funding promotes unnecessary litigation and undermines transparency in the legal system. The U.S. Chamber of Commerce and other organizations have long advocated for tighter regulation of the industry.
In contrast, proponents of litigation funding argue that it can level the playing field and promote access to justice. A spokesperson for the International Legal Finance Association, a trade group representing commercial litigation funders, stated that mandatory disclosure proposals are unnecessary. They emphasized that investors do not direct case investments or control litigation decisions.
Broader Legislative Context
Louisiana is among a handful of U.S. states that have introduced bills governing the litigation finance industry in recent years. Indiana and West Virginia have recently enacted similar laws, while measures in states like Florida and Kansas stalled in their legislatures this year.
Historical Context and Previous Attempts
Louisiana’s legislature previously passed a bill requiring the disclosure of litigation funding agreements in civil cases, but it was vetoed by then-Governor John Bel Edwards, a Democrat, last year. The new legislation, signed by Governor Landry, represents a renewed effort to bring transparency and regulation to the industry.
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