TALLAHASSEE – Attorneys said there is a likelihood Florida could adopt a state law requiring disclosure of finance lenders who loan money to plaintiffs in lawsuits as the state of Wisconsin recently did, but two noted they would not like to see the same kind of regulation that banks have.
“I don’t believe regulating third party lawsuit financing like banks is the best way to cultivate growth in the industry, while maintaining the integrity of the legal profession and our justice system,” David Glickman, attorney with the law firm of Markarian & Hayes based in Palm Beach Gardens, told the Florida Record. “I believe regulating TPLF providers more like hedge funds, or investment advisors, through the Securities and Exchange Commission and comparable state agencies, is the best approach.”
Last month Wisconsin became the first state to adopt a law requiring disclosure of lenders who lend money to plaintiffs to pursue lawsuits. Commonplace in Canada and Australia, the lawsuit financing industry has grown in the U.S. in recent years.
Glickman has been following the issue early-on and published a treatise on the subject with the Florida State University Law Review back in 2016.
“It is absolutely possible that a third party disclosure requirement comes to Florida,” Glickman said. “I would say that the likelihood depends on how the industry as a whole is regulated. Even back in 2014, you had the ILR (Institute for Legal Reform), American Insurance Association, American Tort Reform Association, Lawyers for Civil Justice and the National Association of Manufacturers writing to the secretary of the Committee on Rules of Practice and Procedure for the Administrative Office of the U.S. Courts, proposing that a disclosure requirement be added to the Federal Rules of Civil Procedure (FRCP). If that happens and a disclosure requirement is added to the FRCP, it would not surprise me to see states fall in line shortly afterward,” he added.
Glickman said one of the biggest concerns he found in his research would be the controls governing decision-making in a lawsuit.
“The existence of funding in a lawsuit has a real effect on the economics of the suit, and the strategy behind its conduct and settlement,” he said. “Parties will conduct themselves differently if they know that a TPLF provider is involved in a suit on a particular party’s behalf.”
Michele DeStefano is a professor of law with the University of Miami School of Law and founder and executive director of LawsWithoutWalls, a think-tank of lawyers, businesspeople, professionals and students seeking to create innovations in law, technology and business. She said she is a proponent of litigation financing in the commercial sphere (as opposed to the individual).
“When the agreement is between a corporate claim-holder and the funder, litigation finance enables many benefits such as better case management, oversight and enhanced problem solving,” DeStefano told the Florida Record. “This is because claim funding enables more diverse viewpoints and people from different disciplines and expertise to work with lawyers. Research shows that a diversity of view-points leads to better complex problem solving and better decisions.”
DeStefano also disagreed with the idea of regulating lawsuit financing similar to how banks are regulated.
“I believe there should be some level of regulation and oversight over litigation funding,” she said. “Mandatory disclosure of the actual agreements is not the right answer as the contracts (and the negotiation of terms) are part of the litigation strategy. The details of the agreement will reveal information about the attorneys’ and clients’ analysis of the strengths and weaknesses of the case.
A more moderate approach might be to require mandatory disclosure of the ‘existence’ of an agreement without disclosing the details of the contract or the names of the actual commercial funders involved,” she added.
DeStefano said lawyers should tell their clients that litigation finance is an option and work with their clients to analyze the risks and benefits of using such a resource.
Bill Herrle, executive director of the Florida National Federation of Independent Business (NFIB), an association representing small businesses, said Florida might see a third party litigation financing disclosure law soon.
“Litigation is a constant threat to small business owners,” Herrle told the Florida Record. “I would expect that Florida small business owners would embrace any measure that would slow down the litigation industry.”