Issa Introduces Legislation Reforming Third-Party Financed Civil Litigation

WASHINGTON – Congressman Darrell Issa (CA-48), Chairman of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, and Congressman Scott Fitzgerald (WI-05) introduced H.R. 9922, the Litigation Transparency Act of 2024, which requires the disclosure of parties receiving payment in civil lawsuits.

In hundreds of cases every year, civil litigation is funded by undisclosed third-party interests – including hedge funds, commercial lenders, and sovereign wealth funds operating through shell companies. In response, the bill would require disclosure of investors who have a right to receive payment based on the outcome of a case, as well as the disclosure of the financing agreement between investors and parties to the civil action. Third-party litigation funding also poses unique challenges in patent litigation cases, where investor-backed entities seek large settlements against American companies.

“Our legislation targets serious and continuing abuses in our litigation system and achieves a level of transparency that people deserve, and our standard of law requires,” said Rep. Issa. “We believe that if a third-party investor is financing a lawsuit in federal court, it should be disclosed rather than hidden from the world and left absent from the facts of a case. When we achieve a lasting measure of awareness by all parties, it will advance fair and equal treatment by the justice system and deter bad actors from exploiting our courts.

“As a former state legislator, I helped usher in laws to mandate disclosure of TPLF in Wisconsin courts. This ensured parties were aware of all stakeholders who had a financial interest in the outcome of litigation. These commonsense disclosure laws should similarly be required in federal courts, where the stakes can be higher,” said Rep. Fitzgerald. “I’m proud to join Congressman Issa in bringing needed transparency to our courtrooms.”

Third-party litigation financing also raises national security concerns. A series of recent cases revealed that China-backed funders fueled IP litigation against U.S. companies. National security concerns have also been echoed by 14 state attorneys general, Vice Chairman of the Senate Intelligence Committee Senator Marco Rubio, and Ranking Member of the Subcommittee on Federal Courts, Senator John Kennedy.
This bill follows extensive work by Rep. Issa this Congress, including holding a hearing titled “The U.S. Intellectual Property System and the Impact of Litigation Financed by Third Party Investors and Foreign Entities”, introducing the discussion draft of the LTA, and a letter to the Judicial Conference.

The following organizations submitted statements in support of Rep. Issa’s bill:

National Association of Mutual Insurance Companies
“The court system was never meant to be exploited and abused in this manner. Frivolous and excessive litigation driven by third-party investors has inherently raised costs for Americans across the country. This legislation will help shine a light on who’s behind a lawsuit and ensure that relevant parties have the necessary information in their deliberations.”

The U.S. Chamber of Commerce
“This legislation will help protect the integrity of our judicial system by ensuring that outside financiers are not secretly directing or profiting from litigation they are funding. It is common sense that defendants, plaintiffs, and judges should know who is seeking to profit off litigation. The U.S. Chamber of Commerce thanks Rep. Issa for his leadership and strong work on this important issue.”

American Property Casualty Insurance Association
“The misuse of the legal system fueled by third-party litigation funding has formed a litigious culture, ultimately burdening every consumer and business through increased costs, including the cost of insurance throughout the country. APCIA appreciates Chairman Issa’s leadership for introducing legislation that would require disclosure of third-party litigation funding in civil litigation. APCIA encourages members of Congress to support this legislation.”

High Tech Inventors Alliance
“We commend Chairman Issa and Representative Fitzgerald for their leadership in defending U.S. companies by exposing the predatory tactics of hedge funds, private equity, and foreign countries employed for the sole purpose of exploiting our courts for financial gain. For too long, a lack of transparency has empowered shell companies to leech off American businesses, while hiding their exploitative practices and, oftentimes, their foreign investors and owners. We urge Congress to choose sunlight over secrecy and stand with American innovators.”

US MADE
“This bill is an important step forward in taking on the growing influence of TPLF. No one should be able to manipulate the courts in secrecy to benefit themselves and harm American manufacturers. Chairman Issa’s straightforward bill will finally require the disclosure of outside funding arrangements in civil lawsuits. We are proud to support this bill.

Software & Information Industry Association
"For too many years, abusive patent litigation brought by non-practicing entities or ‘patent trolls’ has hurt the U.S. economy by raising costs on consumers, driving small and medium sized enterprises out of business, and depressing innovation in the information and technology industries. It is estimated that more than 80% of all patent suits are brought by patent trolls, often funded by undisclosed third-party beneficiaries. We applaud Chairman Issa and Representative Fitzgerald for seeking to bring pressure to bear on this shadowy industry through the Litigation Transparency Act of 2024. We encourage Congress to join in supporting this legislation."

Reinsurance Association of America
“At the expense of small businesses, manufacturers, and American families, foreign and domestic investors are partnering with law firms to profit from U.S. litigation.  The Reinsurance Association of America commends Chairman Issa for his leadership and introducing this legislation to fully expose this abuse and restore integrity to the U.S. legal system.  The RAA supports this commonsense legislation and urges Congress to quickly pass it.” 

American Trucking Associations
“Trucking is essential to our economy, delivering the goods Americans need every day and supporting quality jobs.  When the plaintiffs’ bar perverts civil litigation into a casino game of ‘jackpot justice,’ the costs are borne by everyone—not just trucking companies, but consumers too in the form of higher insurance rates and higher prices for everyday goods.  The secretive nature of these predatory loans can even catch plaintiffs off guard when they must pay back the lenders at usurious rates. We commend Congressman Issa for leading this effort to shine a light on third-party financiers seeking to exploit the judicial system to make a quick buck.  This reasonable reform would protect hardworking truck drivers and ensure justice and fairness drive accident litigation outcomes, not profits.”

The text of the bill can be found here.