Keith Goble
This year, about half of all states have at least considered legislation that addresses concern about third-party litigation financing.
The legal term is used to describe instances when litigation financiers pay for lawsuits they feel have a good chance of being won. In return, investors receive a portion of an award or settlement.
In many cases, the practice makes reaching a reasonable agreement more difficult because of the anonymous third party’s financial stake in the case.
Litigation financiers back many types of commercial and consumer claims, including truck-related incidents.
The Owner-Operator Independent Drivers Association has pointed out that truck drivers – and the people who employ, represent and insure them – are often the target of misguided, excessive and expensive litigation related to personal injury cases. The ripple effects are felt across the entire supply chain.
Many of such cases are funded by financiers with exploitative motives. OOIDA has argued that at the very least, plaintiffs should be required to disclose any financing agreement associated with a civil action.
In recent years, states all over the map have acted to adopt rules to regulate the litigation-financing industry.
Kansas
Kansas is the most recent state to enact a law described as shining a light on third-party litigation financing.
Gov. Laura Kelly acted last week to sign into law a bill to require the disclosure of litigation-funding agreements within 30 days of a legal action or 30 days after execution of a funding agreement, whichever is later. All contracting parties to an agreement must be disclosed to courts.
Any foreign person or “foreign country of concern” providing direct or indirect funding must also be disclosed.
The U.S. Chamber of Commerce reported that third-party litigation financing poses national security risks. The agency said that foreign groups could be using financers to gain access to information or evade sanctions.
China, Iran and Russia are included in the chamber’s definition of a foreign country of concern.
The Kansas Chamber of Commerce previously testified at the statehouse that the new rules would enhance transparency by allowing discovery of persons and entities with a financial stake in a court proceeding.
The new law takes effect July 1.
Georgia
Georgia is close behind Kansas in the pursuit to implement stricter disclosure requirements for litigation financiers.
A bill on the Georgia governor’s desk would prohibit litigation funders from having any input into the litigation strategy or from taking the plaintiff’s whole recovery and would make sure plaintiffs are aware of their rights. It would also require that financing agreements be disclosed to the other party in a case.
Sen. John F. Kennedy, R-Macon, has said the state’s civil justice system should not be treated as a “lottery where litigation financers can bet on the outcome of a case to get a piece of a plaintiff’s award.”
One more provision would mandate that all litigation financiers be registered in the state. Entities affiliated with a “foreign adversary” would be barred from registration.
“Through unregulated third-party financing, foreign-affiliated financiers are manipulating our legal system and influencing court outcomes,” Kennedy said. He added that these firms operate with virtually no oversight.
The bill, SB69, is part of a tort reform package sent to Gov. Brian Kemp for his signature.
California
In California, an Assembly bill addresses third-party litigation financing.
Assembly member Michelle Rodriguez, D-Ontario, said that lawsuit financiers are an “unregulated, shadow financial sector in California.”
“Lawsuit financing threatens the ability of California consumers to recover award moneys to which they are entitled,” Rodriguez wrote in her bill.
To help address the issue, AB743 would require financiers to obtain a license from the state.
Rodriguez said licensing by the California Department of Financial Protection and Innovation would help to ensure “only financially responsible, law-abiding financiers can operate in California and prevent exploitative practices, market manipulation and fraud.”
She added that many lawsuit financiers are hedge funds, sovereign wealth funds and other financiers based outside the U.S., including in Russia and China.
The bill is in the Assembly Banking and Finance Committee.
Colorado
A bill introduced last week in the Colorado House focuses on foreign third-party litigation financing.
HB1329 would require foreign financiers to provide certain information to the Colorado Attorney General. The bill creates a deceptive trade practice for violations.
Information provided to the state must identify funders and include a copy of litigation-financing agreements.
Materials must be submitted when civil actions are filed or within 35 days, if civil actions are filed prior to the implementation of financing agreements.
Funders would be prohibited from using a domestic entity to provide funds and from interfering with the right of appropriate parties to direct the course of a civil action.
Failure to comply with the rules would make any financing agreement void and would constitute a deceptive trade practice, which could result in a fine of up to $20,000.
The House Judiciary Committee voted unanimously on Tuesday, April 15 to advance the bill to the House floor.
Louisiana
One year removed from enactment of a rule to regulate foreign involvement in third-party litigation financing in Louisiana, a related reform pursuit is underway at the statehouse.
The new bill, HB432, would prohibit all financiers with a contract or agreement from receiving or recovering, whether directly or indirectly, any amount greater than an amount equal to the share of the proceeds recovered by a plaintiff or claimant in a civil action.
The rule would also apply to an administrative proceeding, legal claim or other legal proceeding.
Any attorney who enters into a litigation-financing contract or agreement must disclose the information to the client represented in a proceeding within 30 days after being retained or within 30 days after entering into the litigation-financing agreement, whichever is earlier.
The bill is scheduled for consideration Tuesday, April 22 in the House Civil Law and Procedure Committee.
New York
The state of New York does not regulate third-party litigation financing. The Senate voted unanimously to advance legislation that would remove the distinction.
S1104 would set contract and disclosure requirements.
Senate Transportation Committee Chair Jeremy Cooney, D-Rochester, wrote that the rule is needed to address “bad actors” who often act in bad faith and charge exorbitant fees for services. He said this would change once legislation is enacted to provide a “set of robust provisions that would tightly regulate the services.”
Financiers would be required to submit a registration application containing “all the information that the Department of State needs to evaluate the character, fitness and financial stability of the applicant.”
The bill has moved to the Assembly Consumer Affairs and Protection Committee.
A related Assembly bill, A7599, is in the Assembly Judiciary Committee.
North Carolina
A North Carolina House bill focuses on third-party litigation financing.
Dubbed the “Consumers in Crisis Protection Act,” H925 includes a rule that would prohibit consumers from using financier funds to pay for attorneys’ fees, legal filings and legal document preparation, as well as any other litigation-related expenses.
Legal funding companies would be required to register with the state. Registration would include a fee and proof of financial stability.
Disclosure of litigation-funding agreements would be required within 30 days of a legal action or 30 days after implementation of an agreement.
A consumer would not be responsible for repaying a financier any amount in excess of net proceeds. If a consumer obtains no recovery from the legal claim, the consumer would not be required to repay a funding company.
Charges a financier could collect would also be limited.
Ohio
Ohio legislation addresses individuals and special interests who invest in litigation funding in exchange for a percentage of the ensuing settlement or judgement.
State law does not require third-party litigation-financing agreements to be disclosed to other parties in the litigation.
Two bills, HB105/SB10, would help address the issue by forbidding financing firms from directing any decisions of a legal claim, including appointing or changing counsel, litigation strategy and settlement or other resolution.
Additionally, foreign entities would be prohibited from entering into a litigation-funding agreement.
Both bills remain in committee.
Oklahoma
One bill halfway through the Oklahoma Legislature addresses third-party litigation financing.
A study by the Oklahoma Chamber Research Foundation showed excessive tort claims that include third-party funding result in a $3.7 billion annual loss in gross production in the state.
To address concerns, HB2619 is intended to strengthen legal protections for businesses and to ensure fairness in civil litigation.
Disclosure of funding agreements would be required upon request in discovery, including an affidavit certifying whether funds originate from a foreign state or entity.
Rep. Erick Harris, R-Edmond, said the bill is needed to strengthen the integrity of the state’s legal system and to prohibit foreign adversaries from attempting to fund litigation that could undermine the fairness of courts.
House lawmakers voted overwhelmingly to advance the bill. It is in the Senate Judiciary Committee with an April 24 deadline to advance from committee.
Rhode Island
In Rhode Island, legislation addresses what is described as “negligible oversight” of third-party litigation-funding companies.
H5221/S534 would create a regulatory framework, disclosure requirements and consumer protections around third-party financing.
At a House Judiciary Committee hearing, lawmakers were told that litigants often receive a tiny fraction of winning verdicts or even end up owing money because of unfair financing terms. Additionally, a foreign component also raises concern.
“In essence, these private finance firms turn the judicial system into an investment market, as an otherwise uninterested party bets on the outcome of litigation for prospective profit,” the American Property Casualty Insurance Association testified.
The group added that the financing market is largely unregulated. Financers often charge rates that can be six times the Rhode Island contractual usury limit of 21%.
Land Line Staff
The Commercial Vehicle Safety Alliance has announced the dates for this year’s International Roadcheck.
The annual three-day “high-visibility, high-volume commercial motor vehicle inspection and regulatory compliance enforcement” is scheduled for May 13-15 in Canada, Mexico and the United States.
During the 72-hour initiative, law enforcement members of CVSA across North America inspect commercial motor vehicles and drivers at weigh and inspection stations, temporary sites and through mobile patrols to ensure regulatory compliance. The data is then compiled and released following the event.
Each year, CVSA selects focus areas for both driver and vehicle inspections during the enforcement blitz. Hours-of-service regulations will be the driver focus area for this year’s International Roadcheck.
During the driver portion of an inspection, CVSA officials will check the driver’s operating credentials, hours-of-service documentation, status in the Drug and Alcohol Clearinghouse and seat belt usage. They will also look for alcohol and/or drug impairment.
For vehicles, inspectors will focus on tire maintenance, checking tires for tread depth and proper inflation. Additionally, they will look for air leaks, tread separation, cuts, bulges, sidewall damage and improper repairs.
If an out-of-service violation is discovered during an inspection, the vehicle will be restricted from operating until all such violations have been corrected. Inspectors also may put a driver out of service for violations such as not possessing a valid or necessary operating license or exhibiting signs of impairment.
Vehicles that successfully pass a Level I or V inspection without any critical vehicle inspection item violations may receive a CVSA decal. Those decals are valid for up to three months.
CVSA said during this year’s event, inspectors may also be available to answer questions about tire health and violations, as well as to help drivers navigate the hours-of-service regulations in their jurisdictions.
During 2024’s International Roadcheck, CVSA officials conducted 48,761 inspections during the three-day window. From those inspections, over 95% of drivers were found to have no out-of-service violations. Additionally, 77% of vehicles passed their inspections without critical violations.
You can reduce the chances of an accident by training, monitoring, and reforming driver behavior using dash cam technology.
Mark Schedler
Identification and Correction
The best defense against an accident is not having one. But with the number of miles traveled and the realities of highway travel, you cannot avoid all accidents. However, you can reduce the chances of an accident by training, monitoring, and reforming driver behavior using dash cam technology. A dash cam system accelerates the identification and correction of unsafe behaviors and sustains the change with ongoing coaching and recognition.
Carriers that correctly use a dash cam system as part of a continual driver training process have achieved best-in-class risk mitigation. A 2019 Virginia Tech Transportation Institute study of carriers who used video event-based coaching and training along with other safety strategies revealed the following results:
- Seven carriers reported that their DOT crash rate decreased an average of 49%.
- Three carriers shared that their Unsafe Driving BASIC showed an average 37% improvement.
- Five carriers reported an average 42% improvement in their Crash Indicator BASIC.
Fleets shared in separate study1 how they are leveraging dash cams and the results they are seeing:
- Nearly 53% said they are now analyzing hard braking events to discover driver behavior trends.
- Over 47% are using the data to improve driving training programs.
- Over 22% said their CSA scores have improved since installation.
The Best Legal Defense is Prevention
In their 2020 study, Understanding the Impact of Verdicts on the Trucking Industry, The American Transportation Research Institute (ATRI) in Arlington, VA, found that verdict awards over $1 million had skyrocketed.
Additional research by ATRI presented in The Impact of Small Verdicts and Settlements on the Trucking Industry showed that more than 600 cases resulted in a settlement or verdict award of less than $1 million.
Why such significant awards? Because a carrier’s actions are judged in court by what they should have known and done, not what they took the time to find and correct. A carrier must correct any unsafe situation that could affect the motoring public, which is made easier by monitoring driver behavior using video.
The study noted a correlation between cases in which carriers were accused of poor hiring or training practices and cases with drivers who had previous driving or hours-of-service violations.
The ATRI Crash Predictor Model study correlated traffic violation or conviction to the increased likelihood of a crash with examples such as:
Failure to Yield Right of Way violation . . . . . . . . . . . . 141%
Failure to Use/Improper Turn Signal conviction . . . . 116%
Reckless Driving violation . . . . . . . . . . . . . . . . . . . . . . .104%
Failure to Obey Traffic Sign conviction . . . . . . . . . . . . .85%
Failure to Keep Proper Lane conviction . . . . . . . . . . . . 78%
Reckless/Careless/Inattentive Driving conviction . . . 62%
When it comes to driver training, you should actively prioritize the prevention of the most costly infractions that ATRI shares and that your dash cam videos and data reveal.
