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.