Some of these funders rely on considerable foreign investment when raising pools of capital to invest in cases (or portfolios of cases). Two private investment funds of Brickell Key Asset Management— Brickell Key Investments LP and Juridica Investments Limited are reported as both having nearly all foreign investment and the latter is registered in the tax haven, Guernsey.

Delta Capital Partners splits one of their funds into two pools, one registered in the Cayman Islands with 100 percent foreign investment and another with only U.S. investors. Their third private fund requires a minimum investment of $100 million and is nearly all (99%) foreign investors.

One of the only public funders, Burford Capital reported in their 2021 annual report that 28 percent of the entirety of their 2021 $2.8 billion AUM, or total capital invested in funds, was attributed to a single investor, a sovereign wealth fund that wanted their identity kept private.

Political Incentives

Beyond financial incentives, the murky nature of litigation funding allows for actors to fund legal cases with political incentives as well as financial. Famously, Hulk Hogan’s case against Gawker caused the news outlet to go bankrupt with an assist of third-party litigation funding from Peter Thiel, the PayPal co-founder and right-wing donor.

More recently, U.S. Rep. Devin Nunes sued Hearst Media for defamation regarding an article in Esquire Magazine about his family’s Iowa dairy farm. The judge on the case suspected litigation funding was involved because Nunes’s brother and the plaintiff, Anthony Nunes III, had “no idea” who paid the lawyers representing the plaintiffs.

“Anthony Nunes III’s lack of knowledge about who is paying the attorneys prosecuting this action raises legitimate concern about not only who may be in charge of the lawsuit, but also whether Plaintiffs are the still the real parties in interest,” wrote Judge Mark Roberts of U.S. District Court for the Northern District of Iowa.

The lack of required disclosure also allows deep-pocketed investors to spend on cases while concealing their involvement.

In 2017, Des Moines Water Works sued three Iowa districts regarding polluted water supplies in hopes of setting a precedent for environmental rights legislation. The organization discovered with an open records request that the Agricultural Legal Defense Fund, which was paying the defense’s legal costs, was financed by larger agrochemical corporations including Koch, DuPont, and Monsanto. Being outspent by the defense fund, the Des Moines Water Works dropped its case.

As a result, “not a lot has happened in terms of changes that will result in long term water quality improvements since the case was dismissed,” said Ted Corrigan, the current CEO and General Manager of Des Moines Water Works.

Legislating Litigation Funding

Over the past several years, a number of bills with various restrictions on litigation funding were introduced into state legislatures and U.S. Congress with limited success.

“It's a new concept [litigation funding],” said State Senator Adrian Dickey of Iowa. “Even my fellow legislators haven’t heard about it, much less have any idea how much of a problem it’s becoming.”

Dickey owns a trucking company and first became aware of the litigation funding industry from trucking industry publications' coverage of rising insurance costs and “nuclear verdicts” attributed to litigation funding.

Supporters of litigation funding criticize the motives behind these bills and their tactics; some say bills limiting interest rates kneecap the industry rather than provide actual safeguards for people.

“There's a rash of bills literally to ban the industry,” said Eric Schuller, President from the Alliance for Responsible Legal Funding, an association of consumer litigation funders. “The insurance industry has realized that this is an industry that is not going to go away, but they want to restrict it and they want to put in parameters; so, they've been able to pass legislation in a couple of states— West Virginia and Arkansas that have very strict rate restrictions on consumer legal funding, where we can’t operate.”

Schuller advocates and works with legislators on the text of legislation relating to litigation funding including the most recent bill in Missouri. He believes bills should require funders to clearly define terms in agreements with consumers and not pay referral fees to companies (or law firms) for new consumers. He also advocates for no rate caps but requiring contracts to be clearly disclosed, allowing consumers to compare rates across companies more easily, a solution he said lowered rates in Oklahoma.

He said, “I'd love to have 50 bills in 50 States because it puts clearly defined measures that protect consumers, protect the businesses, and allows the product to be offered clearly.”

While he supports clear disclosure to the consumer, he along with other litigation funding supporters actively fight laws requiring disclosure of finances of plaintiffs (including litigation funding) to the defense side of litigation, a tactic they argue, only serves the defense.

“I think the motive certainly behind this is to give a leg up on litigation to one side, specifically the insurance companies and defendants in this situation,” said Sam Marcellino of the Ohio Association for Justice in testimony against Ohio’s bill on litigation funding disclosure.

In contrast, Page Faulk, Senior Vice President of Legal Reform Initiatives at the U.S. Chamber Institute for Legal Reform argued, “the defendant has a right to know who is really prosecuting the lawsuit it faces.”

Echoing these sentiments, Joshua Landau, Patent Counsel at the Computer & Communications Industry Association (CCIA), said, “every patent plaintiff wants to present themselves as the small inventor who somebody else unjustly took their invention; that story becomes a lot more difficult to tell if the jury is aware that actually, you [the plaintiff] didn't invent it, and you're being financed by a large litigation finance company that stands to take most of the benefit of this.”

The chamber along with others have petitioned the Advisory Committee of Civil Rules to amend rule 26 Federal Rules of Civil Procedure, which would require disclosure of the agreements in cases and Faulk hopes, “that Congress too will do something if the advisory committee does not move forward with the legislation.”

U.S. Congressman Darrell Issa of California 50th congressional district and U.S. Senator Chuck Grassley of Iowa have repeatedly introduced the Litigation Funding Transparency Act into Congress. Grassley’s office even used the same quotes on the press releases from 2019 and 2021— “for too long, obscure third-party litigation funding arrangements have secretly funneled money into our civil justice system, without any meaningful oversight, all for the purpose of profiting off someone else’s case.”

“It's making a lottery of our legal system and there's absolutely no place for that,” said similarly by State Senator Dickey. “There's endless opportunities to invest— I don't think our legal system should be one of them.”