US judicial panel to examine litigation finance disclosure
By Nate Raymond
Oct 10 (Reuters) -A federal judicial rules-making panel on Thursday agreed to study whether a nationwide rule requiring disclosure of third-party litigation funding in lawsuits is necessary at the urging of major companies, business groups and Republican lawmakers.
After a decade of weighing whether it should do anything to regulate the emerging field of litigation finance, the U.S. Judicial Conference's Advisory Committee on Civil Rules at a meeting in Washington, D.C., agreed to create a subcommittee to examine the issue.
"I agree it is an important issue, and I agree it's an issue that is not going away," said U.S. District Judge Robin Rosenberg, a Florida-based judge who chairs the committee.
The decision came a week after more than 100 major companies from the technology, pharmaceutical, automotive and other sectors signed a letter urging the judiciary to take action and require greater transparency into who is funding the cases being filed against them.
A few federal judges or courts, such as New Jersey's, already require disclosure of litigation funding, where a financier backs clients' cases in exchange for a cut of an eventual settlement or judgment, but there is no uniformity across the judiciary.
The companies that joined that letter included Amazon.com, Google, Cisco, Meta, Comcast, Exxon, Bayer, Ford, Pfizer and Novartis. Several Republican lawmakers including Senators John Cornyn of Texas and Thom Tillis of North Carolina had recently also written letters urging the judiciary to take action.
The creation of a subcommittee, which will be chaired by Chief U.S. District Judge R. David Proctor of the Northern District of Alabama, does not guarantee a rule will be issued in what is likely to be a years-long process.
But committee members said it was finally time they took a closer look at an issue that the U.S. Chamber of Commerce had first urged it take action on back in 2014, citing growth in the sector and the need to know if any problems are emerging.
Companies that finance U.S. commercial lawsuits in exchange for a cut of any recoveries committed $2.7 billion to new deals last year, according to a recent report.
"We know what the theoretical problem is," said U.S. District Judge John Bates, who chairs the judiciary's top rule-making panel, the Committee on Rules of Practice and Procedure. "I think we have to look if there are actual problems."
Rosenberg said the subcommittee would seek input from lawyers, litigation funding industry participants, and others.
Page Faulk, senior vice president of legal reform initiatives at the U.S. Chamber of Commerce Institute for Legal Reform, in a statement welcomed the committee's decision.
"We urge the federal judiciary to move forward swiftly in adopting mandatory disclosure requirements to get a peek behind the curtain of the implications that this secretive, multi-billion-dollar global industry has on our civil justice system," Faulk said.
Business groups have argued that disclosures about financial backers in cases are necessary to allow defendants to make informed decisions about the course of litigation and understand who is making decisions about whether to settle lawsuits.
The International Legal Finance Association, a trade group representing the commercial funding industry, has argued that such a nationwide requirement is unnecessary and that it should be left to individual courts to determine the relevancy of any financing agreement to the merits of any particular case.
Read more:
Louisiana law places new rules on litigation funders
Litigation funder Burford fights order denying bid to take over Sysco cases
US litigation funding in 'state of flux' as deal commitments dip, says report
Litigation funders deployed $3.2 bln in U.S. investments last year - report
Reporting by Nate Raymond in Boston
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