Paul Taylor, an attorney and fellow at the National Security Institute, stated that third-party litigation funding (TPLF) turns lawsuits into a means to make money for attorneys and their funders, rather than a means for clients to pursue justice. Taylor shared his statement during testimony at a June 12 Congressional hearing.

“Because third party litigation funders operate solely for profit, it is their fiduciary duty to turn the justice system into a purely profit-making enterprise for themselves,” said Taylor. “That’s not what lawyers are supposed to do. Again, when a lawyer leverages government power in the way I’ve described, she does so with one eye on her own compensation, and the other eye on justice as understood by her client. But the third party litigation financer has both eyes fixed solely on the money, and it leverages government power solely to that end.”

According to the U.S. Chamber of Commerce Institute for Legal Reform (ILR), TPLF involves third parties such as hedge funds or investment firms providing the upfront capital for lawsuits. In exchange, they receive a percentage of any settlement or award from the case. Without transparency and disclosure requirements, TPLF can influence the course of litigation and incentivize “unmeritorious” lawsuits. The practice is leading to higher costs for consumers because when companies face higher litigation costs due to the presence of TPLF, those companies are forced to raise prices for their goods and services.

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