Doug Marcello
For a decade, litigation funders told courts they were passive investors who wrote checks and stayed out of the way. Three developments this year say otherwise — and one of them took effect last week.
On October 6, Ohio began requiring litigation funders to register with the state attorney general and disclose their funding agreements. House Bill 105, signed by Governor DeWine on July 7, also bars funders from influencing litigation strategy or settlement decisions, prohibits funding from entities not domiciled in the United States, and creates a public database of funding agreements after cases resolve.
Ohio is not an outlier. In June, North Carolina became the first state to ban third-party litigation funding outright rather than regulate it. In the United Kingdom, the collapse of a funder owing roughly £300 million to retail investors has regulators debating whether funders belong inside the financial regulatory perimeter at all.
Taken together, these are not three unrelated news items. They are three simultaneous failures of the same argument.
The scale of what is being regulated
The American Tort Reform Association, citing Westfleet Advisors’ annual market report, told state legislators that major litigation funders alone had more than $15 billion invested in U.S. litigation in 2023. That is the capital base — assets under management across the funders Westfleet tracks.
Annual deployment is a different and smaller figure. Westfleet reported $2.3 billion in new commitments in 2024, down sixteen percent, and $2.8 billion in 2025, a twenty-three percent rebound after two years of contraction. Westfleet stopped publishing assets-under-management estimates with its newest report, citing inconsistencies in how funders define and report the number.
Crack one: the passive investor story
Funders have consistently maintained that clients run their own litigation. Two disputes raise questions, at opposite ends of the market. What happened next is the part most coverage gets wrong.
Burford Capital put more than $140 million into Sysco Corporation’s antitrust claims across the chicken, beef, pork, and turkey industries. The arrangement broke down when Sysco wanted to settle at numbers Burford considered too low.
At the consumer end, funder Legalist went to arbitration against its own client. In Legalist, Inc. v. Rinaldi, pending in the Southern District of New York, Legalist won a partial final award in May 2026 and is now asking a federal court to confirm roughly $105,000 in fees against the man whose case it backed.
Crack two: funders can fail — two different ways
Woodville Consultants Ltd entered administration in July 2026. Its administrators reported in September that it owes close to £300 million to retail investors who bought high-risk loan notes, that its lending was concentrated among ten law firms, that more than £160 million was owed by those ten firms alone — often with no security — and that roughly £37 million appears to have been loaned to parties connected to Woodville’s own directors. The administrators have warned that the value of the underlying portfolio and likely investor recoveries remain uncertain.
Litigation Capital Management, listed on London’s AIM since 2018, went into orderly run-off this month. It lost seven of the eight cases that concluded in its financial year. The result was an £87 million after-tax loss for the year to June 30, 2026 — more than double the prior year — and net liabilities of A$54 million, against net assets of A$114 million a year earlier.
Run-off means LCM will see its existing cases through and make no new investments. It is still carrying 37 ongoing cases, with A$122 million invested and another A$102 million committed. Its directors have warned that the company’s continuation is materially dependent on portfolio realizations outside their control.
The defense implication is worth stating plainly: the plaintiff across the table may be financed by a balance sheet that nobody — not the court, not the defendant, arguably not the plaintiff — has examined. And a funder in run-off is still litigating dozens of live cases while its own survival depends on how they resolve.
Crack three: disclosure arrives, state by state
North Carolina’s House Bill 315, effective June 22, 2026, makes litigation investment unlawful, voids offending contracts, and creates civil penalties of up to $50,000 per violation along with a private right of action and treble statutory damages. The law is prospective and carries nine exceptions, including contingency fees, pro bono work, and insurer obligations.
Ohio took the regulatory route instead, and the Ohio approach is the one more states are likely to copy: registration, disclosure, a prohibition on funder control, and a foreign-funding ban that the legislature justified by what it called the grave risk of foreign actors seeking to interfere with Ohio’s courts.
Federally, nothing has changed yet. A draft Rule 26 disclosure amendment from Lawyers for Civil Justice and the U.S. Chamber’s Institute for Legal Reform has been pending before the Advisory Committee on Civil Rules since March. On September 14, a coalition of 214 companies urged the committee to adopt that proposal rather than draft new language. The committee has not published anything for comment. Individual districts and judges have moved ahead with local rules and standing orders in the meantime.
In the meantime, individual Federal Courts have been issuing local rules concerning the disclosure of funding in the litigation.
What this means for trucking defense
Funding is the capital engine behind nuclear verdicts. It pays for the expert work, the trial preparation, and above all the staying power that lets a plaintiff firm decline a reasonable number and wait.
That is the mechanism carriers feel without being able to name. Settlement talks that go nowhere on a case with real defenses. A plaintiff who should want resolution and does not. A demand that bears no relationship to the exposure.
Three practical consequences follow from this year’s developments:
- Ask about funding. Nothing in the federal rules prevents it, and judges in MDLs, class actions, and patent cases have been requesting funding information on their own initiative. Check your district’s local rules and standing orders before assuming the answer is no.
- In Ohio, the agreements must be reported. A funding agreement must be reported post-trial after October 6. That is a live argument this month.
- Build the record early. Courts have been declining to intervene absent concrete evidence of undue control. That points to targeted early discovery into the funding agreement, assignment mechanics, settlement decision rights, and communications — and being ready to argue why it is relevant and proportional. Settlement authority, counsel selection, and notice requirements are where the passive investor claim breaks.
What to watch
The copycat question will define the next twelve months. North Carolina’s ban energized reform advocates, but no other state has introduced a replica and none is expected to pass. The Ohio model — register, disclose, no control, no foreign money — is the template with legislative legs.
The federal timeline is slower than it looks. A rule published for comment in 2027 would not take effect before December 2029. State legislatures will keep moving faster than the federal rules process, which means the practical question for the next several years is jurisdictional: what can you reach, where. In the meantime, check the local rules that are developing a district-by-district approach to addressing the issue.
The funding industry spent a decade arguing that its arrangements were nobody else’s business. Courts, legislatures, and now its own investors are concluding otherwise.
