Litigation funding is quietly changing the legal world, and regulators are beginning to object
GoFundMy court case… Litigation funding, a multibillion-dollar industry where investors fund lawsuits (and potentially receive a sizable % of the winnings), has been gaining steam in the US. Litigation funding has been used in suits ranging from antitrust to climate change, and most investors can stay anonymous. That's raised concerns that powerful people and institutions could covertly influence cases worldwide.
Sustained-able: Litigation funding’s promise is to help when a plaintiff is up against a deep-pocketed defendant (often seen in climate-related suits).
Case in point: One case between 15K Indonesian farmers and an Australian oil company was settled for nearly $200M last year, with the funding firm taking home 40% of the winnings.
(Un)controlled explosion… Litigation financing’s first big step into the public eye was 2016’s Hulk Hogan v. Gawker Media, in which Hogan’s case was bankrolled by billionaire Peter Thiel. Since then the practice has boomed into a nearly $14B US industry. Firms are selective with cases they fund, and annual returns can top 50%. Last year US funders poured $3B+ into new cases, a 16% jump from the previous year. The number of dedicated US litigation-finance firms has grown to over 40, up from 6 in 2008.
Ulterior motives can lead to exterior problems… Just one example: the US’s largest litigation-funding firm, Burford Capital, is now in litigation with its own client, Sysco, because it thinks Sysco is accepting too low a settlement. Now states are cracking down on litigation funding, demanding greater transparency. Louisiana is advancing a bill that would require the disclosure of litigation funders, while Wisconsin and New Jersey already have these rules. A recent bill in California got watered down after lobbying.