WASHINGTON Oct 24 A business lobby group has
called on the U.S. Congress to regulate companies that provide
financing for commercial lawsuits, describing the practice as
The U.S. Chamber of Commerce Institute for Legal Reform, a
long-time critic of third-party litigation funders like Juridica
Investments Ltd and Burford Capital Ltd, issued
a report on Wednesday urging regulation by the U.S. Federal
Litigation funders provide financing for lawsuits in
exchange for a share of any settlement or judgment, and have
been involved in cases against Chevron Corp and Apple
Inc among others. If the litigant loses, it does not
have to repay the financial investor.
The report argued that third-party litigation finance could
be expected to increase the volume of litigation, undercut the
control of cases by plaintiffs and attorneys, and drags out
"Third-party investments in litigation represent a clear and
present danger to the impartial and efficient administration of
civil justice in the United States," it said.
Several litigation firms dismissed the need for regulation,
saying the Chamber was trying to protect the interests of big
business over smaller firms.
"The irony to me is, since when is business advocating for
regulation? You just have to laugh," said Ralph Sutton, chief
investment officer of Bentham Capital, the New York-based arm of
IMF (Australia) Ltd, a publicly-traded litigation
funder in Australia.
The report called for the disclosure of funders'
participation in lawsuits, limits on their involvement with law
firms, and said the FTC should be able to levy a $1 million
per-funder licensing fee to pay for enforcement and oversight.
Several of the Chamber's proposals would likely increase the
costs of funding cases, such as a suggestion that funders post a
bond for 25 percent of the damages claimed by the plaintiff
they're backing to ensure payment of any adverse cost awards.
International Business Machines Corp General Counsel
Robert Weber, whose company has faced litigation funder-backed
lawsuits, said their involvement added to the burden on courts
by prolonging cases that otherwise would be on their "death
John Beisner, a partner at the law firm Skadden, Arps,
Slate, Meagher & Flom who authored the report, said litigation
funding as an industry merited regulation.
"It's not free enterprise, its coercive enterprise," he
The American Bar Association in February cautioned lawyers
to take care of their professional responsibilities when dealing
with litigation funders, but did not recommend any changes to
its rules on professional conduct. The New York City Bar
Association blessed litigation finance in July 2011.
The extent of the involvement of private funders in U.S.
commercial litigation is hard to determine, since the funders
seek to keep their participation in lawsuits confidential.
Some companies, such as Juridica and Burford, both
incorporated in Guernsey, are publicly traded. Others like
BlackRobe Capital Partners and Parabellum Capital, both in New
York, are privately-held.
"Far from harming business, litigation finance in fact
enables companies of all sizes to free up scarce capital, which
they can then use to develop their core business and create
jobs," Aaron Katz, principal at funder Parabellum, said in an
Richard Fields, chief executive of Juridica, said the
Chamber should be focused on the real drivers of costs in the
legal system, like court budget cuts.
"To me, this is trying to shoot a mouse with a shot gun," he