New Law Uncovers Third-Party Litigation Financing

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The trucking industry is relieved by the enactment of lawsuit reform legislation in Montana, establishing consumer protections and disclosures in third-party litigation financing. The legislation, SB 269, requires lawsuit lenders to register within the state and makes judges, juries, and defendants aware when a third party is financing the litigation in order to make a fair suit. Governor Greg Gianforte signed the bill to pass this law. ATA President and CEO Chris Spear commented:

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“The civil justice system is not a stock market, but that is what it’s becoming with the rise of third-party litigation financing. This common-sense measure will bring lawsuit lenders out from the shadows and make the fact finders aware that a disinterested third party has a financial stake in any verdict. We expect other states will soon follow Montana’s lead in ensuring full transparency behind this perverse and shady practice.”

Third-party litigation financing is a specified arrangement where a funder who is not a party to the lawsuit agrees to help with finances. These typically include private firms operating on large investment portfolios who expect to get a grand payout if the suit is successful. This practice puts pressure on plaintiffs to seek outsized verdicts in order for lenders to receive a return on their investment.

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Duane Williams, executive director of the Montana Trucking Association comments:

“When third-party financiers profit from the justice system, it drives up the cost of litigation for everyone and reduces the efficiency of the process. This law will help prevent predatory lawsuits that hinder our industry’s ability to serve our state and economy safely and efficiently. The Montana trucking industry would like to thank the Montana Chamber of Commerce, Senator Greg Hertz, and Governor Gianforte for their support in increasing transparency in civil litigation.”

Montana’s reforms follow other lawsuit reforms recently enacted in Florida and Iowa.

In Iowa, trucking officials are content with the passage of legislation that limits jury awards to $5 million in accident lawsuits against commercial vehicles. The law also sets limits on the extent to which trucking companies could be held liable for their hiring practices in accident cases.