AUSTIN – The Texas Legislature is currently considering a bill that, if enacted, would require disclosure of third-party litigation funding in all civil actions.
From pelvic mesh dockets to class actions against pharmaceutical companies, trial lawyers from all across the nation have come to rely on outside funders to push their litigation forward.
On Feb. 20, Rep. Matt Krause, a Republican from Fort Worth, filed House Bill 2096, which aims to require the Texas Supreme Court to adopt rules requiring the mandatory disclosure of lawsuit financing agreements.
The House Judiciary and Civil Jurisprudence Committee heard testimony on HB 2096 on March 25, during which Krause told members he believes there should be more transparency in lawsuit funding.
“A lot of times you see private equities … (and) hedge funds investing in what they feel can give them a great return on that investment,” Krause said. “More and More, we’re seeing that this is happening in the world of litigation.
“We think there needs to be a little more transparency.”
Krause says the bill is not limiting lawsuit funding in any way and only seeks to ask the Supreme Court to promulgate rules on transparency when litigation is financed by a third party.
Will Adams, speaking against the bill on behalf of the Texas Trial Lawyers Association, questioned the need for transparency in litigation funding – telling committee members such transparency might give one side an advantage.
“Transparency is a good thing … in a vacuum, but we have to consider the circumstances,” Adams said. “I think privacy is also important.”
Adams said funding agreements don’t prove liability or damages.
“(Funding agreements) show that somebody needed help to push forward litigation … many times industry changing litigation,” Adams said, adding that if multi-billion dollar companies, such as Big Pharma, know how much plaintiff’s attorneys have to spend, they’ll “push them past that line.”
Also speaking against the bill was Eric Chenoweth, who was there representing several lawsuit funders, a list that includes Bentham, Burford and Therium Capital.
Chenoweth told members mandatory disclosure would harm Texas businesses and cause added delay and expense to claimants.
“Don’t be misled by proponents of the bill arguing for transparency,” he said. “The true motivation here is to deter the use of litigation financing.
“Litigation financing levels the playing field.”
Lee Parsley, general counsel for Texans for Lawsuit Reform, spoke in favor of the bill.
Parsley reminded members that bill is “simply just” a disclosure bill and gave several examples of how that disclosure matters, one of which was a scenario of a judge having money invested in a lending company funding a lawsuit in his or her court.
As of April 3, HB 2096 is pending in committee.