Mark Friedlander, Insurance Information Institute senior director of media relations
The Western District of Louisiana has become the latest federal court to put in place a rule requiring disclosure of third-party litigation funding (TPLF) arrangements by litigants who come before the court.
The Western District, which has locations in Alexandria, Lafayette, Lake Charles, Monroe and Shreveport, published the TPLF rule on Sept. 9. About one-quarter of federal district courts have implemented transparency rules governing the disclosure of litigation funders’ identities, according to the Systemic Justice Program at Harvard Law School.
TPLF refers to any agreement that involves a person or entity providing funding to a litigant or counsel, either directly or indirectly, in a civil action in order to obtain a financial interest in the lawsuit’s outcome.
Under the Western District’s disclosure rule, parties must file statements identifying such third-parter funders and providing the funders’ addresses, as well as a summary of the financing arrangement. The statement must also state whether the funder has a contingent interest in the outcome of the case and whether the funder has any authority to influence litigation or potential settlement decisions.
“The disclosure statement shall not require production of the funding agreement itself unless ordered by the court,” the order says.
Parties are required to make such disclosures within two weeks of their first filings, pleadings or motions, according to the order, or within two weeks of entering into a TPLF contract.
Mark Friedlander, senior director of media relations for the Insurance Information Institute (Triple-I), said TPLF transparency helps to restore a basic level of transparency within the civil justice system.
“Third-party litigation financing has evolved into a global multibillion-dollar asset class of dark money, and identifying the investors in lawsuits is a good first step,” Friedlander told the Louisiana Record in an email. “Litigation funding agreements have historically operated in the shadows. Judges, juries and even opposing counsel often don’t know a hedge fund or private investor has a financial stake in the case’s outcome.”
But he said that the Western District’s disclosure rule is not as extensive as the TPLF regulations passed by the state Legislature in 2024, which apply only to state courts and not federal jurisdictions.
The state law requires litigation funders from “foreign countries of concern” to provide their funding agreements to Louisiana’s attorney general, according to Friedlander. It also bars such funders from playing a role in litigation decisions of the parties involved in the case.
“When a third party has a financial stake in a lawsuit’s outcome but no fiduciary duty to the plaintiff, it can prolong litigation, discourage reasonable settlements and drive up costs of the settlement, which flow back to consumers and businesses through higher insurance premiums,” he said.
The Louisiana law also makes the existence of any litigation financing arrangement subject to discovery in state courts.
Although legislation to make TPLF contracts more transparent in federal courts has stalled in Congress, state lawmakers nationwide have made strides in curbing legal system abuses, according to Friedlander.
“This year’s legislative activity reflects growing recognition that issues such as third-party litigation financing, predatory legal marketing practices and excessive litigation can create significant economic impacts,” he said.
Dai Wai Chin Feman, U.S. chapter chair for the International Legal Finance Association, told the Record that the Western District’s disclosure rule was limited and would not require litigants to disclose “sensitive work-product information.”
Chin Feman also disputed the accuracy of the report that 25% of federal district courts have rules to identify TPLF funders, adding that many of those are longstanding financial interest disclosure rules and are not specific to litigation funding.
