By Lewis Nibbelin, Research Writer, Triple-I
Ohio has enacted a law mandating greater transparency in third-party litigation funding (TPLF), adding to nationwide momentum to better regulate the practice.
Signed into law last week, House Bill 105 requires litigation funders to register with the Ohio attorney general before operating in the Buckeye State and to disclose funding agreements to the attorney general once the case resolves. Agreements with foreign persons or entities are altogether prohibited to mitigate “the grave risk posed by foreign actors that seek to interfere” with Ohio courts, the bill states.
To further protect consumers, the new law establishes clear disclosure requirements on funding fees and repayment limits as well as imposes caps on fees from consumer litigation funders. Both consumer and commercial funders are also barred from influencing case strategy, settlement decisions, and counsel selection, earning strong support from the state’s small business community.
TPLF occurs when outside investors profit from lawsuits by paying legal costs in exchange for a share of the settlement or judgment if the suit wins. In practice, this encourages prolonged and unnecessary cases and can culminate in extreme nuclear verdicts of $10 million or more, a substantial portion of which investors will collect, rather than the plaintiff.
Mark Friedlander, Triple-I’s senior director of media relations, told BestWire that these added expenses contribute to thousands of job losses and higher costs on everyday goods and services throughout Ohio, including the cost of insurance.
“Third-party litigation financing has evolved into a global multibillion-dollar asset class of dark money,” Friedlander said. “Without question, there needs to be more transparency and that’s why this legislation is so important.”
Ohio’s TPLF transparency framework follows in the footsteps of similar measures emerging across the U.S., such as those implemented in Colorado, Mississippi, Oklahoma, Tennessee, and Utah. While the mechanisms behind each state policy differ, all mandate clearer disclosure of financing agreements and prohibit those involving foreign TPLF.
Legislation in North Carolina that went into effect this month ranks among the most comprehensive, effectively banning TPLF with exceptions only for funding that is not contingent on courtroom outcomes.
“Across the country, state lawmakers are taking meaningful steps to address legal system abuse and the factors driving higher costs for consumers, businesses, and insurance markets,” said Triple-I CEO Sean Kevelighan. “This year’s legislative activity reflects growing recognition that issues such as third-party litigation funding, predatory legal marketing practices, and excessive litigation can create significant economic impacts.”
Learn More:
North Carolina Becomes First State to Ban Third-Party Litigation Funding
States Take the Lead on Third-Party Litigation Funding Reform
Legal System Abuse Awareness Campaign Spreads Across U.S.
Florida Premiums Drop Amid Post-Reform Stability
New Consumer Guide Highlights Economic Impact of Legal System Abuse and the Need for Reform