Litigation Finance Regulatory Bill Signed by Louisiana Governor

A bill in Louisiana that brings more scrutiny to the litigation finance industry was signed into law, several months after the governorship changed hands to the Republican party.

The measure (SB 355) bars outside funders from controlling cases in which they invest including whether to settle, appointing or changing counsel, choosing expert witnesses, and anything related to litigation strategy. The bill also requires parties in lawsuits to disclose funding from “countries of concern” to the state attorney general and makes litigation finance contracts subject to discovery in civil cases.

It was introduced by the state Senate majority leader, Jeremy P. Stine.

Gov. Jeff Landry, a Republican, signed the bill on June 19 and it will become law the first of August. His predecessor, Democrat John Bel Edwards, last year vetoed more expansive legislation that would have generally required third-party funding disclosures in civil cases.

The bill is part of a push in several states to restrict the practice of investors paying for the cost of lawsuits in return for a piece of the proceeds in successful cases. The US Chamber of Commerce is pushing for legislation, saying the $15.2 billion litigation finance industry encourages frivolous lawsuits.

This year, bills were introduced in a handful of states with mixed results. Indiana enacted legislation into law that blocks foreign entities from funding lawsuits. West Virginia updated an existing law to include litigation finance. The statute requires investors to provide a copy of contracts to consumers and does not allow firms to assign or securitize a contract to another party, among other regulations.

In Florida, a bill requiring disclosure of litigation finance agreements and of foreign investments stalled in the House. A bill in Kansas allowing discovery of litigation funding agreements also died in committee.