Wisconsin Requires Disclosure of All Litigation Funding Arrangements

Wisconsin Governor Scott Walker signed legislation in April that requires all third-party litigation funding deals to be disclosed, regardless of whether there has been any discovery request for that information. The law is consistent with lobbying efforts by the U.S. Chamber of Commerce, which has long been an aggressive critic of litigation financing.

Wisconsin Act 235 requires litigants “provide to the other parties any agreement” under which third-party funders are entitled to a share in any earnings from a civil action, settlement or judgment. The rule excludes lawyer contingent fee arrangements. According to Law360, the new law is first of its kind on the state level.

In a press release, Lisa Rickard, president of the U.S. Chamber’s Institute for Legal Reform, said: “Wisconsin’s law brings litigation funding out of the shadows, so that funders in the state can’t anonymously ‘pull the strings’ of a lawsuit without other parties’ knowledge.” Paige Faulk, vice president of the Institute expressed confidence that other states would follow suit: “This law is another step in what’s become a growing movement.”

But the legislation may alienate many of the commercial entities that the Chamber purports to serve. In recent years, more and more businesses have sought to use litigation funding as a way to manage their risk and maximize the value of their litigation portfolios. Now they face some strategic harm from the legislation that the Chamber promoted.

As one observer noted, “[m]ost states have been diligent to draft new laws that clearly separate consumer and commercial litigation finance. In its haste to pass a consumer law, however, Wisconsin did not do so, despite there being no expressed desire to regulate commercial litigation finance. We view this as an accidental outlier that is likely to change in due course once Wisconsin businesses realize that their legislators just overreached.”

Keywords: litigation finance, third-party litigation funding, regulation, discovery, disclosure

Work Cited: Jamie Hwang, Wisconsin Law Requires All Litigation Funding Arrangements to Be Disclosed, ABA Journal (April 10, 2018) available at http://www.abajournal.com/news/article/wisconsin_law_requires_all_litigation_funding_arrangements_to_be_disclosed