Republicans Split Over LitFi Regulation: Litigation Finance

Happy Friday! Today is my three-year anniversary at Bloomberg Law and there’s no better way to celebrate than digging into this busy week in the world of litigation finance.

For starters, I wrote about the split in the Republican party over regulation of the litigation funding industry.

Populist conservatives have tended to side with the funders and the progressive trial bar, while Republican lawmakers in favor of regulation are aligned with the Chamber of Commerce and the insurance industry.

After Sen. Thom Tillis’ bill last summer, conservative nonprofits started railing new legislation over concerns that their own donors could get lumped into calls for disclosure. Many of these nonprofits, like the religious liberty group Alliance Defending Freedom, use donations to fund litigation aimed at changing law and policy.

ADF has publicly opposed Rep. Darrell Issa’s stalled litigation finance proposal, forming a surprising coalition with Democrats.

“I’m so glad to hear populists from left to right standing up for the little guys,” said Democratic Rep. Jamie Raskin during a markup hearing of the bill.

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Arizona limits out-of-state business

The Arizona Judicial Council voted to update two rules for its alternative business structure program. It now requires ABS firms to provide legal services and not just make referrals. It also requires they devote at least part of their business to serving people in the state.

The state bar wanted even tougher limits, arguing last month that some firms were using the program as a launching pad to operate nationally.

Last week, the leaders of KPMG’s Arizona law firm penned a letter opposing the Arizona bar’s efforts to limit its law firm and other “alternative business structures” from operating outside the state.

“A narrower scope for ABS firms risks undermining the ABS program’s objective of promoting innovation,” KPMG Law leaders Thomas Greenaway and David Rizzo wrote.

Judge wants to out funders

Last week, I noticed filings racking up in a federal court in Florida referencing litigation funding.

Turns out the recently confirmed Judge Anne-Leigh Gaylord Moe has been filing standing orders in cases in her courtroom requiring parties name any outside funder involvement.

The court didn’t respond to my request for comment, so I don’t know what the impetus was for the standing order. I spoke with five plaintiffs attorneys who received the orders and they all said they had been given no heads-up or explanation about the new disclosure rule.

A representative for State Farm, a plaintiff in one of the cases and a big proponent of litigation finance disclosure, said the insurer “welcomes” the standing order.

“This step promotes transparency, giving everyone involved a clearer understanding of the interests at play in a lawsuit,” the spokesperson said.

What I’m Reading

• The US Chamber of Commerce Institute for Legal Reform and the Lawyers for Civil Justice submitted a joint comment letter to the Advisory Committee on Civil Rules urging them to create a uniform rule requiring disclosure of litigation funding agreements. The comment comes ahead of the committee’s April meeting, where they are expected to discuss results from a listening tour.
• Esquire Financial Holdings, the parent company of Esquire Bank, announced that it acquired Signature Bank. Esquire Bank is dedicated to serving the financial needs of the litigation industry. The combined company will have approximately $4.8 billion in assets.
• Burford Capital announced four senior additions to its US commercial investment team. The new hires come from prominent law firms and financial institutions including Selendy Gay, Fortress Investment Group, Law Finance Group, and Cyrulnik Fattaruso.

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