Third Party Litigation Funding (TPLF)

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Third party litigation funding (TPLF) is the practice of hedge funds and other financiers investing in lawsuits in exchange for a percentage of any settlement or judgment. TPLF is a global industry with approximately $100 billion available to funders and firms. The practice, while lucrative for those betting on cases, increases the probability that meritless claims will be brought, inserts questions about who is actually controlling the litigation other than the plaintiff and defendant, and makes settling lawsuits far more difficult and expensive. Even the funders admit they deliberately complicate litigation. Allison Chock, Chief Investment Officer at Bentham IMF (one of the world’s largest litigation funders) stated, “We make it harder and more expensive to settle cases,” highlighting TPLF’s distortion of our civil justice system. The U.S. Chamber Institute for Legal Reform (ILR) works to bring TPLF, which threatens to undermine long accepted norms in our judicial system, out of the shadows. Read More...

Unlike other financial products, TPLF is largely unregulated around the world. The practice operates in secret, making it difficult for judges and parties to know who actually has an interest in the outcome of the litigation. TPLF also presents various ethical issues, particularly when a funder is directly financing a law firm or lawyer and cutting claimants out of certain significant litigation decisions.

On multiple occasions, ILR has urged the federal Committee on Rules of Practice and Procedure and Advisory Rules Committees to adopt a disclosure rule to bring a degree of transparency to TPLF. Recently, ILR led a coalition of 30 business and legal organizations in sending a letter the Committee debunking the funders’ arguments against disclosure and transparency.

ILR believes TPLF, like other outside interests in litigation, should be subject to reasonable transparency standards.

01/01/2019

Suggested Resources

Research
  • ILR Briefly: Third Party Litigation Funding in Qui Tam False Claims Act

    ILR Briefly: Third Party Litigation Funding in Qui Tam False Claims Act

    July 17, 2020

    In addition to investing in portfolios of private lawsuits, third party litigation funders have started financing qui tam False Claims Act cases brought on behalf of the U.S. government. The catch is that up until very recently, the government had no insight into whether funders were involved or the level of control they exerted. That changed in June 2020, when the Department of Justice announced a policy change to start shedding some light on this opaque practice. Read More

  • ILR Briefly COVID-19 Series: State Liability Problems and Solutions

    ILR Briefly COVID-19 Series: State Liability Problems and Solutions

    May 21, 2020

    As states reopen and continue to respond to the needs of their citizens and economies, it is important that they consider offering liability protections to prevent a wave of COVID-19 lawsuits at the state level. This edition of ILR Briefly documents major hot spots for COVID-19 litigation under state law and provides an array of policy solutions to prevent lawsuits from disrupting states' economic recoveries. Read More

All Results for Third Party Litigation Funding (TPLF)

  1. Official Says DOJ Probing TPLF in False Claims Act Cases

    January 28, 2020 | News

    During a recent keynote address, Deputy Associate Attorney General Stephen Cox said the U.S. Department of Justice (DOJ) is looking into the use of third party litigation funding (TPLF) in False Claims Act cases, Law360 reports.... Read More

  2. Another Bar Association Considers Nonlawyer Firm Ownership

    January 27, 2020 | News

    The District of Columbia's bar association is considering easing the rules regarding nonlawyers owning and partnering with law firms, Law360 reports.... Read More

  3. Selling More Lawsuits, Buying More Trouble: Third Party Litigation Funding A Decade Later

    January 27, 2020 | Research

    Selling More Lawsuits, Buying More Trouble finds that the third party litigation funding industry has grown massively since ILR's original research on the subject, and that the ethical and practical concerns we identified with TPLF in 2009 were well-founded.... Read More

  4. In the News Today - January 14, 2020

    January 14, 2020 | News

    Skadden Attorneys Predict Continued "Record Pace" Of Securities Lawsuit Filings; Public May Be Interested In TPLF, Judge Says... Read More

  5. 2019 Winter | ILR Research Review | Volume 6, Issue 3

    December 19, 2019 | Research

    Our Winter 2019 Research Review looks at a number of legal trends that are creating increasingly complex litigation and compliance burdens for companies-leaving the door open for plaintiffs' lawyers to profit.... Read More

  6. Australian High Court Ruling Will Disrupt Litigation Funders' Business Model

    December 05, 2019 | News

    The High Court of Australia ruled yesterday that courts have no power to order class members to pay a portion of their recoveries to litigation funders, which Law.com says could be "a major blow" to the industry.... Read More

  7. Litigation Funders Poised For Major Investment Infusion

    November 20, 2019 | News

    A new survey found that litigation funders have a staggering $9.52 billion under management in the U.S. and are actively seeking new portfolio-style deals, Law360 reports.... Read More

  8. Rules Committee To Continue Work On TPLF

    November 01, 2019 | Blogs

    In another welcome sign, the Advisory Committee on Civil Rules for the U.S. courts announced this week that it will continue to study the effects of third party litigation funding (TPLF) in civil litigation and the potential need for a disclosure requirement. ... Read More

  9. Lead Generators Accused of Fraud

    October 31, 2019 | News

    A mass tort lead generator firm was accused by its investors of fraud, who alleged they were misled about the potential returns on their investments, Reuters reports.... Read More

  10. In the News Today - October 28, 2019

    October 28, 2019 | News

    Pending EU Collective Action Directive Could Ignite TPLF Abuses in Europe... Read More