Litigation Finance Disclosure Legislation Vetoed in Louisiana

Louisiana Governor John Bel Edwards vetoed legislation to require disclosure of litigation finance agreements, a setback for efforts to clamp down on the lawsuit funding tool.

The bill would have given large corporations a tactical advantage in the state civil cases the bill applied to, Edwards, a Democrat, said in a Thursday letter explaining his veto.

“This piece of legislation is clearly a pretense designed to gain a litigation advantage under the guise of promoting transparency in litigation and protecting national security,” he wrote.

The legislation was part of a push in several states to restrict the opaque litigation finance industry that topped $13 billion in assets under management last year. Wisconsin and New Jersey already require disclosure, and US District Judge Colm F. Connolly in Delaware has required it for certain patent cases in his courtroom.

In Louisiana, the bill required disclosure of litigation finance to all parties within 60 days of an agreement. Unlike similar bills in other states, it required the parties produce a copy of their financing agreement, with the amount of financing redacted.

Republican State Senator Barrow Peacock sponsored the legislation, stating fears that litigation finance could be a threat to national security and that Louisiana’s natural resources and army bases could make the state particularly vulnerable.

“It’s disappointing that the governor did not reach out to me before he vetoed this legislation,” Peacock said. “He simply did not see the need for it even though nationally this is being seen as a problem in our federal courts and this would apply to our state courts. It’s simply a disclosure bill.”

Peacock said that depending on the legislature’s plans for a possible July session, he will decide whether to pursue overriding the governor’s veto. Two-thirds of the state House and Senate would have to vote to override.

U.S. Chamber of Commerce Institute for Legal Reform, which supported the bill, will “continue working with policymakers in Louisiana to guard litigants and the state’s courts against secretive outsiders who pour money into lawsuits,” Nathan Morris, the group’s senior vice president of legal reform advocacy, said in a statement.

Gary Barnett, executive director of the International Legal Finance Association applauded the veto, saying in a statement it “protects Louisiana’s business community from losing a vital financing tool used to mitigate risk and maintain sufficient operating capital in their business.”

Litigation finance levels the playing field by allowing companies and individuals with fewer resources to pursue meritorious claims, Edwards wrote in his veto letter to Louisiana Senate President Patrick Page Cortez.