Florida, a major player in championing legal reform bills, put up a strong fight on the issue of outside funding of civil litigation within its courtrooms. It is one of several states that pursued legislative efforts during the 2024 session that would place reasonable controls on a currently unregulated investment practice called third-party litigation funding.
Through third-party litigation financing, outside investments in civil litigation have become increasingly popular with big money management groups. By providing money to fund massive ad campaigns that find potential plaintiffs or cover other costs of bringing lawsuits, investors can realize large profits when the plaintiff litigators prevail in court or, more commonly, when they force the defendant to settle.
When defendants are large companies, which are often targeted for litigation, settlements can run into billions of dollars.
The economic concerns associated with litigation financing are obvious. Without legislative attention being paid to this issue, those concerns will persist. Huge lawsuits can target major corporations even if there is little to no established wrongdoing.
By basing unfounded claims of injury on junk science, backed up with testimony from professional paid “experts,” attorneys can coerce companies into settlements to protect their public reputation and avoid the expense of mounting a defense.
This stifles economic growth by depleting capital that could otherwise be used to fund the development of new products or services for consumers or the creation of new jobs.
However, an equally troubling aspect of this type of litigation financing is how it can interfere in the legal process and halt courts from arriving at just verdicts in a timely manner. This is at the heart of the legislation that was proposed in Florida earlier this year.
Third-party funders can influence key aspects of the plaintiff attorneys’ legal strategy. They can dictate what witnesses to call, when to settle, or the level of compensation the plaintiffs will accept.
The need to pay the funders their percentage of any settlement or judgement can also prompt plaintiffs and their attorneys to hold out for a greater amount of compensation. Further, these funders can remain anonymous, as there are no legal requirements to reveal their identity publicly or to disclose their level of involvement in the case.
The Florida bills from the 2024 legislative session, House Bill 1179 and Senate Bill 1276, would have barred anyone who is financing a lawsuit from making decisions related to a civil action, administrative proceeding, or claim. This would include such things as appointing counsel, selecting expert witnesses, or devising litigation strategy.
There could be some unintended consequences of the legislation, such as if a father funds their son’s legal case in a civil suit, Dad is now legally barred from offering strategy advice or recommending a good lawyer. However, the intent of the legislation is to require attorneys who accept outside funding to disclose that information to all involved parties. This would be a massive step forward to deterring waves of frivolous litigation.
Disappointingly, neither bill was passed into law this session. The Senate version was approved by the Senate Fiscal Policy Committee in a 15-5 vote, but the measure became stalled in the House Judiciary Committee. Even so, both House and Senate sponsors plan to reintroduce the legislation next year.
As a result, this outcome became a statewide disappointment for Florida’s lawmakers, as they could not come to a resolution to protect Floridians and make a pioneering effort in regulating third-party litigation.
While this legislative session lacked results for legal reform efforts, there is some hope for the Sunshine State to refocus their efforts in 2025. Florida has a notable history of being a leader in tort reform, particularly evident in the 2023 legislative session.
In 2023, Florida passed an historic tort reform legislative package to create a more balanced and fair legal system. Gov. Ron DeSantis played an integral role in these tort reform efforts, using his influence to advocate for these changes in the state legislature.
His administration’s focus on reducing frivolous lawsuits and creating a more business-friendly environment resonated with consumers and business owners alike across the state.
The success of these tort reform initiatives in 2023 positioned Florida as a leader in legal reform, demonstrating a commitment to creating a fair and transparent legal system that supports economic growth and accountability. This legacy of leadership and dedication to legal reform is part of what has made Florida so attractive for businesses. It is also why it is vital that the work does not stop here.
It is imperative that the Florida House and Senate work towards solutions to pass this much-needed legislation next year. Third-party litigation financing will continue to cause problems in the legal system until commonsense controls are instituted to make the process more transparent and focused on producing fair judicial outcomes instead of corporate profits.
The efforts to produce those controls should be pursued not just in Florida, but in every state legislature across the country.
David Williams is president of the Taxpayers Protection Alliance.
