U.S. Senate Republicans have introduced a bill targeting companies that invest in lawsuits, proposing rules that would force them to identify themselves and refrain from interfering with settlements.
Sens. Chuck Grassley of Iowa, Thom Tillis of North Carolina, John Kennedy of Louisiana and John Cornyn of Texas on Tuesday submitted the Litigation Funding Transparency Act. The businesses that would be affected are called third-party litigation funders and provide money up-front to plaintiffs lawyers in exchange for a percentage of whatever is recovered in court.
These arrangements worry some who feel they give investors who aren’t parties in court proceedings control over them. For example, Burford Capital is now allowed to challenge a $50 million settlement between Sysco Corp. and poultry producer Pilgrim’s Pride.
The U.S. Court of Appeals for the Seventh Circuit last week found problems with the execution with the settlement, which Burford felt wasn’t large enough. The company is the world’s largest third-party lawsuit investor, and its fight with Sysco, its own client, has complicated the case for years.
“… But for this legal maneuvering, this litigation could have been resolved long ago,” Seventh Circuit Judge Nancy Maldonado said. “This case is a cautionary tale to any party who seeks to fund its litigation through a third party.”
The Senate bill would keep funders from influencing litigation strategy and settlement negotiations. It would also prevent them from viewing any evidence that is subject to a protective order.
