U.S. business group urges regulation of litigation funders

Wed Oct 24, 2012 11:42pm EDT
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By Nate Raymond

WASHINGTON (Reuters) - A business lobby group has called on the U.S. Congress to regulate companies that provide financing for commercial lawsuits, describing the practice as "coercive enterprise".

The U.S. Chamber of Commerce Institute for Legal Reform, a long-time critic of third-party litigation funders like Juridica Investments Ltd and Burford Capital Ltd, issued a report on Wednesday urging regulation by the U.S. Federal Trade Commission.

Litigation funders provide financing for lawsuits in exchange for a share of any settlement or judgment, and have been involved in cases against Chevron Corp and Apple Inc among others. If the litigant loses, it does not have to repay the financial investor.

The report argued that third-party litigation finance could be expected to increase the volume of litigation, undercut the control of cases by plaintiffs and attorneys, and drags out litigation.

"Third-party investments in litigation represent a clear and present danger to the impartial and efficient administration of civil justice in the United States," it said.

Several litigation firms dismissed the need for regulation, saying the Chamber was trying to protect the interests of big business over smaller firms.

"The irony to me is, since when is business advocating for regulation? You just have to laugh," said Ralph Sutton, chief investment officer of Bentham Capital, the New York-based arm of IMF (Australia) Ltd, a publicly-traded litigation funder in Australia.

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