Finance
Litigation Finance Limits Advance in Louisiana With New Governor
Two Louisiana bills that put the brakes on the burgeoning litigation finance industry have advanced through initial hurdles, as lawmakers hope to take advantage of a change in governors after last year’s effort fell short with a veto.
One bill requires parties to disclose litigation finance agreements within 60 days after filing a civil action. The state House approved that measure, and it is pending with the Senate Judiciary Committee.
The second bill requires parties to disclose the presence of litigation finance in lawsuits if a foreign entity is the source of funding. That legislation cleared the state Senate and the House Committee on Civil Law and Procedure and needs approval by the full House.
The bills are part of a push in several states to restrict the practice of investors paying for the cost of lawsuits in return for a piece of the proceeds in successful cases. The US Chamber of Commerce is pushing for legislation, saying the $15.2 billion litigation finance industry encourages frivolous lawsuits.
Democratic Governor John Bel Edwards last year vetoed legislation sent to him by the Republican-controlled House and Senate in Louisiana, saying the bill to require disclosure of litigation finance favored large corporations in civil suits. Republican lawmakers, who again hold majorities in both state bodies, hope for a different result this year with a member of their party, Jeff Landry, as the governor.
Republican Representative Emily Chenevert this year has modeled her disclosure bill (HB336) on the one Edwards vetoed. It allows parties to redact the dollar amount financed, makes the contracts subject to discovery and bars funders from directing or influencing litigation.
“The appetite was there already within the legislature and so now it’s like, let’s attempt this and let’s see with a new House and some new senators what could happen,” Chenevert said in an interview. “Let’s do this again, give it another shot.”
Chenevert’s bill was deferred in the Senate Judiciary Committee after the chairman announced that there were 56 proponents and 67 opponents in attendance in line to speak at a hearing. A new date has not yet been scheduled.
The second bill (SB355), introduced by the state Senate majority leader, Jeremy P. Stine, requires disclosure of litigation financed by governments in foreign countries of concern to the state Attorney General, such as China, Russia and Iran. It mirrors legislation brought forward at the federal level last year by Senator John Kennedy (R-La.) and House Speaker Mike Johnson (R-La.).
Other bills
Litigation finance bills have faced mixed results in state legislatures. Earlier this year, Indiana enacted legislation into law that blocks foreign entities from funding lawsuits.
West Virginia updated an existing law to include litigation finance. The statute requires investors to provide a copy of contracts to consumers and does not allow firms to assign or securitize a contract to another party, among other regulations.
In Florida, a bill requiring disclosure of litigation finance agreements and of foreign investments stalled in the House. A bill in Kansas is pending and would allow discovery of litigation funding agreements.
The US Chamber backs the state efforts and earlier this month warned of the risks of litigation finance.
With outside funding, “plaintiffs face minimal risk in bringing forward claims, legitimate or not,” Matt Webb, a senior vice president for the Chamber’s Institute for Legal Reform, wrote in a post. “This dynamic often pressures businesses to settle out of court to avoid the costs and uncertainties of protracted litigation, even when the claims against them lack merit.”
In Louisiana, the Chamber backs Chenevert’s bill though calls Stine’s proposal “under inclusive.” The Stine proposal “addresses foreign funding only, but there are plenty of ways frankly that foreign dollars could be put into US investment vehicles and influences litigation,” said Nathan Morris, a vice president at the Chamber’s legal reform institute.
Litigation finance has defenders in state houses.
“The Chamber’s intentionally approaching states where there is not litigation financing, such as Louisiana, in an attempt to pass a bill that can then be used as a domino in support of national regulation,” said Dai Wai Chin Feman, managing director at funder Parabellum Capital.
He spoke out against Chenevert’s bill as a representative of the industry’s trade group, the International Legal Finance Association, but described Stine’s bill as “acceptable to our industry.”
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The World Bank is ditching its commitment to steer 45 percent of its spending toward projects with climate benefits, after facing pressure from the Trump administration.
The move, announced Monday following a meeting of the bank’s board of directors last week, marks a victory in President Donald Trump’s effort to purge climate policies from U.S. foreign policy. His administration has described the target as “distortionary” and “nonsensical.”
The bank preserved its broader Climate Change Action Plan — of which the 45 percent target was a key metric — just days before it was set to expire at the end of June. In addition to directing money toward climate projects, the plan provides technical support for helping countries reduce their greenhouse gas pollution and adapt to rising temperatures.
“We will retire the 45% climate co-benefits target,” the World Bank Group said in a statement, noting that it had “done significant work in answering client demand and needs.”
The bank’s work on climate “is and will remain firmly client driven, supporting them in delivering on their own ambitions as set out in their national plans and NDCs,” the statement added, referring to the nationally determined contributions countries submit under the Paris Agreement.
The decision to drop the climate finance target follows months of pressure from the Trump administration. People with knowledge of the negotiations said the U.S. was firm that the target must go despite other countries indicating their support for the bank’s climate goal. The U.S. has sway over the bank’s decisions as its largest shareholder.
Beyond the finance target, the Climate Change Action Plan also provides diagnostic reports on countries’ climate and development goals and aims to align lending with the Paris Agreement, which calls for preventing temperature rise from surpassing 2 degrees Celsius since the Industrial Revolution.
The bank said it would honor a board request to undertake an independent evaluation of the climate plan to determine if it’s helping countries grapple with rising temperatures. The decision effectively extends the plan beyond its expiration at the end of June.
The climate target was supported by many of the bank’s shareholders. It’s also been a prominent signal of the bank’s support for climate action at a time when the impacts of rising temperatures are accelerating.
“This is way, way away from where we should be for a responsible financial architecture,” said one official from a developed country who was directly involved in the negotiations and was granted anonymity to describe internal discussions.
The bank will continue to track and report on the amount of money going to projects with climate co-benefits. It exceeded its own target last year by directing 48 percent of its financing to climate-related projects.
Other climate targets embedded in agreements that govern different arms of the bank will remain, including one for the International Development Association, the bank’s fund for the poorest countries.
Multilateral development banks play a key role in global climate negotiations, where wealthy countries have committed to helping provide $300 billion a year for poorer countries by 2035. That no longer includes the United States, which has left the Paris Agreement and will exit the underlying United Nations Framework Convention on Climate Change early next year.
“Targets send enormous signals about an institution’s direction of travel,” said Clemence Landers, a senior fellow at the Center for Global Development. “At the same time, it’s a sign of the times and the World Bank is doing its level best to not rankle its largest shareholder.”
She believes the bank will continue financing renewable energy projects in countries that want them, despite having dropped its climate target.
“I wouldn’t be shocked if the bank continued to have an extremely robust clean pipeline with or without this target,” said Landers.
The bank says retiring the 45 percent target is part of its shift from a focus on “inputs to outcomes.” It will continue to monitor and report net greenhouse gas emissions across its projects and countries’ ability to withstand climate risks.
“We will continue to report to the Board on progress, including on climate co-benefits, and to contribute to our related joint MDB efforts,” the statement said, referring to its role as a multilateral development bank. “We will explore and discuss ways to better structure our engagement on adaptation, nature and pollution.”
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