Third-party litigation financing has witnessed significant growth over the past decade. However, with the election of Donald Trump and the impending GOP control of both the House and the Senate, legal industry insiders are on high alert for potential reforms that could disrupt this business model. Many supporters of greater regulation have been Republicans, adding an interesting twist to the situation.

Business-Friendly Outlook and Its Impact

Trump's administration is expected to be more business-friendly, which raises questions about the future of the litigation funding industry. Other pro-business, Republican-leaning organizations like the U.S. Chamber of Commerce remain wary of third-party financing as it could potentially harm business defendants. The chamber, which estimates the industry to be worth $15.2 billion, deems the arrangement problematic as it may lead to prioritizing profit over justice and give litigation funders excessive control. 1: The concern over foreign powers benefiting from U.S. litigation funding led to the passing of a law in Louisiana this summer. This state law could potentially influence similar measures at the federal level. It presents an appealing way for the administration to address the issue. One federal legislator introduced a bill in October that requires disclosure of all third-party funding in civil litigation. If federal legislative proposals focus more on foreign entities influencing litigation, it could land on the White House's radar and necessitate the president's involvement. 2: Litigation financing is a risky business, with most arrangements being nonrecourse. The type of judges Trump may appoint to the bench poses unpredictability for companies in this business. The worry is more about judicial experience or competence rather than ideological bias. The distinction between consumer and commercial litigation financing also plays a role in how the issue is viewed politically.

Democratic and Republican Stances

Paradoxically, Democrats, who typically support the plaintiffs' bar, seem less enthusiastic about regulating litigation financing. Republicans, on the other hand, who usually advocate for less government intervention and regulation, are calling for more oversight. Professor Maya Steinitz believes there should be bipartisan interest in this area as the absence of regulation is hurting both plaintiffs and defendants. 1: Outside the executive branch, there is growing interest in both the judiciary and state legislatures to address litigation funding. On the legislative front, most bills have come from Republican lawmakers, but New Jersey has a Democratic prime sponsor for its proposed Litigation Transparency Act, which specifically targets consumer litigation funding. West Virginia also passed a bill making changes to third-party litigation funding statutes. 2: The federal judiciary is also looking at litigation financing, with the U.S. Supreme Court's Advisory Committee on Civil Rules proposing to create a subcommittee to probe transparency. The incoming president's nominations could have a significant impact. In October, it was reported that the advisory committee finally proposed creating the subcommittee after the issue had been on the radar for a decade. The topic is also gaining traction abroad, with the U.K.'s Civil Justice Council publishing an interim report on litigation funding.