Pennsylvania Record

Wednesday, October 16, 2019

Pa. small business advocate sees hurdles to legal reform that targets litigation funders

By Nicholas Malfitano | Apr 10, 2018

HARRISBURG – The passage of legal reform legislation in Wisconsin last week in part took aim at the practice of third-party litigation funding, but the director of the National Federation of Independent Business's Pennsylvania chapter says an unfavorable legal climate may prevent such a law from coming to the Keystone State.

On April 3, Wisconsin Governor Scott Walker signed into law AB 773, a bill containing several major civil litigation reforms that were designed to reduce the cost of legal action for Wisconsin businesses.

Among the legal reforms contained in AB 773 is a measure that requires any third-party litigation funding agreements to be disclosed “without awaiting a discovery request,” making Wisconsin one of the first states in the nation to require such transparent notice. Litigation funders help finance the pursuit of lawsuits in exchange for a portion of any recovery.

Business officials in Wisconsin have already applauded the passage of this legislation, but could such a law be enacted in Pennsylvania?

Kevin Shivers, Executive State Director of the National Federation of Independent Business’s Pennsylvania office, said Wisconsin is “blazing a trail for good government and improving a climate not only for consumers, taxpayers and businesses” and has made “a strong step in that direction” with its new law.

But, as to whether such a law would come to fruition in Pennsylvania, Shivers expressed reservations.

“At this point, our climate is such that it would make that type of [law] a little bit difficult. The current environment in Pennsylvania is one that has frustrated many of us in the private sector, but also as consumers and taxpayers. The cost of litigation in our state is a major deterrent to businesses and job creators wanting to locate here,” Shivers said.

Shivers pointed to a projection that will supposedly see 180,000 working-age Pennsylvanians leaving the state over the next decade in favor of places such as Wisconsin, Indiana and Texas, locations with more business-friendly litigation climates.

“The only thing that Pennsylvania seems to be a magnet for is personal injury lawyers that are looking to win a big award in Philadelphia or Pittsburgh,” Shivers stated. “We have some concerns that the current climate in our state is certainly making it difficult.”

Citing Wisconsin’s 2.9 percent unemployment rate, Shivers said Wisconsin’s governor and legislature have “worked very hard to create a climate in that state where job creators know that they can locate, that they can grow, and that workers know it’s a place for them to come to get a good-paying, family-sustaining job and raise their families.”

“We’re just not there yet in Pennsylvania,” Shivers commented.

In the absence of similar legislation in Pennsylvania to this point, Shivers presented other solutions for civil justice reform which could be pursued.

“It’s just recognizing that there is a cost to following the whims of the litigation industry in our state. You see lawsuits in Pennsylvania where sandwich shops are being sued because their foot-long sandwiches measure 11-and-a-half inches, a state where you see jackpot jury awards, where the rules are stacked against defendants in favor of plaintiffs [and] which drive up litigation costs,” Shivers said.

Shivers also mentioned the state being included on the American Tort Reform Association’s annual list of “Judicial Hellholes”, through the Supreme Court of Pennsylvania and the Philadelphia Court of Common Pleas, as a source of concern for tort reform advocates nationwide.

“When we shine a light on how bad Pennsylvania’s civil justice climate is, how much it costs taxpayers, how much it costs local governments, and how, quite honestly, it denies citizens with legitimate concerns about being able to take those concerns to their local courthouse, because that docket is blocked and literally filled with cases that are being filed by out-of-state lawyers. This has a chilling effect on the local economies and areas around Pennsylvania where you have these 'Judicial Hellholes,'” Shivers remarked.

Shivers said it’s been concerning to attempt to figure out the state Supreme Court’s decisions and their impacts on the civil justice system.

“We have had a number of justices removed for some personal improprieties, we have had a significant amount of money that has been invested by the litigation industry to elect judges in our state. Those are really serious concerns that we have,” Shivers said.

“But, the good news is we were able to highlight some of these offenses several years ago, and there were some reforms that were enacted – particularly, in the City of Philadelphia’s [County Court of Common Pleas] and their Complex Litigation Center. But as we’ve learned, the minute you turn that spotlight off, there’s a little bit of backsliding that happens. That’s the effort here in Pennsylvania on the part of taxpayers, consumers and businesses, to put pressure on lawmakers here to be able to bring back some of these reforms.”

Shivers said while success is always “a moving target” and Pennsylvania is working toward transparency in the areas of private attorney contracts and Workers' Compensation, these are areas that other states like Wisconsin have already covered.

“We are still behind our competitor states, who are moving the ball even further forward. The reforms taken on by Wisconsin are clearly an indication of that,” Shivers said.

Rob Goza, Public Information Officer for the U.S. Small Business Administration’s Eastern Pennsylvania District Office, explained the SBA in its capacity as a federal agency was unable to comment on pending legislation.

John Beisner, an attorney with Skadden Arps Slate Meagher & Flom in Washington, D.C., who testified before the Wisconsin State Assembly and Senate on behalf of the U.S. Chamber Institute for Legal Reform prior to the passage of AB 773, recently offered his own opinion on the practice. The ILR owns the Pennsylvania Record.

“If someone is invested in a lawsuit against you, they’ve bought part of the outcome...I think the defendant has a right to know who’s driving this bus in conducting litigation against you,” Beisner said.

A recent article published in the Wall Street Journal quoted Allison Chock, the Chief Investment Officer for third-party litigation titan IMF Bentham, as being cognizant of the criticism her company faces from civil justice reform organizations. 

Chock said, “They’re trying to make it more difficult to get litigation finance. I understand why. We make it harder and more expensive to settle cases. Litigation funding helps level the playing field by putting plaintiffs on “more equal financial footing against deep-pocketed defendants.”

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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Organizations in this Story

National Federation of Independent Businesses Philadelphia County Court of Common Pleas Wall Street Journal