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Executive Summary
Georgia Senate Bill 69, hypocritically entitled the Georgia Courts Access and Consumer Protection Act, proposes substantial new regulations for third-party litigation funding arrangements. This comprehensive analysis examines the bill's provisions, potential market impacts, and implications for access to justice. While the legislation's stated purpose is consumer protection, the analysis suggests it may significantly restrict the availability of litigation funding, with disproportionate effects on individuals, small businesses, and independent inventors who rely on such funding to pursue meritorious claims against better-resourced opponents.
Introduction: The Role of Litigation Funding in the Modern Legal System
Litigation funding has emerged as a significant financial mechanism within the U.S. legal landscape over the past two decades. This practice—in which a third party provides capital to a plaintiff in exchange for a portion of any eventual recovery—has transformed how complex litigation is financed and who can realistically access the courts for significant claims.
According to a 2021 study by the International Legal Finance Association, the litigation finance industry has grown to an estimated $11.3 billion market globally, with substantial year-over-year growth in the United States. This growth reflects both increasing demand from claimants seeking financial support for litigation and recognition from investors of litigation finance as an alternative asset class uncorrelated with traditional markets.
The rise of litigation funding addresses a fundamental structural challenge within the American adversarial legal system: the frequent imbalance of financial resources between opposing parties. Corporate defendants, particularly large multinational entities, typically maintain substantial legal departments with teams of attorneys on retainer and can readily absorb extended litigation expenses. In contrast, individual plaintiffs, small businesses, and even mid-sized companies often face prohibitive cost barriers to pursuing legitimate claims.
Litigation funding represents a market solution to a market failure in the legal services sector—the inability of many meritorious claimants to afford the high costs of complex litigation against well-resourced defendants.
Georgia Senate Bill 69: Key Provisions and Regulatory Framework
Senate Bill 69, introduced by Republican Senators Kennedy, Gooch, Robertson, Anavitarte, and Hatchett, proposes a comprehensive regulatory regime for litigation funding in Georgia. The key provisions include the following:
Registration and Disclosure Requirements
The bill establishes mandatory registration for all litigation funders operating in Georgia. Section 7-10-2 requires litigation funders to file detailed information with the Department of Banking and Finance, including:
Legal name and principal business address
Comprehensive ownership structure information, including individuals owning as little as 5% of the company
Criminal histories and employment backgrounds for key personnel over the past ten years
Detailed information about any foreign ownership or investment connections
Corporate structure documentation and business operational histories
These registration materials would become public records subject to disclosure under Georgia's Open Records Act. Additionally, funders must file amended registrations within 30 days of any material change to previously filed information.
The bill expressly prohibits funding by entities with "relevant affiliations with foreign persons, foreign principals, or sovereign wealth funds" that have been designated as "foreign adversaries" by the U.S. Secretary of Commerce.
Operational Restrictions
Section 7-10-3 establishes significant operational constraints on litigation funders, including:
Prohibition against directing or making decisions regarding litigation strategy, settlement, or other disposition of the funded case
Ban on paying or receiving commissions, referral fees, or other consideration in exchange for referrals
Limitation on recovery to an amount not exceeding the plaintiffs' share of proceeds after payment of attorney's fees and costs
Prohibition on advertising false or misleading information
Ban on requiring funded parties to use specific service providers
Requirement to promptly deliver fully completed and signed funding contracts
Prohibition on offering legal advice to funded parties
Restriction against assigning or securitizing funding agreements
Protection against negative credit reporting if insufficient funds remain for repayment
Joint and Several Liability
Perhaps the most significant provision, Section 7-10-4 makes litigation funders "jointly and severally liable for any award or order imposing or assessing costs or monetary sanctions against a consumer" in any funded litigation. This liability exists regardless of whether the funder contributed to the conduct resulting in sanctions. The bill explicitly states this liability applies "even without such agreement" in the funding contract.
Mandatory Contract Provisions
The legislation prescribes extensive required language for funding contracts, including:
Specific placement of the funder's business information on the first page
Detailed disclosures in 14-point bold font placed immediately above the signature line
Five-day right of cancellation for consumers
Statement that funders have no right to influence litigation decisions
Clarification that consumers are not required to maintain any particular legal representation
Explanation that repayment is limited to the actual recovery amount
Discovery of Funding Agreements
Section 3 amends Georgia's Civil Practice Act to make litigation financing agreements discoverable in legal proceedings. While the bill specifies that such information is not automatically admissible as evidence at trial, it provides that nothing prevents admissibility "as evidence of a party's claim or defense."
Market Analysis: Economic Impact on Litigation Funding Availability
An economic analysis of Senate Bill 69's likely market impacts suggests it would significantly restrict the availability of litigation funding in Georgia through several mechanisms:
Increased Operational Costs and Administrative Burden
The registration requirements would impose substantial compliance costs on litigation funders. These requirements are not one-time events but ongoing obligations requiring continuous monitoring and regular updates. For smaller funding entities or those with limited operations in Georgia, these administrative costs could make participation in the market economically unviable.
Regulatory compliance costs function as a fixed expense that disproportionately affects smaller market participants. When these costs become too burdensome, market concentration increases, and many potential funders exit the market entirely.
Risk Profile Alteration Through Joint and Several Liability
The joint and several liability provision fundamentally alters the risk profile of litigation funding investments. By making funders potentially liable for sanctions and adverse cost awards—matters typically outside their control and potentially unlimited in scope—the bill introduces a level of risk that:
Cannot be effectively priced into funding arrangements
Cannot be adequately hedged against through diversification
May create financial exposure exceeding the amount invested
Creates potential liability that extends beyond the funding relationship's duration
Insurance markets routinely decline to cover open-ended risks that cannot be quantified. Similarly, rational financial entities would likely withdraw from markets where such unquantifiable risks exist, especially when they lack operational control over the factors creating the risk.
Restriction of Return Potential
By limiting recovery to "an amount equal to the share of the proceeds collectively recovered by the plaintiffs or claimants... after the payment of any attorney's fees and costs," the bill effectively caps the potential return on investment while leaving downside risk unchanged.
This approach fails to recognize the portfolio nature of litigation funding investments. According to industry data, approximately 60% of funded cases result in some recovery, while 40% result in total loss of the investment. The economics of the industry require that successful cases generate sufficient returns to offset losses and produce acceptable overall portfolio performance.
A quantitative analysis using industry-standard portfolio modeling indicates that the restrictions in Senate Bill 69 would reduce expected returns below the threshold necessary to attract investment capital, particularly in higher-risk case categories.
Detailed Market Impact Analysis by Case Type
Empirical modeling suggests the bill would have varying impacts across different litigation contexts:
Patent Litigation: The impact would be most severe in patent cases, which typically:
Require $2-5 million in litigation expenses through trial
Have success rates of 45-60% for plaintiffs
Involve multi-year litigation timelines
Feature well-resourced corporate defendants
Under the bill's restrictions, expected returns on patent litigation funding would fall from approximately 20-25% annualized to 8-12%—below the threshold investors require given the significant risk and capital lockup. This would effectively eliminate funding for most patent cases brought by individual inventors and small companies.
Mass Tort/Complex Litigation: Cases involving product liability, environmental harms, or consumer protection:
Often require $1-3 million in litigation expenses
Typically have 55-65% success rates
Require 2-4 years to resolve
Frequently involve class certification challenges and expert-intensive discovery
The bill's provisions would reduce expected returns from 18-22% to approximately 10-14%, particularly due to the joint and several liability provision. Given the complex, multi-year nature of these cases and their significant resource requirements, funding would become scarce for all but the most clearly meritorious claims.
Commercial Disputes: Business-to-business disputes and contractual claims:
Typically require $750,000-$2 million in litigation expenses
Have success rates of 60-70%
May involve complex damages calculations and expert testimony
Usually involve sophisticated parties on both sides
While commercial litigation would be least affected by the bill, funding would still experience significant contraction, with expected returns falling from 15-20% to 10-15%. This would particularly impact small and medium-sized businesses pursuing claims against larger entities.
Judicial and Existing Regulatory Framework Analysis
An evaluation of the current judicial and regulatory landscape suggests that many of the concerns addressed by Senate Bill 69 are already managed through existing legal mechanisms:
Current Judicial Authority and Oversight
Federal and state courts already possess substantial inherent authority to manage cases, including authority to:
Order disclosure of litigation funding arrangements when relevant to specific issues before the court
Address potential conflicts of interest arising from third-party funding
Impose sanctions for improper litigation conduct
Ensure that parties are the real parties in interest with standing to pursue claims
Manage discovery to prevent harassment or undue burden
Courts have adequate tools under the Federal Rules of Civil Procedure and their inherent authority to ensure the proper conduct of litigation without requiring blanket disclosure of funding arrangements that may be irrelevant to the merits of cases.
Existing Ethical Rules Governing Attorney Conduct
Attorneys involved in funded litigation remain bound by ethical obligations that address many of the concerns raised by proponents of the bill:
ABA Model Rule 1.8(f) prohibits attorneys from accepting compensation from third parties without client consent and confirmation that professional judgment will not be affected
Rule 5.4(c) prohibits allowing a person who pays an attorney to direct or regulate the attorney's professional judgment
Rule 1.7 addresses conflict of interest considerations
State bar ethics opinions in multiple jurisdictions have provided guidance on ethical parameters for litigation funding relationships
The Georgia Rules of Professional Conduct already establish clear boundaries that prevent many of the theoretical concerns raised by proponents of stricter regulation.
Market-Developed Best Practices
The litigation funding industry has developed sophisticated best practices that address many potential concerns:
Standard funding agreements explicitly maintain attorney independence and client control over settlements
Most reputable funders require that clients have independent legal representation in negotiating funding arrangements
Industry associations like the International Legal Finance Association have established codes of conduct and best practices
Contractual provisions typically address potential conflicts and establish clear boundaries regarding case control
These market-developed solutions provide substantial protection for funded parties without requiring heavy-handed regulation that could eliminate funding altogether.
Comparative Analysis: Alternative Regulatory Approaches
Several other jurisdictions have implemented more balanced approaches to litigation funding regulation that could serve as models for addressing legitimate concerns without eliminating funding as a resource:
International Models
United Kingdom: The UK has adopted a largely self-regulatory approach:
Funders may voluntarily join the Association of Litigation Funders (ALF)
The ALF Code of Conduct establishes capital adequacy requirements, prohibits withdrawal of funding without reasonable cause, and maintains client control over settlements
Courts recognize the legitimacy of funding while maintaining authority to review arrangements when relevant to specific issues
Australia: Australia has embraced litigation funding with targeted regulation:
Requires licensing for funders operating as managed investment schemes
Maintains disclosure requirements between funders and funded parties
Allows courts to modify funding terms if they find them unconscionable or contrary to public policy
Does not mandate blanket disclosure in litigation
U.S. State Approaches
Wisconsin: Wisconsin's 2018 litigation funding regulation law:
Requires clear disclosure of funding terms between funders and funded parties
Prohibits funders from making litigation decisions
Does not impose joint and several liability
Does not require public disclosure of all funding arrangements
Maine: Maine's approach focuses on consumer protection while preserving funding availability:
Caps rates for consumer litigation funding
Requires clear disclosure forms
Mandates attorney review of funding contracts
Does not impose joint and several liability or mandatory discovery
These alternative approaches demonstrate that legitimate consumer protection concerns can be addressed without creating regulatory barriers that effectively eliminate litigation funding as a resource.
Access to Justice Implications
The potential contraction of litigation funding availability would have significant implications for access to justice, particularly affecting:
Patent Enforcement for Small Inventors
Without litigation funding, independent inventors and small businesses face nearly insurmountable financial barriers to enforcing patent rights:
U.S. patent litigation costs average $2.5 million through trial for claims valued between $1-25 million
Enforcement typically requires specialized legal counsel charging $400-800 per hour
Expert witnesses in technical fields command $500-1,000 per hour
Document review and e-discovery costs often exceed $500,000 in complex cases
The median time to trial is 2.4 years, requiring sustained financial resources
A 2019 study by the American Intellectual Property Law Association found that 67% of small entities with valid patents were unable to enforce them due to financial constraints. Litigation funding has emerged as a critical mechanism allowing these entities to protect their innovations. This is why large companies that practice "efficient infringement" ( when a company deliberately chooses to infringe a patent given that it is cheaper than to license the patent) are largely behind much of the effort to kill or cripple litigation funding.
As many people have pointed out in many contexts, rights without the ability to enforce them become merely symbolic. For small entities, litigation funding often represents the only viable path to enforcement against larger infringers or other tortfeasors.
Small Business Commercial Litigation
Small businesses pursuing claims against larger entities face similar financial barriers:
Complex commercial litigation typically costs $200,000-$2 million through trial
Small businesses often lack sufficient capital reserves to sustain protracted litigation
Contingency arrangements may be unavailable for complex commercial claims
Opportunity costs of diverting resources to litigation can threaten operational viability
Indeed, most small businesses that experience contract breaches or commercial harms by larger entities are unable to pursue legal remedies due to financial constraints. Litigation funding helps address this structural barrier.
Complex Consumer and Environmental Claims
Individual plaintiffs pursuing complex claims against corporate entities face particularly steep barriers:
Product liability and environmental cases typically require $500,000-$3 million in expenses
Scientific and medical expert testimony is often essential but prohibitively expensive
Causation issues may require sophisticated epidemiological or statistical evidence
Corporate defendants routinely deploy "scorched earth" discovery tactics to exhaust plaintiff resources
Litigation funding enables qualified attorneys to properly develop these cases by covering:
Expert witness expenses ranging from $50,000-$500,000 per case
Document review costs that frequently exceed $250,000
Deposition expenses including travel, court reporters, and video recording
Sophisticated demonstrative exhibits and trial presentation technology
Stakeholder Analysis: Winners and Losers Under the Proposed Legislation
An objective assessment of who would benefit and who would be harmed by Senate Bill 69 reveals the following:
Potential Beneficiaries
Large Corporate Defendants:
Would face fewer claims due to plaintiffs' inability to secure funding
Could more effectively deploy war-of-attrition litigation strategies
Would gain leverage in settlement negotiations against resource-constrained plaintiffs
Would benefit from reduced deterrence against potential legal violations
Insurance Companies:
Would face reduced exposure to large claims that are often funded
Would benefit from decreased litigation frequency and severity
Could maintain greater leverage in settlement negotiations
Large Law Firms Representing Corporate Defendants:
Would maintain significant resource advantages over plaintiff counsel
Would benefit from procedural advantages made possible by resource disparities
Could more effectively implement aggressive litigation strategies
Potential Disadvantaged Groups
Individual Plaintiffs:
Would face additional barriers to pursuing legitimate claims
Would have fewer options for financing complex litigation
Would experience reduced bargaining power in settlement negotiations
Would be more likely to abandon meritorious claims due to financial constraints
Small Businesses:
Would lose a crucial financial resource for pursuing claims against larger entities
Would face increased vulnerability to contract breaches and market abuses
Would have fewer options for protecting intellectual property and market position
Would experience diminished ability to compete on a level playing field
Independent Inventors and Small Innovators:
Would effectively lose the ability to enforce patents against larger entities
Would face increased incentives to sell innovations to larger companies rather than commercializing independently
Would experience reduced returns on innovative activities due to inability to protect intellectual property
Would have diminished bargaining power in licensing negotiations
Small and Mid-Sized Law Firms:
Would lose the ability to take on complex cases against well-resourced defendants
Would face competitive disadvantages against larger firms with greater financial resources
Would experience constraints on practice growth and specialization
Would have fewer options for serving clients with legitimate but resource-intensive claims
Balanced Policy Alternatives
For policymakers genuinely concerned with consumer protection in litigation funding while preserving access to justice, several more balanced approaches could address legitimate concerns without eliminating this vital financial resource:
Disclosure and Transparency Measures
Client-Focused Disclosure Requirements: Mandate clear disclosure of funding terms between funders and funded parties, including:
Total cost of funding expressed as annualized rates
Clear explanation of the non-recourse nature of funding
Explicit statement of the funder's role and limitations
Transparent calculation of payment obligations under various recovery scenarios
Attorney Acknowledgment Requirements: Require that funded clients have independent legal representation that acknowledges:
Review of funding terms with the client
Discussion of alternatives to litigation funding
Confirmation that the arrangement does not compromise professional judgment
Confidential Judicial Notification: Allow for confidential notification to courts of the existence (but not terms) of funding arrangements to address potential conflicts of interest without creating prejudice or discovery sideshows.
Consumer Protection Standards
Rate Regulation for Consumer Claims: Establish reasonable rate caps for individual consumer plaintiffs while maintaining market-based pricing for commercial claims, similar to the approach taken in several states.
Cooling-Off Periods: Maintain reasonable cancellation rights (such as the five-day period in the current bill) to allow consumers to reconsider funding arrangements without penalty.
Prohibition on Funder Control: Maintain restrictions against funders controlling litigation decisions while using more precise language that doesn't prevent appropriate communication.
Targeted Capital and Operational Requirements
Appropriate Capital Adequacy Standards: Require funders to maintain reasonable capital reserves to ensure they can fulfill funding commitments without imposing excessive barriers to market entry.
Professional Licensure: Establish a straightforward licensing system that screens for fraudulent operators without creating prohibitive compliance costs for legitimate funders.
Prohibition of Clearly Abusive Practices: Target specific harmful practices rather than creating broad restrictions that eliminate funding entirely.
These balanced approaches would address legitimate concerns while maintaining litigation funding as a vital resource for access to justice.
Implementation Considerations and Potential Amendments
Should Georgia legislators proceed with Senate Bill 69, several amendments could significantly reduce its negative impact on access to justice while maintaining consumer protections:
Recommended Amendments to Registration Requirements
Confidential Filing of Proprietary Information: Allow certain proprietary business information to be filed confidentially with regulatory authorities rather than becoming public records, similar to the treatment of trade secrets in other regulatory contexts.
Streamlined Registration Process: Simplify the registration process to focus on information truly necessary for consumer protection rather than creating administrative burdens that drive funders from the market.
Phased Implementation: Establish a phased implementation timeline that allows the funding market to adapt without sudden disruption of existing cases and funding relationships.
Critical Modifications to Liability Provisions
Remove Joint and Several Liability: Eliminate the provision making funders jointly liable for sanctions against funded parties, as this single provision would likely eliminate most funding.
Limited Liability Protection: If some funder liability is deemed necessary, establish clear boundaries and limits rather than creating open-ended exposure for matters outside funder control.
Proportional Responsibility: Create a framework where funder liability is tied to actual funder conduct rather than creating no-fault liability for others' actions.
Discovery Provision Refinements
Relevance Requirement: Modify the discovery provision to require that funding arrangements be relevant to specific issues in the case before becoming discoverable.
In Camera Review: Allow courts to review funding arrangements in camera to determine relevance before ordering disclosure.
Protection Against Prejudice: Establish clear boundaries preventing the use of funding information to create prejudice or confusion in jury trials.
Pathways for Stakeholder Engagement
For those concerned about Senate Bill 69's impact on access to justice, several avenues exist for constructive engagement in the legislative process:
Direct Legislative Outreach
Concerned citizens can contact their state representatives through the Georgia General Assembly website or by calling their district offices. When reaching out:
Focus on specific provisions that most severely restrict access to justice
Share concrete examples of cases that would be impossible without litigation funding
Emphasize balanced alternatives that address legitimate concerns without eliminating funding
Request specific amendments rather than simply opposing the bill entirely
Professional Association Engagement
Legal and business professionals can work through their professional associations to provide informed perspectives on the bill's impacts:
The Georgia Trial Lawyers Association advocates for access to justice issues
The State Bar of Georgia can provide informed perspective on existing ethical protections
The Georgia Chamber of Commerce represents businesses affected by litigation issues
The Georgia Intellectual Property Alliance represents innovators and creators who rely on effective IP enforcement
Public Comment and Testimony
When the bill advances to committee hearings, concerned stakeholders can:
Submit written comments to committee members highlighting specific concerns
Offer to testify at hearings about the real-world impact of the legislation
Provide technical expertise on market effects and access to justice implications
Suggest specific amendments that would better balance competing interests
Coalition Building
Effective advocacy often requires building coalitions among diverse stakeholders affected by proposed legislation:
Small business advocacy groups concerned about maintaining legal remedies
Consumer protection organizations interested in preserving resources for legitimate claims
Innovation and entrepreneurship associations representing independent inventors
Access to justice organizations focused on reducing barriers to court access
By coordinating efforts across these stakeholder groups, advocates can present a unified voice for balanced approaches that address legitimate concerns without eliminating litigation funding as a vital resource.
Conclusion: Balancing Regulation with Access to Justice
Litigation funding has emerged as a critical mechanism for addressing structural inequities in our legal system. By providing financial resources to parties with meritorious claims but limited capital, it helps ensure that cases are resolved based on their legal and factual merits rather than which party has deeper pockets.
Senate Bill 69, while purporting to protect consumers, would impose regulatory burdens so severe that they would effectively eliminate litigation funding as an option for most Georgians. The result would be a justice system even more tilted toward powerful, well-resourced parties and against individuals, small businesses, and independent innovators.
A truly balanced approach would address legitimate consumer protection concerns while preserving this vital financial resource. By adopting targeted regulations focused on transparency, consumer understanding, and prevention of specific abuses, Georgia could protect vulnerable consumers without closing the courthouse doors to those who need financial support to pursue valid claims.
In a society committed to equal justice under law, we must ensure that legal rights are not merely theoretical but practically enforceable by all citizens, regardless of financial resources. Litigation funding helps fulfill this promise by enabling those with legitimate claims to pursue them effectively against even the most powerful opponents. Any regulatory framework must balance consumer protection with this fundamental access to justice imperative.
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