US Senate litigation funding bill adds carveout for non-profits

By David Thomas

Feb 13 (Reuters) - A group of U.S. Senate Republicans this week introduced the latest bill to force greater disclosure of third-party financing for lawsuits, after years of similar efforts met with failure in the U.S. Congress.

The new bill, spearheaded by Senate Judiciary Committee Chair Chuck Grassley, targets only mass torts and class action lawsuits, unlike earlier proposed legislation seeking to require disclosure of third-party funding in all civil litigation.

It would also exclude non-profit legal organizations from the disclosure requirements if the funds they received for litigation came from U.S.-based donors to provide pro bono, or free, representation.

That exemption follows criticism of similar litigation funding transparency legislation by conservative legal advocacy groups. America First Legal, co-founded by senior White House aide Stephen Miller, and other groups have argued that requiring them to disclose their backers would expose donors to scrutiny by Democrats and liberal groups.

The Oversight Project, a spinoff of the Heritage Foundation that has made such arguments, told Reuters on Thursday that it nevertheless opposes Grassley's bill.

"We believe that good conservative outcomes can be funded by outside financing. The bill is still meant to chill litigation finance," Oversight Project president Mike Howell said in an email.

A spokesperson for Grassley declined to comment. In a statement announcing the bill, called the Litigation Funding Transparency Act, Grassley said it "strikes the right balance of sunshine while protecting Americans’ access to justice."

The International Legal Finance Association, the litigation funding industry's chief lobbying group, said it opposes the legislation.

"Everyday Americans, whose legal rights Sen. Grassley so often champions, would be deeply harmed by the bill as their access to the courts may very well evaporate," ILFA executive director Paul Kong said in a statement.

Litigation finance is now a multibillion-dollar industry, and calls for greater transparency around its use have persisted for years. Grassley introduced similar bills in 2018, 2019, and 2021.

A similar bill in the U.S. House, which would have required disclosure of third-party funding in all civil litigation faltered in the House Judiciary Committee last month, after Republican and Democratic lawmakers criticized the legislation.

Gene Hamilton, president of America First Legal, had blasted the House bill on social media website X, writing in a January 12 post that "any entity willing to finance litigation on behalf of conservatives will be harassed and doxxed by the radical left."

America First Legal did not immediately respond to a request for comment.

In addition to requiring funding disclosures in class actions and mass tort cases, the Senate bill would bar third-party funders from influencing litigation strategy or settlement talks, and from accessing protected case documents.

"All parties involved in class actions and multi-district litigation cases should know who is secretly bankrolling the cases and manipulating the outcomes for profit," Stephen Waguespack, president of the U.S. Chamber of Commerce Institute for Legal Reform, said in a statement released by Grassley's office.

Joining Grassley in sponsoring the bill, S. 3826, are Thom Tillis of North Carolina, John Kennedy of Louisiana, and John Cornyn of Texas.