Congressman Darrell Issa, chairman of the House Judiciary Subcommittee on Courts, Intellectual Property, Artificial Intelligence and the Internet, has joined colleagues in reintroducing legislation to regulate third-party financed civil litigation.
The Republican who represents East County was joined by Rep. Scott Fitzgerald of Wisconsin and Rep. Mike Collins of Georgia in introducing the Litigation Transparency Act of 2025.
This proposed legislation — like that Issa also put forth in October 2024 — would require the disclosure of parties receiving payment in civil lawsuits.
Issa’s office said that in hundreds of cases yearly and with increasing frequency, civil litigation is being funded by undisclosed third-party interests as an investment for return — including from hedge funds, commercial lenders, and sovereign wealth funds operating through shell companies.
Third-party litigation funding also poses unique challenges in patent litigation cases, where investor-backed entities often seek large settlements against American companies, distorting the market and stifling innovation, according to the bills sponsors.
The bill requires disclosure of investors receiving payment based on the outcome of a case. It also mandates disclosure of the financing agreement sbetween investors and parties to these civil actions.
“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.
“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,” he added.
Fitzgerald said he worked to establish disclosure laws in his own state and “commonsense disclosure laws should similarly be required in federal courts, where the stakes can be higher. I’m proud to join Congressman Issa in bringing needed transparency to our courtrooms.”
Collins said the bill would protect America’s economy from unfair litigation. “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,” he said.
The legislation has received support from the Consumer Technology Association, Google, Uber and the U.S. Chamber of Commerce among other organizations.
An argument against this type of bill was voiced by Keith Sharfman, professor of law and director of bankruptcy studies at St. John’s University School of Law.
Three years ago Tuesday, Sharfman wrote a piece titled “The Economic Case Against Forced Disclosure of Third Party Litigation Funding” for the New York Bar Association.
He wrote that, until recently, the norm of financial privacy “was as true for the purchase of legal services as it was for anything else. No one (and certainly not adversaries in a civil suit) used to think that they had the right to know how a party obtained the funding to finance its case.”
How litigation was funded was never the concern of anyone other than the client and its attorneys, he said.
“Financial privacy is not protected, of course, when party finances directly bear on litigation outcomes, such as in bankruptcy and family law litigation where party financial disclosures are necessary and routine.
“But in the vast majority of cases, where litigation funding is legally irrelevant to case outcomes, preserving party financial privacy has always been the norm.”
He added:
“Generally speaking, the last thing a party wants an adversary to know is that it cannot afford to prosecute or defend its case or that its case is not strong enough to attract much if any external funding. Adversaries who know this information can try to use it to win not on the merits, as the legal system intends, but instead through a battle of attrition.
“While it might well interest an adversary strategically to know how (and how well) cases are funded, the law never entitled an adversary to know.”
Updated at 10:10 p.m. Feb. 11, 2025
