There’s an old joke most lawyers know: How is it that California has the most lawyers and New Jersey has the most dangerously high polluting chemical plants? The answer? New Jersey had first choice.
A certain percentage of practicing attorneys have always been dedicated to the almighty dollar and that alone. This has always been true, and it’s always been a burden on the profession. However, we could always rely on the fact that most lawyers were dedicated to justice and the concept of justice. Lawyers would bring cases that were sincere and helped people and companies that were being unfairly treated.
Sadly, the forces of greed are overwhelmingly displacing the forces of good in the law.
The latest tool in the subversion of the system: third-party litigation funding. This is where otherwise disinterested deep pockets foot the bill for litigation of which they are not a party, often as unknown actors to the court or to defense attorneys.
Today, hedge fund managers and other investors are routinely funding litigation in which they have no direct interest. Some make the investment as a way to have a big payday if the jurors return a large verdict. Others just want to disrupt competitors with strawman suits against business rivals, holders of intellectual paper they view as financially dangerous, or even against whole rival industries. These secret funders are turning mass tort litigation into big business — and detrimentally impacting both economic growth in the United States and the legal system itself.
But that is not where it stops. Using the openness of our legal system and relying upon their ability to completely hide their participation, investing in mass tort litigations may now be an avenue of interest by foreign adversaries, to allow them to unfairly compete. By hanging their business rivals with legal red tape, they are looking to tank American competitiveness.
Armed with discovery afforded to plaintiffs’ attorneys for the strawman, these third-party funders could also gain access to sensitive business information by proxy. This includes uncovering industrial secrets, patent processes, new market strategies and product development. Considering that innovation is one of the strongest strategic assets of the United States, this has prompted national security concerns as to what powers this may provide foreign actors to weaken key defense industries, sabotage major U.S. energy sectors, and otherwise damage American institutions.
To protect their states and the nation from what they are convinced is a serious threat to national security, 14 state attorneys general sent a letter to U.S. Attorney General Merrick Garland asking for information on what the Department of Justice is doing to address the pressing issue of foreign interference in the American legal system. Other outside groups, such as the U.S. Chamber of Commerce Institute for Legal Reform, have also called out the lack of safeguards regarding third-party funders.
The study, titled “A New Threat: The National Security Risk of Third Party Litigation Funding,” explains how the ability to fund litigations secretly creates a clear path for U.S. adversaries such as China or Russia to realize a wide range of strategic objectives. It further outlines how damaging the U.S. economy or accessing sensitive information through backdoor misuse of the legal process could be accomplished with little risk of exposure for foreign investors from these countries.
There are laws which would otherwise protect national interests and important business secrets from being exposed to international rivals in litigation. But there’s no such protection afforded to the defendant and from the avarice of lawyers when secret third-party funders are involved. Indifferent to the importance of national security, unique national business advantages, and the protection of American business methodology, these lawyers mindlessly pursue the almighty buck, however detrimental to the rest of us it is.
Yet despite the potential hazards posed by foreign investment in civil litigation in the United States, there has been very little public discussion of the issue or action taken to prevent bad actors from misusing the system. In fact, because of the lack of transparency in general, the full extent of foreign investment in the U.S. legal system is largely unknown.
Policymakers must step in to protect us from these international interests because we can no longer rely on the legal establishment to police itself and provide this protection to all of us by the operation of professional ethics. At the very least, requiring the disclosure of third parties engaged in funding these cases, so we can know the entities involved and the risks posed to American interests as a result of the litigation, would be a start.
Former Rep. Michael Patrick Flanagan (R-Ill.) previously represented the 5th District of Illinois in the U.S. House of Representatives and sat on the Committee on the Judiciary. An attorney, he previously served in the U.S. Army and retired at the rank of captain.