Law Professor and Funder Offer Response to House Hearing on Litigation Funding
Although calls for the regulation of third-party litigation funding are neither new nor uncommon, as LFJ reported earlier this month, a hearing in the US House of Representatives placed these familiar critiques within an explicitly political lens. In an op-ed for The Hill, Suneal Bedi, assistant professor of business law and ethics at Indiana University’s Kelley School of Business, and William C. Marra, director of litigation funding at Certum Group, provide a response to the recent Congressional committee hearing on litigation funding. At its latest hearing, the House Committee on Oversight and Accountability’s leading members suggested that third-party funding posed a threat to the American legal system and encouraged frivolous lawsuits. However, Bedi and Marra suggest that litigation funding is actually “more likely to expedite case resolution, reduce litigation spend, lower the cost of legal services, and deter frivolous lawsuits.” The authors argue that this position is reinforced by the latest scholarship, citing a recent paper titled ‘Financing the litigation arms race’, which was published in the Journal of Financial Economics. Bedi and Marra explain that the paper’s ‘game theoretic model’ found that the presence of third-party funding would discourage defendants from trying to prolong the litigation or pile up exorbitant costs, because the funder ensures that a plaintiff cannot be bullied into submission due to a lack of funds. Furthermore, they argue that increased competition from litigation funders should lead to an overall decrease in the cost of legal services. Addressing the idea of funders backing frivolous lawsuits, Beddi and Marra highlight that the same paper backed up the natural conclusion that a funder who focused on frivolous cases would quickly go out of business. In the conclusion to the op-ed, Beddi and Marra also reference their own paper in the Vanderbilt Law Review, which found that “litigation funding likely results in a net increase in welfare”. They argue that lawmakers should properly evaluate the existing research and scholarship into litigation funding, before enacting regulation that harms the very legal system they are looking to protect.