Louisiana enacts new Third-Party Litigation Funding (TPLF) law

June 27, 2024 / 15 min read

On June 19, 2024, Louisiana Governor Jeff Landry (R) signed into law Senate Bill 355 (S.B. 355) which adds two new chapters to Louisiana’s Revised Statutes titled as “Transparency and Limitations on Foreign Third-Party Litigation Funding Act” and “Litigation Financing Disclosure Act.”^[1] S.B. 355 passed the Louisiana House of Representatives on a 81-20 vote and passed in the Senate 37-0.^[2] The Louisiana’s state legislature’s website states the effective date of this new law is August 1, 2024.^[3]

In general, S.B. 355 contains several provisions regulating foreign TPLF, including provisions requiring foreign funders to disclose certain information to Louisiana’s attorney general. In addition, the new law contains other general provisions, including prohibiting funders from making (or influencing) certain litigation and settlement decisions, and making the existence of TPLF agreements subject to discovery under Louisiana’s Code of Civil Procedure and Code of Evidence rules.

signing a law contract

The following provides an overview of Louisiana’s new TPLF law:

Transparency and Limitations on Foreign TPLF

S.B. 355 adds a new chapter (Chapter 2-C) to the Louisiana Revised Statutes titled the “Transparency and Limitations on Foreign Third-Party Litigation Funding Act,”^[4]which sets forth certain new provisions that:

Define various terms regarding foreign TPLF in relation to the new law’s applicability, including, but not limited to, “foreign third-party litigation funder,” “foreign entity,” and “foreign country of concern;”^[5]
Require disclosure of information regarding foreign TPLF and foreign source certification by foreign entities, as well as a copy of the funding agreement, to Louisiana’s attorney general;^[6]
Prohibit foreign litigation funders from engaging in various activities, including, but not limited to, “appointing or changing counsel, choice or use of expert witnesses, litigation strategy, and settlement or other disposition;”^[7]
Outline several enforcement provisions, including, but not limited to, subjecting foreign litigation funders to actions under Louisiana’s deceptive and unfair trade practices laws, fines, and potential sanctions;^[8]and
Require Louisiana’s attorney general to file a report “at least once each calendar year” with the president of the Senate and speaker of the House of Representatives providing certain information regarding foreign litigation funding, including but not limited to, certain identifying information of each foreign funder; whether any foreign funder violated any of the prohibitions contained in this new law; and “any determinations or analysis of the disclosures received.”^[5] The new law also states that the attorney general “shall distribute the reports pursuant to this Section in compliance with the provisions of R.S. 24:772.”^[6]

Litigation Financing Disclosure Act

S.B. 355 adds a new chapter (Chapter 2-D) to the Louisiana Revised Statutes titled the “Litigation Financing Disclosure Act”^[11]which sets forth certain new provisions that:

Define various key terms in relation to the new law’s applicability, including not limited to, “Litigation financer,” Litigation Financing,” and “Litigation financing contract or agreement;” ^[12]
Prohibit a funder from engaging in certain litigation activities, stated in full, as follows: “A litigation financer with a litigation financing contract or agreement with the party shall not decide, influence, or direct the party or the party's attorney with respect to the conduct of the underlying civil proceeding or any settlement or resolution of the civil proceeding, or make any decision with respect to the conduct of the underlying civil proceeding or any settlement or resolution of the civil proceeding. The right to make these decisions remains solely with the party and the party's attorney in the civil proceeding;” ^[13]
Provide that “the existence of a litigation financing contract or agreement is subject to discovery in accordance with the Code of Civil Procedure and Code of Evidence in all civil actions;”^[14] and
Exempt certain parties from the new law stating, in full, as follows: “This Chapter shall not apply to non-profit organizations funded by private donors that represent clients on a pro bono basis. Awards of costs or attorney fees to non-profit organizations shall not be affected by this Chapter. This Chapter shall not be interpreted to require a nonprofit legal organization to disclose its donors or sources of funding.” ^[15]

Effective Date

S.B. 355 states, in part, that “[t]he provisions of this Act shall have prospective application.”^[16] The Louisiana’s state’s legislature’s website states the “effective date” of this new law is “8/1/24.”^[17]

Consideration Points

Louisiana’s enactment of S.B. 355 into law comes on the heels of West Virginia’s and Indiana’s recently passed TPLF statutes. Many will likely recall that the Louisiana state legislature passed a TPLF bill last year, but that bill was ultimately vetoed by then Governor John Bel Edwards (D).

In assessing S.B. 355, Louisiana’s new law targets three main areas of concern for many regarding TPLF practices:

First, S.B. 355 regulates various aspects of foreign TPLF which has become a growing TPLF focus point. In this regard, it is noted that the Protecting Our Courts from Foreign Manipulation Act of 2023 was introduced in Congress last September which, in general, proposes to regulate TPLF by foreign persons, states, and sovereign wealth funds. As another example, the U.S. Chamber of Commerce Institute for Legal Reform (ILR) released a detailed report in November 2022 titled a “New Threat: The National Security Risk of Third-Party Litigation Funding” which outlined various concerns about third-party funding by foreign parties and entities. This report, in part, argues that there are growing concerns “that a large volume of foreign-sourced money may be pouring into U.S. civil litigation against U.S. companies and industries (including those in defense and other highly sensitive sectors), raising significant national and economic security risks; a foreign government could fund litigation to advance its strategic interests against the U.S.; and that though the U.S. government has taken action to limit foreign access to U.S. technology, there is no measure currently in place to prevent foreign adversaries from using TPLF to circumvent existing safeguards.”^[18]In addition, Senator John Kennedy (R-La), as member of the Senate Judiciary Committee, sent a letter in 2023 to Attorney General Merrick Garland and Chief Justice John Roberts regarding this issue.

Second, S.B. 355 prohibits funders from making (or influencing) certain litigation and settlement decisions. Whether funders have the ability to make (or influence) claims and litigation decisions continues to be a concern to many given the potential impact this could have on a variety of issues, including settlement. As noted above, S.B. 355 bars a third-party funder from making (or influencing) decisions regarding several different litigation items and matters.

Third, Louisiana’s new law, as noted above, makes “the existence of a litigation financing contract or agreement [. . .] subject to discovery in accordance with the Code of Civil Procedure and Code of Evidence in all civil actions.”^[19] In this regard, Louisiana now joins Indiana, Montana, Wisconsin, and West Virginia which are other states that have also passed statutes requiring TPLF disclosure. Comparing these statutes, it is noted, in general, that Louisiana’s statute is similar to Indiana’s statute in that the “existence” of the TPLF agreement is subject to discovery under each state’s general discovery rules.^[20]More specifically, as noted above, Louisiana’s statute states, in part, that the “existence” of the TPLF agreement is subject to discovery per Louisiana’s Code of Civil Procedure and Code of Evidence.^[21] Meanwhile, Indiana’s statute states, in part, that the “existence and contents” of the TPLF agreement are subject to discovery.^[22] In contrast, the respective statutes of Montana, Wisconsin, and West Virginia require, in main part, the production of the TPLF agreement to the other party without a formal discovery request.^[23]

Going forward, it will be interesting to learn how S.B. 355 impacts claims, litigation, and settlement practices. Likewise, it will be interesting to see the extent to which foreign TPLF is involved in claims and the information regarding foreign TPLF which will be part of the attorney general’s required reports to the Louisiana state legislature.

Questions?

Please feel free to contact the author if you have any questions regarding Louisiana’s new TPLF law as outlined above. Also, be sure to review the author’s other TPLF articles and resources for additional TPLF updates.

[1] The introductory verbiage of S.B. 355 states as follows: “ To enact Chapter 2-C of Code Title XII of Code Book III of Title 9 of the Louisiana Revised Statutes of 1950, to be comprised of R.S. 9:3580.1 through R.S. 9:3580.7, and to enact Chapter 2-D of Code Title XII of Code Book III of Title 9 of the Louisiana Revised Statutes of 1950, to be comprised of R.S. 9:3580.10 through 3580.12, relative to litigation disclosure; to provide relative to financial disclosure; to provide relative to the creation of the "Transparency and Limitations on Foreign Third-Party Litigation Funding"; to provide for definitions, terms, and conditions; to provide for contract disclosures; to provide for violations and contracts; to provide for time limitations; to provide for certification formation; to provide relative to prohibitions for third-party funding; to provide for enforcement of foreign litigation; to provide relative to legislative reports; to provide relative to the creation of the Litigation Financing Disclosure Act; to provide for discovery; to provide with respect to class action lawsuits; to provide relative to prospective application; and to provide for related matters.” Id.

[2] See, https://legis.la.gov/legis/BillInfo.aspx?s=24RS&b=SB355&sbi=y

[3] See, https://legis.la.gov/legis/BillInfo.aspx?s=24RS&b=SB355&sbi=y

[4] The introductory verbiage to the provisions outlined in Chapter 2-C reads as follows: The introductory verbiage to the provisions outlined in Chapter 2-D reads as follows: “Be it enacted by the Legislature of Louisiana: Section 1. Chapter 2-C of Code Title XII of Code Book III of Title 9 of the Louisiana Revised Statutes of 1950, comprised of R.S. 9:3580.1 through R.S. 9:3580.7, and Chapter 2-D of Code Title XII of Code Book III of Title 9 of the Louisiana Revised Statutes of 1950, comprised of R.S. 9:3580.10 through 3580.12, are hereby enacted to read as follows:” S.B. 355, Section 1.

[5] These terms, along with the complete set of terms defined under this chapter, are contained at §3580, click here to review S.B. 355 where these definitions can be viewed in full.

[6] These provisions are contained in §3580.3 and §3580.4, click here to review S.B. 355 where these provisions can be viewed in full.

[7] These provisions are contained in §3580.5, click here to review S.B. 355 where these provisions can be viewed in full.

[8] These provisions are contained in §3580.6, click here to review S.B. 355 where these provisions can be viewed in full.

[9] These provisions are contained in §3580.7, click here to review S.B. 355 where these provisions can be viewed in full.

[10] Id. Louisiana Revised Statutes §24:772 states “A. (1) To comply with any provision of law and any resolution requiring or requesting the submission of reports to the legislature, the agency shall send an e-mail notification which contains an electronic copy of the report to the David R. Poynter Legislative Research Library in such an electronic format as may be determined by the Legislative Budgetary Control Council. The David R. Poynter Legislative Research Library shall distribute a list of such reports to the members of the legislature via e-mail and, upon the request of a member, via paper copy. (2) Notwithstanding Paragraph (1) of this Subsection, an agency may send an electronic copy of a report to one or more members of the legislature. (3)(a) Each agency shall distribute a list of its reports and publications to the David R. Poynter Legislative Research Library by February first of each year. The list shall include all reports and publications issued by the agency during the previous calendar year and shall be sent via e-mail. (b) Each agency shall also distribute an electronic copy of each report and publication on such list to the David R. Poynter Legislative Research Library by February first of each year. (c) The David R. Poynter Legislative Research Library shall ensure that the information required to be submitted pursuant to this Paragraph, including a link to each report and publication, is distributed via e-mail to each member of the legislature. B. In addition to the distributions required in Subsection A of this Section, one printed copy of each report shall be filed with the David R. Poynter Legislative Research Library. The David R. Poynter Legislative Research Library shall be a depository for all reports and shall receive such materials without cost within five days of publication. C. During an audit of each state agency, the legislative auditor shall cause an examination of the records of the various reports submitted to the legislature by such agency, insofar as is practicable, to determine whether the agency has complied with the provisions of this Section. An audit report of a state agency by the legislative auditor shall contain specific comment on the compliance of such agency with the provisions of this Section.” Id.

[11] The introductory verbiage to the provisions outlined in Chapter 2-D reads as follows: “Be it enacted by the Legislature of Louisiana: Section 1. Chapter 2-C of Code Title XII of Code Book III of Title 9 of the Louisiana Revised Statutes of 1950, comprised of R.S. 9:3580.1 through R.S. 9:3580.7, and Chapter 2-D of Code Title XII of Code Book III of Title 9 of the Louisiana Revised Statutes of 1950, comprised of R.S. 9:3580.10 through 3580.12, are hereby enacted to read as follows:” S.B. 355, Section 1.

[12] These terms, along with the complete set of terms defined under this chapter are contained at §3580.11, click here to review S.B. 355 where these definitions can be viewed in full.

[13] This provision is codified at §3580.12A.

[14] This provision is codified at §3580.12B.

[15] This provision is codified at §3580.12C.

[16] S.B. 355, Section 2.

[17] See, https://legis.la.gov/legis/BillInfo.aspx?s=24RS&b=SB355&sbi=y

[18] See, U.S. Chamber of Commerce Releases New Report on the National Security Ramifications of Third Party Litigation Funding” (November 2022).

[19] As noted above, this provision is codified at §3580.12B.

[20] Under Louisiana’s new law, §3580.12B reads as follows: ”The existence of a litigation financing contract or agreement is subject to discovery in accordance with the Code of Civil Procedure and Code of Evidence in all civil actions.” Id. Indiana’s discovery provision, codified at Indiana Code § 24-12-4-2(d), states: “In a civil proceeding in which a consumer claimant is a party, the existence and contents of the CPAP contract are subject to discovery under the Indiana Rules of Trial Procedure by: (1) a party other than the consumer claimant; or (2) an insurer that has a duty to defend another party in the civil proceeding.” Id.

[21] As noted above, this provision is codified at §3580.12B.

[22] Indiana Code § 24-12-4-2(d); see, n. 20 above.

[23] Montana’s law is codified at Montana Code Annotated § 31-4-108 and states: “(1) Except as otherwise stipulated or ordered by a court of competent jurisdiction, a consumer or the consumer’s legal representative shall, without awaiting a discovery request, disclose and deliver to the following persons the litigation financing contract: (a) each party to the civil action, administrative proceeding, claim, or cause of action, or to each party’s legal representative; (b) the court, agency, or tribunal in which the civil action, administrative proceeding, claim, or cause of action may be pending; and (c) any known person, including an insurer, with a preexisting contractual obligation to indemnify or defend a party to the civil action, administrative proceeding, claim, or cause of action (2) The disclosure obligation under subsection (1) exists regardless of whether a civil action or an administrative proceeding has commenced. (3) The disclosure obligation under subsection (1) is a continuing obligation, and within 30 days of entering into a litigation financing contract or amending an existing litigation financing contract, the consumer or the consumer’s legal representative shall disclose and deliver any new or amended litigation financing contracts (4) The existence of the litigation financing contract and all participants or parties to a litigation financing contract are permissible subjects of discovery in any civil action, administrative proceeding, claim, or cause of action to which litigation financing is provided under the litigation financing contract, regardless of whether a civil action or an administrative proceeding has commenced.” Id.

Wisconsin’s law is codified at Wis. Stat. Ann. § 804.01(2)(bg) and states: “Third party agreements. Except as otherwise stipulated or ordered by the court, a party shall, without awaiting a discovery request, provide to the other parties any agreement under which any person, other than an attorney permitted to charge a contingent fee representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise.” Id.

West Virginia’s statute, codified at W. Va. Code Ann. § 46A-6N-6 states: “Except as otherwise stipulated or ordered by the court, a party shall, without awaiting a discovery request, provide to the other parties any agreement under which any litigation financier, other than an attorney permitted to charge a contingent fee representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise.” Id.