HR-1109-119
Committee Consideration and Mark-up Session Held
Sponsored by Darrell Issa (R-CA)
What it does
This bill would require parties and attorneys in federal civil lawsuits to disclose in writing to the court and other parties the identity of anyone (other than counsel) who has a contingent right to payment based on the case's outcome, such as third-party litigation funders. It would also require production of the underlying funding agreements, with exceptions for simple loan repayment, capped interest, and attorney's fee reimbursement, and disclosures must be made within 10 days of the agreement or at filing, whichever is later, with a duty to correct.
Who benefits
Defendants and their counsel, particularly corporations and insurers facing lawsuits, who would gain visibility into whether outside funders are directing litigation strategy or settlement decisions. Courts seeking to assess potential conflicts of interest or improper outside influence over cases. Litigation funding critics who argue undisclosed funders can distort case management and settlement incentives.
Who is hurt
Litigation funding companies and their investors, who would face new disclosure burdens and potential exposure of proprietary funding terms. Plaintiffs, particularly individuals and smaller entities relying on third-party funding to pursue claims against well-resourced defendants, who may find funders less willing to invest if terms become discoverable. Plaintiffs' attorneys who rely on funding arrangements to finance litigation costs.
Supporters argue
Supporters argue that undisclosed third-party litigation funding can create hidden conflicts of interest, allow foreign entities or hedge funds to control litigation strategy without court oversight, and distort settlement negotiations when a party's real financial stakeholder is invisible to the judge and opposing counsel. They contend transparency simply extends existing disclosure norms, similar to conflict-of-interest rules already applied to judges and counsel, without banning funding arrangements outright.
Opponents argue
Opponents argue that forced disclosure of funding agreements could reveal privileged litigation strategy and case valuations, giving well-resourced defendants a tactical advantage by letting them probe a plaintiff's financial resources and staying power. They contend the measure could reduce access to justice for individuals and small businesses who depend on litigation funding to challenge larger corporations, since funders may demand higher returns or decline deals once terms become discoverable.