Mich. House approves bill to regulate lawsuit-investors

Michigan lawmakers have advanced a bill that would target the companies that make money off lawsuits in the practice of third-party litigation funding, with a 60-45 House vote last week.

The entities front litigants and lawyers money in exchange for a share of what is recovered in court. That amount usually exceeds state usury laws but since funders receive nothing if the case is a loser, the agreements aren’t considered traditional loan subject to those caps. Still, critics worry the funders exert control over the litigation and that the practice encourages questionable lawsuits.

“Third-party litigation funding sounds like some boring legal jargon out of a law textbook many of us would never read,” said the bill’s sponsor, Republican Rep. Mike Harris. “The truth behind the phrase, and what it means for Michigan citizens, is a lot more threatening.”

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