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Litigation Funding Fueling Rise of Australian Class Actions

Five Australian law firms have threatened to sue a single company. If they all file, this would be the most class actions against one company in Australian history. Reuters recently called this an “unprecedented class-action feeding frenzy.” What you’ll also notice in that article is how litigation funders are backing these lawsuits and looking to make a profit.

This has become a growing trend in Australia, which is the birthplace of third party litigation funding. According to King & Wood Mallesons, an Australian law firm, 28 percent of Australian class actions were backed by funders in 2013 and 2014. In 2016 and 2017, 58 percent of class actions were funded. This is only based on publicly available information. Since these funders are allowed to operate in the shadows, the true number may be higher.

Calls to regulate the opaque third party litigation funding industry have grown globally. The Australian Institute of Company Directors recently called on the Australian government to take action to make sure litigation funding is “transparent and appropriate like any other form of financial advice.”

Litigation funding is rapidly spreading. It can lengthen litigation, make the process more expensive, and take money from real plaintiffs. In fact, a litigation funder recently admitted to the Wall Street Journal that they “make it harder and more expensive to settle cases.” The Australian government, and other governments around the world, should act before the “feeding frenzy” continues to spread.

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