California May Make It Harder to Secretly Bankroll Someone Else’s Lawsuit

Judges in California want plaintiffs to disclose funders.

Bankrolling other people’s court fights dates to the Dark Ages, when it was a favorite tactic of noblemen who wanted to harass their enemies. In recent years litigation funding has become a multibillion-dollar industry as investors have quietly fronted the costs of civil suits in exchange for a piece of any eventual monetary awards. The billionaire investor Peter Thiel turned the practice into a tool of revenge this year, surreptitiously paying for pro wrestler Hulk Hogan’s privacy suit against the website Gawker, which published a Hogan sex tape. The case went to trial and ended with a $140 million jury verdict that pushed the site into bankruptcy. Thiel subsequently said he got involved because of a 2007 Gawker story outing him as gay.

Federal judges in California may be about to deal the business a serious blow. In June the rules committee of the U.S. District Court in San Francisco proposed that any party to a lawsuit filed in the jurisdiction would have to disclose any financial support from third-party sources known as litigation funders. The next step is for the full court to consider the question.

Read on.

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