Litigation Funding Act signed by the Governor of Louisiana

Louisiana has passed a law giving greater control to the litigation finance industry, months after the governor’s office went to the Republican Party.

The measure (SB 355) prohibits third-party funders from controlling the matters in which they invest, including dispute resolution, the appointment or replacement of legal counsel, the selection of expert witnesses, and any other matters related to litigation strategy. The bill also requires parties to a lawsuit to disclose to the attorney general the status of funds from “countries of concern” and makes litigation financing agreements conditional on disclosure in civil cases.

It was introduced by state Senate Majority Leader Jeremy P. Stine.

Republican Gov. Jeff Landry signed the bill into law on June 19, and it will go into effect on August 1. His predecessor, Democrat John Bel Edwards, last year vetoed more expansive legislation that would have generally required third-party funding disclosures in civil cases.

The bill is part of an effort in several states to curb the practice of investors paying lawsuit costs in exchange for a share of profits from winning cases. The U.S. Chamber of Commerce is pushing for legislation, saying the $15.2 billion litigation finance industry encourages frivolous lawsuits.

Bills have been introduced in several states this year with mixed results. Indiana has passed legislation that prevents foreign entities from financing lawsuits. West Virginia updated existing law to include litigation funding. The Act obliges investors to provide consumers with copies of contracts and does not allow companies, among others, to: to assign or secure the contract to another party.

In Florida, a bill requiring disclosure of litigation financing and foreign investment agreements is stuck in the House. A Kansas bill allowing discovery of litigation financing agreements also died in committee.