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
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All Results for Third Party Litigation Funding (TPLF)

  1. Third Party Financing: Ethical and Legal Ramifications in Collective Actions

    November 19, 2009 | Research

    This paper begins with an overview of third party litigation financing. It next examines the current third party financing practices of a number of European jurisdictions. Then, it sets forth ILR's critique of the practice, particularly the incentives it creates to engage in frivolous and abusive litigation. ILR also presents a case study of the Commonwealth of Australia, the first jurisdiction to permit third party litigation funding, where such funding has dramatically increased litigation and given investors pervasive - even total - control over a claimant's case. Finally, the paper concludes that such funding should be prohibited altogether in collective litigation.... Read More

  2. Legal Reform Summit Calls for Jobs, Not Lawsuits

    October 28, 2009 | Press Release

    Calling the next few years a transformational time that could define the future of our civil justice system, speakers at the U.S. Chamber Institute for Legal Reform's (ILR) 10th Annual Legal Reform Summit urged U.S. decision makers to consider the costs of expanding liability for job creators during the economic recovery.... Read More

  3. Selling Lawsuits, Buying Trouble: The Emerging World of Third-Party Litigation Financing in the United States

    October 28, 2009 | Research

    This paper begins with an overview of third-party litigation financing. It next examines current third-party financing practices in the United States. It then sets forth a critique of the practice, particularly the incentives it creates to engage in frivolous and abusive litigation. In this section, the paper also presents a case study on the Commonwealth of Australia, the first jurisdiction to permit third-party litigation funding, where such funding has dramatically increased litigation and given investors pervasive - even total - control over a plaintiff's litigation. Finally, the paper proposes that third-party litigation financing be prohibited in the United States to prevent these abuses. At the very least, the paper concludes, such funding should be banned in class actions and other forms of aggregate litigation.... Read More