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%.
Matt Cole
Following executive orders from President Donald Trump related to the administration’s deregulatory agenda, the Department of Transportation is asking for public input on existing regulations and other regulatory documents that can be modified or repealed to help meet the administration’s goals.
In a Federal Register notice published Thursday, the DOT said it is seeking “comments and information to assist DOT in identifying existing regulations, guidance, paperwork requirements, and other regulatory obligations that can be modified or repealed, consistent with law, to ensure that DOT administrative actions do not undermine the national interest and that DOT achieves meaningful burden reduction while continuing to meet statutory obligations and ensure the safety of the U.S. transportation system.”
Trump’s executive orders require:
- Unless prohibited by law, whenever an agency proposes a new regulation, it must identify at least 10 existing regulations to be repealed, a significant expansion of a similar executive order issued during Trump’s first term requiring just two regulations be repealed for any one promulgated.
- For fiscal year 2025, all agencies must ensure that the total incremental cost of all new regulations, including repealed regulations, being finalized is significantly less than zero, as determined by the Director of the Office of Management and Budget (OMB), unless otherwise required by law or instructions from OMB
- Any new incremental costs associated with new regulations must, to the extent permitted by law, be offset by the elimination of existing costs associated with at least 10 prior regulations
Citing a February executive order relative to the “President’s ‘Department of Government Efficiency’ Deregulatory Agenda,” too, the DOT Federal Register notice outlined seven categories of regulation it was seeking to identify, as all federal agencies must report them to “the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget” for potential action:
- Unconstitutional regulations and those that raise serious constitutional difficulties, exceeding the intended scope of government power.
- Regs based on unlawful delegations of legislative power.
- Regs based on faulty interpretation of underlying statutory authority or prohibition.
- Those not authorized by clear statutory authority that implicate matters of social, political or economic significance.
- Rules that impose significant costs on private parties not outweighed by public benefits.
- Regs that harm the national interest by impeding technological innovation, infrastructure development, disaster response, inflation reduction, research and development, economic development, energy production, land use, and foreign policy objectives.
- Finally, regs that impose undue burdens on small business and impede private enterprise and entrepreneurship.
To implement the executive orders, DOT is taking two immediate steps: opening public comment as described here, and creating an email inbox at Transportation.RegulatoryInfo@dot.gov. Individuals can use that inbox to identify for DOT existing regulations, guidance, reporting requirements, and other regulatory obligations that they believe can be modified or repealed, consistent with law.
In the Request for Information (RFI) published Thursday, DOT is looking to identify “regulations, guidance or reporting requirements that are obsolete, unnecessary, unjustified, or simply no longer make sense.” It’s also looking to identify regs, guidance or reporting requirements that should be altered or eliminated.
In filing comments, commenters are asked to provide, to the extent possible, supporting data or other information such as cost information, and specific suggestions regarding repeal, replacement, or modification.
DOT has provided 12 questions related to Trump’s executive orders that commenters can respond to.
Comments can be filed online here, or by emailing Transportation.RegulatoryInfo@dot.gov, and including “Regulatory Reform RFI” in the subject line. Written comments and information are requested on or before May 5.
DOT’s call for input follows a request from Trump and Elon Musk’s new Department of Government Efficiency, or DOGE, for Americans to inform the top levels of the executive branch on waste, fraud and abuse at federal agencies.
Overdrive polling about what truckers would like to see DOGE tackle highlighted ELDs, truck parking and temporary visa/permanent work programs for foreign/immigrant drivers as among top issues they’d like to see addressed, among other areas of interest.
During President Trump’s first term, the Federal Motor Carrier Safety Administration’s Motor Carrier Safety Advisory Committee was tasked with making recommendations for regulations that were “outdated, unnecessary or ineffective,” and those that “impose costs that exceed benefits,” FMCSA said at the time.
FMCSA brought its own ideas to the meeting where the committee considered the task, and both FMCSA’s and MCSAC members’ recommendations from that effort can be seen here in discussion notes. Among regulatory provisions that were eliminated as a result were 1-5 a.m. periods required in any 34-hour restart under the hours of service (suspended by Congress prior), likewise requirements related to filing/storing no-defect Driver Vehicle Inspection Reports.
Members of the public were invited to provide written and/or in-person ideas to that committee at the time, yet few such ideas are reflected in the discussion notes, and it’s unclear what, if any, made it into the final report on the task, accessible via this link.
As noted above, Trump’s executive order during that term called for the elimination of just two regs for every new one instead of the 10 required during this term. Discussion among stakeholders and the FMCSA at that time, according to the MCSAC meeting discussion notes, acknowledged that “removing an obsolete rule allows the agency to add more safety regulations.”
By Shannon Newton, president of the Arkansas Trucking Association and immediate past chair of the Trucking Association Executives Council.
On February 11, Arkansas Governor Sarah Sanders signed Act 28 into law, addressing litigation reform in the state relating to large truck crashes. The Bill eliminates phantom damages from medical expense recoveries. This significant legislation defines recoverable medical charges based on amounts actually paid and accepted, rather than inflated billed amounts.
Phantom damages—the difference between billed charges and actual payments—have been artificially inflating settlements and increasing costs across multiple industries, including transportation. While ensuring injured parties remain fully and appropriately compensated, the new law will not affect other damage categories or impact subrogation rights.
Though some state news coverage labeled the bill “tort reform-lite,” this victory is far from insignificant for trucking. What makes this achievement particularly noteworthy is the persistence with which it was secured. This isn’t the first time Arkansas has attempted to address phantom damages. The legislation that ultimately passed with 46 cosponsors is practically identical to one that failed in 2023.
Arkansas’s success may be attributable partly to a new champion. House Speaker Rep. Brian Evans, a logistics business owner, understands the industry and the effects of an unjust judicial system on businesses, as well as the downstream effects on customers and citizens who ultimately pay inflated prices.
This victory in Arkansas is part of a growing wave of reform across the country. In 2023, Florida scored a major triumph when the state eliminated one-way attorney’s fees and fee multipliers. Working closely with Gov. Ron DeSantis, the Florida Trucking Association and its allies secured passage of a law that addresses transparency of medical damages and requires consideration of fault in assessing liability. The Florida law also reduces the statute of limitations from four to two years in order to discourage less meritorious lawsuits and focus resources on legitimate cases.
In the same year, Iowa capped non-economic damages to $5 million per plaintiff in trucking cases and eliminated liability for negligent hiring claims when drivers are acting within the scope of their duties. These successes required strong buy-in from Senate leadership.
The Nebraska and Maryland’s Legislatures are currently taking up bills to cap non-economic damages. Nebraska senators have also filed bills to allow evidence that a person was not wearing a seat belt to be admissible in civil proceedings determining liability, to reduce the statute of limitations in personal injury cases and to disclose third-party financing in litigation.
These state-by-state victories are the direct result of an initiative that began six years ago when American Trucking Associations named lawsuit abuse a tier one advocacy priority. The initiative required restructuring and inverting their advocacy approach to empower state associations in a state-by-state fight.
ATA’s prioritization on this topic has generated crucial momentum. Since 2019, over half of U.S. states have filed reform bills, with twelve successfully enacting meaningful reforms.
This strategy is necessary because each state’s legal environment and legislative opportunities for change differ significantly. Despite our interstate industry’s preference for uniformity, reform on this issue must happen state-by-state, with advocacy strategies tailored to local opportunities. The Arkansas Trucking Association is proud to put the first victory of 2025 on the board, doing our part to make our corner of the map a better place to operate. As more states join this movement, the scales of justice come a little closer back into balance.
