Guest Author
In 2022 and 2023, the Florida Legislature passed, and Gov. Ron DeSantis signed into law, extensive reforms to put an end to years of unchecked legal system abuse and claims fraud.
But, because billboard lawyers use a host of abusive marketing and litigation tactics to take advantage of vulnerable Floridians and make a mockery of our court system, additional action is needed.
One especially concerning legal system abuse trend is third-party litigation financing. This booming and largely unregulated industry allows lenders who have no relationship to the claimant or the issue being litigated to secretly invest in a lawsuit in exchange for a portion of the settlement. Because of the current lack of regulation, these lenders are able to charge exorbitant interest rates — sometimes well over 200%. While an injured person’s legal bills might be covered in the short term, they often see little — if any — of the award or settlement when and if a judge or jury finds in their favor.
These lawsuit lenders are often hedge funds or foreign actors, and without any disclosure and transparency protections currently in place, courts and defendants do not know when one is involved or who they are. This provides a concerning opportunity for foreign entities to secretly use our court system to threaten our economic and security interests.
A recent report entitled “A New Threat: The National Security Risk of Third Party Litigation Funding” shines a light on the security risks and danger posed by litigation financing. Through funding frivolous litigation, foreign entities could overwhelm courts, target specific litigation to weaken critical industries or obtain confidential materials through discovery.
Recent revelations in litigation confirm that these concerns are legitimate as it has been disclosed that foreign governments and foreign actors are investing in sensitive intellectual property litigation in the United States.
Unfortunately, third-party litigation financing is growing rapidly. Westfleet Advisors, a litigation finance advisory firm, found investments in U.S. litigation financing rose to $13.5 billion in 2022, with new capital commitments growing by nearly 16% year over year. Additionally, the leading financier of litigation has seen its assets increase 355% over the last several years, including the addition of nearly $1 billion at the end of 2018 by an unknown, foreign sovereign wealth fund.
As litigation financing becomes more prevalent, injured individuals are not the only ones falling victim to these schemes — businesses are too.
In 2023, restaurant food distributor Sysco Corp sued Burford Capital Limited — which was providing financing for litigation — for blocking its decision to settle its antitrust litigation. This is another example of a funder interfering with a plaintiff’s decision regarding their court case and further raising ethical concerns around litigation financing and the role of funders.
This secretive and unregulated practice increases frivolous lawsuits and contributes to higher litigation costs, which are then passed onto households and businesses. As a result, studies have shown consumers pay higher costs for everyday items, from gas and groceries to insurance.
Florida has an opportunity to lead the way in tackling this extremely troubling issue. This Session, the Florida Legislature is considering common-sense reforms, including transparency and disclosure in third-party litigation financing, to restore balance to our court system. Legislation by Sen. Jay Collins and Reps. Tommy Gregory and Toby Overdorf will bring much-needed transparency to this industry while protecting consumers and preserving the integrity of our court system.
We encourage lawmakers to pass these important consumer protection bills to build on the historic reforms passed last year and further rein in legal system abuse in Florida.
Doing so will benefit and help protect all Florida consumers and businesses.
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Logan McFaddin is vice president of state government relations for the American Property Casualty Insurance Association.
