BATON ROUGE - Gov. Jeff Landry has signed a measure into law that will bring a degree of transparency about the involvement of third-party litigation funders in subsidizing civil litigation in Louisiana.
The legislation by state Sen. Jeremy Stine (R-Sulphur), Senate Bill 355, gained Landry’s signature on June 19. The measure will allow the disclosure of such litigation funding agreements, but instead of being automatically disclosed to juries, the accords could only be revealed during the discovery process.
“This bill will bring these types of agreements out of the dark and shed light on previously unknown ethical conflicts, allowing opposing parties to know who may have a financial stake in the outcome of litigation,” a news release from the Louisiana Association of Business and Industry (LABI) states.
“Importantly, the bill also prohibits a third party from having any influence or control over negotiations and settlement decisions in state court cases.”
Lana Venable, executive director of Louisiana Lawsuit Abuse Watch (LLAW), described the legislation as a compromise that will make the civil justice system more fair.
“While we were hopeful for more comprehensive legislation, we applaud Sen. Stine, Rep. (Emily) Chenevert (R-Baton Rouge) and all the legislators who worked together to reach an acceptable compromise, and we thank Gov. Landry for signing it into law,” Venable said in an email to the Louisiana Record.
The new disclosure law does not apply to nonprofit legal groups that are funded by private donors and that handle cases on a pro bono basis, according to the text of the bill. In turn, legal nonprofits will not be mandated to disclose their sources of funding.
“Third-party funders will now be discoverable, allowing parties to know who is bankrolling lawsuits against them,” Venable said. “Improving transparency is an important step in bringing more fairness, balance and predictability to our civil justice system.”
In addition, foreign third-party litigation funders involved in civil actions, including foreign sovereign wealth funds, will be required to disclose to the state’s attorney general their names, addresses and nations of incorporation, according to the state Legislature’s analysis of the bill. Such funders will also be required to provide a copy of any litigation-funding agreement to the attorney general.
The attorney general, according to the provisions of the bill, will have to report to legislative leaders annually about the extent of foreign involvement of third-party litigation finance agreements in Louisiana. And violations of SB 355 will be considered a deceptive and unfair trade practice under state law.
In enacting the new law, which becomes effective on Aug. 1, Louisiana joins Florida, Indiana and West Virginia in regulating the use of litigation financing.
Litigation financing does not only allow plaintiffs with limited resources to sue major companies, according to a partner in the national law firm Saul Ewing LLP, Casey Grabenstein. It is also a key tool in cases pitting businesses against other businesses, including patent-infringement disputes and antitrust litigation, since smaller firms may lack the resources to protect their rights, Grabenstein said.
LABI noted that despite this year’s passage of SB 355 and other tort reform bills, including those that attempt to better ensure swift property insurance claims resolutions, eight other legal reform bills either stalled in state Senate committees or were otherwise sidelined.