Sunshine is the best disinfectant for third-party litigation financing

Over the past several years, the Florida Legislature and Gov. Ron DeSantis have shown that smart policies can lower Floridians’ cost of living.

For example, decisive actions taken in 2022–2023 to curb legal system abuse in the property insurance market are helping drive down insurance premiums, creating greater market stability and giving Floridians more affordable coverage options.

Now, lawmakers have another opportunity to make Florida even more affordable by putting simple transparency guardrails in place to prevent Florida’s courtrooms from turning into casinos for investors, particularly foreign investors.

They say sunshine is the best disinfectant, and legislation advancing in the Florida Legislature would do just that for the fast-growing practice of third-party litigation financing (TPLF). By enacting commonsense transparency, SB 1396 by Sen. Colleen Burton would require disclosures about TPLF agreements — arrangements in which a party with no connection to a lawsuit funds it in exchange for a portion of the recovery.

Currently, hedge funds, institutional investors and even foreign adversaries are pouring billions of dollars into litigation funding, seeking to turn courts into investment opportunities. A newly released report shows this practice is distorting the civil justice system, with TPLF investors passing exorbitant costs onto households through inflated prices and reduced economic growth — ultimately costing American consumers and families more than $600 each year.

Further, TPLF increases the likelihood that meritless claims will be filed, raises questions about who is controlling litigation, creates inevitable conflicts of interest among attorneys, clients and funders, and makes settlements more difficult and costly.

For far too long, institutional investors have been allowed to invest in litigation with little oversight, to the detriment of both litigants and the court system. SB 1396 would require disclosure of funding agreements — particularly those involving foreign entities — and prohibit conduct by financiers that could undermine the attorney-client relationship.

Letting the sunshine in would allow all parties to make informed decisions grounded in a realistic assessment of a case’s dynamics, while safeguarding vulnerable plaintiffs who may not fully understand the extent of funder control or influence.

By putting TPLF guardrails in place, Florida can continue building on its record of smart policies that lower costs for Floridians while protecting its court system from foreign bad actors seeking courtroom casino cash.

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Bob Johnson is a retired business leader who lives in The Villages.