IL lawmaker intros bill to regulate third-party lawsuit investing
[February 17, 2026]
By Jonathan Bilyk | Legal Newsline
Amid a growing push nationwide for new laws to regulate the booming
business of third-party lawsuit investing, a state lawmaker has
introduced legislation in Springfield in a bid to bring greater
transparency to the practice in Illinois, as well.
State Rep. Dan Ugaste, R-Geneva, filed HB5244 in the Illinois state
House of Representatives.
“Other states are acting, and it’s time Illinois does as well,” On Feb.
9, State Rep. Dan Ugaste, R-Geneva, said in a statement announcing the
legislation. “If you are going to profit from lawsuits filed in
Illinois, you shouldn’t be allowed to hide in the shadows.”
Ugaste's legislation, as well as new laws being introduced in other
states and in the U.S. Congress, has been spurred by mounting concerns
over the use of courts in Illinois and elsewhere in the U.S. legal
system to generate profits for investors who are not parties to lawsuits
or their attorneys.
Rather, the so-called third-party litigation financiers instead lend
money, typically to plaintiffs, to pay attorneys and other costs needed
to press legal claims, often against companies or other plaintiffs
perceived as deep-pocketed.
In recent years, third-party litigation financing has underwritten tens
of thousands or even hundreds of thousands of lawsuits against major
pharmaceutical companies, tech firms, food producers, and many others.
However, recent court actions have revealed that this financing brings
with it the potential for influence and interference in the course of
litigation merely to maximize returns and profits for investors -
sometimes even to the point of outright seizing control of cases and
thwarting settlements to force defendants to keep litigating until they
agree to pay what investors believe the case is worth, over the
objections of the plaintiffs whose legal claims the investors were
financing.
This was seen most recently in federal court proceedings in Chicago,
when litigation financing giant Burford Capital persuaded an appeals
court to let them nix a $50 million settlement. That deal between
poultry producer Pilgrim's Pride and food distributor Sysco Corp. would
have ended just one part of a long-running and multi-faceted court fight
over claims food producers have violated federal antitrust laws by
artificially boosting prices of chicken and other meats.
In the appellate ruling, one of the judges on the Seventh Circuit Court
of Appeals called the case a "cautionary tale" about the largely
unchecked rise of third-party lawsuit investing. In that decision,
Seventh Circuit Judge Nancy Maldonado agreed Burford had the law on its
side in the case, but she blasted the company for dragging out a
settlement to end the litigation solely to boost its profits, in the
process "having turned the courtroom into a trading floor."
[to top of second column]
|
State Rep. Dan Ugaste, R-Geneva, speaks during a news conference in
Springfield, Illinois. Photo: Greg Bishop / The Center Square
In addition for the potential of undue interference with court
proceedings that do not involve lawsuit investing in any way beyond its
interest in generating profits for investors, the practice has also come
under criticism by others for its potential use by foreign interests to
assail American companies, gum up American courts, and harm the U.S.
economy.
Under the measure proposed by Ugaste, third-party lawsuit funding would
not be banned. Rather, it would come under regulations requiring greater
disclosure and transparency to block foreign funding and allow courts
and defendants to know who they are dealing with.
Further, the new legislation would provide consumer protections against
lawsuit lenders, while limiting the amount investors could recover to
make sure plaintiffs receive the lion's share of the recovery.
The legislation "creates basic rules to ensure outside funders aren’t
steering cases, pressuring settlements, or turning the courts into a
business opportunity,” Ugaste said.
Legal reform advocates in Illinois supported the measure. The Illinois
Coalition for Legal Reform, for instance, noted similar legislation has
been introduced in other states, including Iowa and Missouri, while such
measures have been enacted into law in Wisconsin and Indiana.
Congress is also considering similar measures on a national level.
“Commercial third-party litigation funding has grown quickly, but
Illinois law has not kept pace,” said Katie Reilly, Executive Director
of the ICLR. “This legislation brings needed transparency and
commonsense guardrails to ensure that lawsuits filed in Illinois are
driven by facts and justice — not investors seeking profit.”
The fate of the legislation is far from certain in the
Democrat-dominated Illinois General Assembly.
Trial lawyers whose lawsuits, which are worth billions of dollars
annually, are routinely boosted by such third-party investments, donate
millions of dollars each election cycle to Illinois Democrats, parlaying
their campaign financing into strong support in Springfield.
Ugaste asserts the legislation is only about "transparency and
fairness."
"If someone is funding a lawsuit and expecting to profit from it, the
public and the courts deserve to know who they are and what role they’re
playing,” Ugaste said.
This report was produced by Legal Newsline and
distributed by The Center Square as part of a content-sharing agreement. Reach
editor John O’Brien at john.obrien@therecordinc.com. |
