Litigation Finance Regulation Approved by Kansas Governor (2)

A new bill regulating the litigation finance industry was approved by Kansas Governor Laura Kelly this week.

The bill is being touted as a compromise between warring lobbying groups. The International Legal Finance Association and the Kansas and US Chamber of Commerce negotiated aspects of the bill that are often sticking points, including funders from other countries and the amount of detail required in disclosures. While federal bills have stalled out, state bills have passed with moderate success. It’s unclear how popular Kansas is as a locale for litigation funding due to the confidential nature of the sector.

The two groups battled over a similar bill last year in the state, which ultimately died in Senate committee. This year they reached an agreement.

“I’m pleased to report that the opponents from last year’s bill and proponents of the bill have been able to reach a compromise,” said Eric Stafford, senior director of government affairs at the Kansas Chamber of Commerce, during a house committee hearing in March.

The bill requires disclosure of direct or indirect funding from “foreign countries of concern,” as defined by the US Secretary of Commerce including China, Iran and Russia. Legislation in other states has included bans on funders from foreign countries participating in the sector, which could hobble funders such as Fortress Investment Group and Burford Capital, which count sovereign wealth funds as investors.

It also requires disclosure of litigation funding agreements in private to the judge. Funders often take issue with disclosure of funding agreements to defendants and earlier versions of the bill allowed parties to obtain agreements in discovery.

“We would like to thank the Kansas legislature who has shown that a reasonable, sensible solution can be reached. We hope Kansas can be a lesson for the U.S. Chamber of Commerce, the insurance industry and big tech that year after year insist on advancing overbroad, unnecessary mandatory disclosure proposals that are a solution in search of a problem that does not exist,” said Paul Kong, executive director of the International Legal Finance Association, in a statement.

Stafford said in a statement the Kansas Chamber of Commerce was pleased to reach a compromise.

“This increased level of transparency is no different than plaintiff lawyers seeking disclosure of insurance limits, which has been allowed under Kansas law for some time,” he said in the statement.

Legislators have pushed for more regulation of the litigation finance industry, in which investors fund suits in exchange for a portion of an award or settlement. This year bills were introduced in Iowa, Ohio, Oklahoma, New Hampshire, Arizona, as well as a handful of other states.

The bill that is furthest along is in Georgia and is currently on the desk of Governor Kemp waiting for signature. The bill is part of Kemp’s tort reform package that was unveiled in January. The governor presented the package as a way to level the playing field in courtrooms and stabilize insurance costs for businesses and consumers.