Push for Disclosure Grows as Litigation Financing Becomes More Commonplace

The privacy once enjoyed by investors who finance other people’s lawsuits was rarely questioned before Hulk Hogan brought a media spotlight onto the niche industry by winning a $140 million jury verdict that forced the Gawker website into bankruptcy.

When Terry Jean Bollea (the professional wrestler’s real name) filed an invasion-of-privacy lawsuit against Gawker Entertainment in 2013, it was generally assumed that the existence of a litigation finance agreement was nobody’s business other than the plaintiff and their counsel. But after Bollea reached a $31 million post-judgment settlement agreement with Gawker, the press cited confidential sources to report that Silicon Valley tech billionaire Peter Thiel had funded the lawsuit.

Since then, tort reform advocates have made some progress toward requiring more disclosure when litigation funding agreements are used. Wisconsin in 2018 passed a law that requires disclosure of any litigation funding agreement that is in place. West Virginia passed a similar statute in 2019, but regulate only litigation finance agreements with individual consumers, not corporations.

At least two federal court districts — the Northern District of California in 2017 and the New Jersey district earlier this year — have adopted rules requiring disclosure of the existence of any litigation funding contracts in a case.

In the meantime, the American Bar Association has outlined best practices for attorneys who use litigation funders. The California Bar Association has also issued guidance about ethical considerations.

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