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Growth in Size of MDLs Partly Driven by Third Party Litigation Funding, Says Prominent Defense Attorney

Speaking to Law.com’s Daily Business Review, Shook, Hardy, & Bacon partner Hildy Sastre opined on the phenomenon of MDLs growing into “record-setting numbers in the tens of thousands or hundreds of thousands of cases.” According to Sastre, that rapid growth is helping to drive a feedback loop whereby bigger cases invite additional litigation funding, which helps in turn to drive bigger cases, and so on.

One of the major problems with litigation funding is the near-total lack of transparency around funding agreements, which may allow funders to structure agreements in a way that gives them more control of decisions related to the litigation. An effective solution to this problem, according to Sastre, would be the disclosure of the funding agreements themselves.

Momentum in favor of disclosure requirements seems to be growing around the world. Earlier this month the U.S. District Court for the District of New Jersey implemented a rule amendment requiring the disclosure of certain information about third party litigation funding in any funded case heard in New Jersey federal court, and across the Atlantic, European Union lawmakers have announced a legislative initiative that would create a raft of new safeguards around the litigation funding industry.

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N.J. Federal Courts Will Now Require Disclosure of Litigation Funding

There is a Chinese Proverb that says, “never do anything that you want to remain a secret.” Now, thanks to a new rule amendment adopted by the U.S. District Court for the District of New Jersey, this proverb also applies to litigation funders in federal court in the Garden State. New Jersey’s decision is a significant victory in the fight to bring transparency to a multibillion industry that operates in the shadows.

U.S. Senators Introduce First-of-its-kind Litigation Funding Transparency Bill

Three U.S. Senators have introduced a bill that would require transparency in third party funding in class action and multi-district litigation. It takes aim both at litigation funding and lawsuit lending, in which lending firms offer plaintiffs loans with “up-front” cash that usually come with sky-high interest rates.

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