U.S. Chamber: Tennessee Legal Reform Will Lower Costs for Consumers

State joins growing nationwide litigation funding transparency momentum

NASHVILLE - House Bill 2108 was signed into law by Governor Bill Lee. This law requires litigation funders to register with the state, disclose funding agreements to the court and defendants within 14 days of filing suit, bars foreign adversaries from funding litigation, and prohibits funder control of litigation.

Outside groups, including foreign entities, may currently bankroll litigation through a shadowy practice called third-party litigation funding (TPLF). This industry undermines the integrity of the courts and drives up costs for businesses and consumers.

According to the Institute for Legal Reform (ILR), litigation drains $3,096 from Tennessee households annually. With this new law, the state joins a number of its neighbors, including Georgia and Mississippi, in promoting a transparent and fair civil justice system that protects consumers and businesses instead of rewarding anonymous funders.

"Affordability is already a main concern for families. More costs are the last thing they need," Stephen Waguespack, President of the Institute for Legal Reform, said. "For too long, third-party litigation funding has let hidden investors game our courts for profit. Lawmakers are recognizing the need for commonsense TPLF reforms, and Tennessee is part of the growing momentum. At ILR, we're working alongside policymakers and state chambers to restore fairness in the civil justice system, so consumers and businesses get the predictable, fair legal environment they deserve. We commend Governor Lee, Representative Clark Boyd, and Senator Brent Taylor for their efforts to rein in third-party litigation funding."

Background:

This law establishes a comprehensive framework to regulate TPLF and brings needed transparency to Tennessee's legal system.

HB 2108 ensures that Tennesseans bringing claims are protected by being aware of who is funding and controlling their claims and that legal disputes are resolved on merit, not dictated by outside investors or financial interests. Funders must also disclose a financing agreement to the court and other parties within 14 days of the initial filing. Additionally, litigation financiers are jointly and severally liable for any penalties or court-ordered sanctions. They also have to cover any costs, legal fees, damages, or fines imposed against an individual they're funding, and the law caps the annual fee funders can charge at 10% of the original financing amount.

HB 2108 also keeps foreign governments out of Tennessee courtrooms. When foreign adversaries and sovereign wealth funds invest in U.S. litigation, American businesses may be targeted as part of efforts to undermine national security. Finally, non-profits seeking injunctive relief are excluded from this law.