Court orders are beginning to reveal “surprising” data on the sources of litigation funding

There is no federal law requiring the disclosure of litigation funding agreements in court cases, but a troubling prospect has been found in individual jurisdictions that have rules to increase transparency, according to a panel on the topic from the American Insurance Answering Association Real Estate (APCIA). annual meeting.

“We don’t know to what extent, because there are so few jurisdictions that require disclosure, but in those few jurisdictions that do have disclosure rules, it was surprising what was discovered,” said Paul Taylor, a fellow at Homeland Security. Antonin Scalia Institute at George Mason University School of Law, who served for more than 20 years as counsel to the Subcommittee on the Constitution and Civil Justice of the House Judiciary Committee.

Taylor said an intellectual property case in federal court in Delaware involved a Chinese-backed third-party funder called Purple Vine. The Federal District of Delaware requires financial disclosure of litigation through a standing order, and the implications of this particular finding, Taylor continued, are very clear when looking at the information shared during the legal process, particularly during discovery — an exchange of information before process between the parties in the legal process. case.

“No matter how tight a nondisclosure rule is, there are so many people involved that there’s a lot of room for leaks,” Taylor continued at the Chicago conference. “That’s where sensitive information could give foreign competitors an advantage in a certain area. If they get sensitive knowledge about a company’s product, it might just allow them to get litigation revenue, which they could use to fund whatever other anti-American projects they might be.”

Third-party litigation funding (TPLF) – an investment for claimants from an outside firm in exchange for a portion of a settlement or judgment – ​​has been repeatedly cited by the insurance industry as a factor in driving up the cost of accident claims. Industry trade associations have lobbied to raise awareness of the practice and encourage court rules to disclose third-party funders.

Shortly before the discussion, APCIA released a statement in support of federal TPLF legislation introduced by Congressman Darrell Issa, chairman of the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet.

“The abuse of the legal system fueled by third-party litigation funding has shaped a litigious culture, ultimately burdening every consumer and business with increased costs, including the cost of insurance across the country,” said Nat Wienecke, senior vice president of the federal dept. APCIA. government relations, in a statement.

Vishal Amin, head of IP Policy at Intel, said that a “huge amount” of IP cases do not come from competitors, but from others funded by third parties and “come after our interests”.

“It’s almost a form of economic warfare,” Amin told the conference audience. “You have sovereign wealth funds from the Middle East; You have foreign governments (such as) the example of the Chinese or Russian oligarchs now funding some of this litigation funding. There is a method to the madness here.”

Former Congressman Bob Goodlatte of Virginia, also a member of the jury, said TPLF interferes with a judge’s job of administering justice fairly and efficiently because judges cannot identify potential conflicts of interest. In addition, he said, plaintiffs’ lawyers may be less likely to settle cases because they are bound by TPLF contracts. In fact, they may be forced to proceed with a case because the terms of the contract have not been met.

The terms of insurance contracts involved in a case are disclosed confidentially, and the same should be true of TPLF agreements, Goodlatte said. Whether through court rules or state or federal law, more needs to be done to stop the courts from becoming a “casino,” he added.

“The courts were not designed for this purpose, and justice is being denied — no longer fairly administered — by the extensive amount of third-party litigation funding that is taking place,” Goodlatte said.

TOPICS
Processes Mergers and acquisitions