Citizens Against Lawsuit Abuse warns of foreign-funded lawsuit scheme

Citizens Against Lawsuit Abuse (CALA) has expressed concerns regarding third-party litigation funding, describing it as a scheme that enables foreign interests to profit from lawsuits. The organization is calling for increased transparency in this area. The announcement was made on the social media platform X.

According to The Wall Street Journal, third-party litigation funding (TPLF) involves hedge funds, private equity firms, and foreign investors financing lawsuits in exchange for a portion of any settlement or judgment. This practice has seen significant growth in the United States. The Journal reports that lawmakers and legal reform advocates are worried that these funding arrangements could result in a lack of transparency and foreign influence within the American legal system. CALA cited this trend as a major factor contributing to rising legal costs and advocated for new disclosure requirements to inform both courts and the public about the sources and terms of litigation funding.

The Wall Street Journal further states that the U.S. litigation funding industry managed over $13.5 billion in assets as of 2023, with much of it originating from entities outside the country. Some foreign investors benefit from favorable tax treatment and are not subject to U.S. taxes on their share of proceeds, raising financial and national security concerns. Bipartisan efforts are reportedly underway in Congress to introduce laws mandating transparency regarding parties funding major lawsuits in the United States.

According to the U.S. Government Accountability Office (GAO), third-party litigation funders often seek returns ranging from 20 to 30 percent or more on their investments in legal cases, making it a highly profitable sector for investors. A GAO report from 2022 found that such funding is increasingly common in large commercial lawsuits, class actions, and patent litigation, yet there is often little or no disclosure to courts or other litigants about these arrangements. The GAO recommended additional regulations and transparency requirements to prevent conflicts of interest and maintain fairness in the judicial process.

According to its official website, Citizens Against Lawsuit Abuse is a grassroots advocacy group dedicated to educating the public about the negative impacts of lawsuit abuse on jobs, businesses, and the economy. It aims to promote civil justice reforms that enhance fairness, transparency, and accountability within the legal system. CALA operates across multiple states and is recognized for its public education efforts and legislative advocacy aimed at reducing frivolous lawsuits and abuses within the legal system.