Third-Party Suit Reforms — A Bill is in the U.S. House

Republican California Congressman Darrell Issa — the Chairman of the House Judiciary Subcommittee on Courts, Intellectual Property, Artificial Intelligence and the Internet — is working with Republican Congressman Scott Fitzgerald of Wisconsin and Georgia Republican Congressman Mike Collins on third-party lawsuit reforms.

HR 1109 — The Litigation Transparency Act of 2025 — will force third parties to disclose their identity and that they will receive payment from the outcome of civil lawsuits.

Issa’s news release said more and more litigation for civil matters is being funded by third-parties that are not required to disclose their identity. They consider the funding to be a business investment. Many of these third-party entities are hedge funds, commercial lenders, and sovereign wealth funds that function though a shell company.

And they’re seeking very large, and profitable, settlements to pad their pocketbooks.

A study by RAND found 80 cents of every settlement dollar paid to class action victims end up in the hands of legal firms and go to administrative costs. That’s less than 20 center per dollar going to the victims.

Investments in third-party lawsuits hit $2 billion in 2024. The total assets of the funds financing these lawsuits has grown to $16.1 billion. The outrageous settlements — often known as nuclear verdicts — cost the U.S. economy $500 billion a year.

“Our legislation targets serious and continuing abuses in our litigation system that distort our system of justice by obscuring public detection and exploiting loopholes in the law for financial gain,” Issa said. “Our approach will achieve a far better standard of transparency in the courts that people deserve, and our standard of law requires. We fundamentally believe that if a third-party investor is financing a lawsuit in federal court, it should be disclosed rather than hidden from the world and left absent from the facts of a case.” 

Rep. Fitzgerald agrees

“As a former state legislator, I helped usher in laws to mandate disclosure of TPLF in Wisconsin courts,” Fitzgerald said. “This ensured parties were aware of all stakeholders who had a financial interest in the outcome of litigation. These commonsense disclosure laws should similarly be required in federal courts, where the stakes can be higher,”

Rep. Collins agrees transparency is critical to begin to control escalating court decisions now sitting in the many millions of dollars.

“Transparency in our legal system is essential to protecting industries vital to Georgia and America’s economy from unfair litigation practices. I have been advocating for tort reform for years and will continue the fight to ensure that lawsuits are fair and not driven by hidden third-party investors,” Collins noted. “The Litigation Transparency Act will provide much-needed disclosure, safeguarding both businesses and consumers from the rising costs and legal abuse that result from secretive litigation funding.”

The bill has the support of several important groups including the National Association of Mutual Insurance Companies (NAMIC) and the American Property Casualty Insurance Association (APCIA). 

“The court system was never meant to be used as a for-profit investment scheme. Frivolous and excessive litigation driven by investors has raised costs for Americans across the country, including the cost of insurance,” NAMIC said in a news release. “When disputes end up in court, all the relevant parties should know everyone involved on each side, and this legislation will ensure that no one in the court system operates in shadow. NAMIC applauds Chairman Issa for his steadfast leadership on this front and urges Congress to advance this important legislation.”

The APCIA’s take on the legislation is similar.

“Legal system abuse is a significant factor impacting insurance affordability and availability in the states and across the country. By its very nature, third-party litigation funding contributes to the growth in lawsuits and increases litigation costs, both of which increase the cost of insurance overtime for every American family, individual, and business who purchases it,” the APCIA said. “Chairman Issa’s legislation is a significant step forward to address the negative impacts of litigation funded by third party investors by requiring disclosure of third-party litigation financing to the parties and the court in all federal civil actions.  APCIA appreciates Chairman Issa’s leadership and will continue to educate and urge members of Congress to support this legislation.”

The Reinsurance Association of America (RAA) is also supporting the legislation.

“At the expense of small businesses, manufacturers, and American families, foreign and domestic investors are partnering with law firms to profit from U.S. litigation,” the RAA said. “The Reinsurance Association of America commends Chairman Issa for his leadership and introducing this legislation to fully expose this abuse and restore integrity to the U.S. legal system. The RAA supports this commonsense legislation and urges Congress to quickly pass it.”

Other groups supporting Issa’s bill:

• Google
• The U.S. Chamber of Commerce
• Uber
• Consumer Technology Association
• Consumer Choice Center
• High Tech Investors Alliance
• US-Made
• American Trucking Association
• Software Information Industry Association

Source link: Congressman Darrell Issa — https://bit.ly/4iNciZr