COMMENTARY: Movement is growing to expose hidden litigation funders

An insidious financial arrangement is happening inside American courtrooms that most people never hear about. Third-party investors and some foreign investors are pouring billions of dollars into lawsuits they did not originate, in pursuit of one thing: outsized returns on a litigation investment.

This is third-party litigation funding, known as TPLF, and the growing movement to bring it into the open is one of the most important legal reform efforts in decades.

The Washington Health Innovation Council has been tracking this issue, and its 2024-25 annual report documented an unmistakable pattern for its member companies. Health-care innovators, from medical device manufacturers to biopharmaceutical developers, are being targeted by litigation investors.

Here is how the machine works. A litigation funder identifies a high-value corporate defendant. Plaintiffs are recruited, frequently without being told who is underwriting the effort. Legal strategy is shaped around maximizing a payout rather than around the merits of the case. Settlements are influenced by contract terms that give outside funders control. The plaintiff’s actual interests — the harm they allegedly suffered and the remedy — become secondary. As a result, the defendant, the court and the public are kept in the dark.

What often goes unreported is how patients are brought into these cases in the first place. Plaintiff recruitment includes targeted advertising campaigns designed to alarm ordinary Americans about products they may have used safely for years, and these ads frequently invoke the FDA name and logo in ways that imply government action or warning. A patient who sees those ads and believes federal regulators agree is not making an informed choice to join a lawsuit.

The toll on American innovators is steep. Getting a new medical device or therapy to patients in this country already takes years of clinical development and regulatory review. When a company must simultaneously fight an assault backed by hedge fund capital, resources are diverted, timelines lengthen and in some cases products never reach Americans.

Pat Fogarty, the deputy general counsel at AdvaMed, described this dynamic precisely in a recent DC Journal piece, writing that litigation investors view the American court system as a marketplace for high-return investments rather than a mechanism for delivering justice.

The good news is that this is no longer a fringe concern. In 2025, six states took decisive legislative action. Georgia led the field with the most comprehensive package, the Courts Access and Consumer Protection Act, which requires outside financiers to register with state regulators, bars them from influencing litigation strategy and prohibits foreign funding of these arrangements. Arizona, Colorado, Kansas, Montana and Oklahoma enacted their versions of reform. Ohio and North Carolina have added their names to the list, a development the U.S. Chamber Institute for Legal Reform has highlighted as further evidence of nationwide momentum.

The federal picture is moving as well. In February, Sen. Chuck Grassley, R-Iowa, and a group of co-sponsors introduced the Litigation Funding Transparency Act of 2026, which would require disclosure of third-party litigation financing in federal class actions and multi-district litigation proceedings. The Institute for Legal Reform and Lawyers for Civil Justice submitted a joint filing calling for amendment of the Federal Rules of Civil Procedure to establish a uniform national disclosure standard.

Ohio offers lessons for states beginning this work. State Rep. Meredith Craig, a Republican and co-sponsor of related legislation, said the coalition mattered most. “We ultimately had every major business group supporting the legislation, from the Ohio Farm Bureau to the Ohio State Medical Association. That broad coalition showed this wasn’t about helping one particular industry; it was about protecting Ohioans and the integrity of our courts.”

On bipartisanship, she said, “Members on both sides of the aisle agreed that it was time to defend our constituents and our businesses from being taken advantage of. We were able to put politics aside.”

For the innovation community, the stakes are high. When endless litigation backed by anonymous investors drains resources that would otherwise go into research and clinical development, patients wait longer for the treatments. And when foreign investors are involved, it raises national security concerns about who is gaining access to sensitive intellectual property through discovery.

The Washington Health Innovation Council will continue to advocate for common-sense transparency reform that ensures every party in a courtroom — defendant, judge, plaintiff, the public — has full information about who is financing the litigation before them. State legislatures have shown that reform is achievable. Congress now needs to follow their lead, and the Litigation Funding Transparency Act is a targeted starting point.

Innovators work hard to deliver high-quality products to patients. Justice should not be a financial product, and bringing third-party litigation funding into the sunlight is the first step toward making sure it is not.

Jack Kalavritinos is the founder of JK Strategies and a former official in the Bush and Trump administrations. He wrote this for InsideSources.com.