Concerns Over Recent Republican Moves Against Litigation Funding

For quite some time, conservatives have sought to address what they see as judicial overreach.

In civil justice, this concept is often referred to as “tort reform,” which aims to curb excessive damages and attorney fees to keep courts from feeling like a lottery. Conservatives argue that plaintiffs deserve justice, not massive payouts. However, there seems to be a troubling initiative underway to limit conservative legal actions under the guise of tort reform.

This insidious effort targets “third party litigation funding.” This situation arises when legal expenses are covered by parties other than the plaintiff or their attorney. As litigation costs climb, these arrangements are gaining traction, especially concerning significant conservative cases tackling issues related to “woke” policies. Examples include litigation over Environmental, Social, and Governance (ESG) practices at financial firms, Diversity, Equity, and Inclusion (DEI) matters at large corporations, and surgeries performed at major hospitals.

It’s no surprise that these large companies are hesitant to face legal challenges.

What’s baffling is that some Republican lawmakers and state legislatures are supporting these initiatives. They seem to have lost sight of the foundational principles of tort reform, which aimed to eliminate abusive lawsuits and outrageous damage awards. It was never meant to obstruct legitimate legal claims or complicate the funding of necessary litigation.

Efforts to restrict litigation funding manifest in three primary ways. One approach involves pushing for a proposal by Senator Thom Tillis, which would introduce heavy taxes on litigation funding and require litigants to report their financiers to the IRS.

It’s problematic for conservatives to create mechanisms that would enable the IRS—known for targeting certain groups—to access the identities of those supporting conservative legal efforts. Past actions against Tea Party organizations show that bureaucrats faced minimal consequences for such targeting. There’s a legitimate concern that future administrations could misuse such information for audits and intimidation tactics against conservative supporters.

The second tactic involves overregulation, including proposals like one from Missouri, which could hold funders liable for lawyers’ errors. The third and most common strategy is mandating the disclosure of identities and financial details of funders, raising a host of privacy issues. Publicly revealing these identities could lead to harassment from the very groups conservatives are opposing in court.

These proposals typically do not differentiate between the many important cases out there and those that are abusive. Just as “gun-free zones” haven’t improved safety, it’s unlikely that these laws will deter problematic lawsuits. The chilling effects are likely to hit legitimate conservative funders the hardest, benefiting the largest and often most unscrupulous firms.

Proponents often raise concerns about funding from foreign sources, but they rarely restrict their claims to those specific instances. While no one wants funding from entities in countries like China, the solution should be to prohibit that type of funding directly, not to undermine all litigation financing.

If these initiatives succeed, they could significantly hinder the conservative legal movement at a time when lawsuits are necessary to combat policies like DEI and ESG.

There are already allegations being filed by individuals receiving sex reassignment surgeries, claiming gross malpractice. Any changes in the law that would limit the funding of these lawsuits would be seen as legislative malpractice by conservative lawmakers.

Efforts to reduce frivolous lawsuits should never aim to make funding legal challenges more difficult to come by. Attempts to limit litigation financing only seem to level the playing field in favor of the biggest, often less scrupulous, companies.

It appears that the underlying motive of the legislation aimed at litigation finance might be less about preventing abuse and more about stifling conservative legal efforts.