Litigation Funding Arrangements must be Disclosed Under Wisconsin Law

Wisconsin Gov. Scott Walker signed legislation last week that forces all third-party litigation funding deals to be disclosed. The deals must be reported even if no discovery request has been made.

Burford Capital view this as an accidental outlier and predict a backlash from business.

It is known as Wisconsin Act 235 and requires all litigants to “provide to the other parties any agreement” under which litigation funders are entitled to a share in any potential returns from a civil action, settlement or judgment. The rule does, however, exclude lawyers contingency fee arrangements. According to Law360, the new law is first of its kind on the state level.

The U.S. Chamber of Commerce’s Institute for Legal Reform supports the new law. In a concerning statement they announced that their view that litigation funding both prolongs litigation and leads to more lawsuits. A surprising stance on the industry and once that has been rebutted in many other jurisdictions.

“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,” Lisa A. Rickard, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in a press release.

Senior vice president of the U.S. Chamber of Commerce’s Institute for Legal Reform, Paige Faulk, told the ABA Journal in a statement that she thinks other states will follow suit. Paige said “This law is another step in what’s become a growing movement.”

Burford Capital, the biggest commercial litigation finance provider in the country was critical of the law, pointing out that Wisconsin’s law also applies to commercial litigation finance as well as consumer litigation finance. In a statement Burford Capital said that it predicts a backlash from businesses.

“Most states have been diligent to draft new laws that clearly separate consumer and commercial litigation finance,” Burford chief marketing officer Liz Bigham said in its statement. “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.”