Strengthening Transparency and Integrity in Tennessee’s Courts
As litigation financing continues to grow nationwide, states are increasingly examining how to ensure their legal systems remain fair and transparent. In Tennessee, the Chamber has worked with lawmakers to introduce legislation this session that would take an important step toward modernizing our laws to address this evolving practice.
Understanding Litigation Financing
Litigation financing, sometimes referred to as third-party litigation financing, occurs when outside investors provide funding to support a lawsuit in exchange for a financial return if the case is successful. While Tennessee law already regulates consumer lawsuit lending, particularly in cases involving individual plaintiffs, the rapid growth of commercial litigation financing has created a regulatory gap.
In commercial cases, investment funds pledge significant sums into lawsuits, essentially turning the legal system into a casino. These funders are not parties to the dispute, yet they can have substantial financial stakes in the outcome. As the practice has expanded across the country, concerns have grown about transparency, accountability, and the potential for outside interests to influence litigation strategy or settlement decisions.
Why This Legislation Matters
The proposed amendments to Tennessee law would establish clear and reasonable guardrails around litigation financing arrangements. At its core, the legislation is about protecting the integrity of Tennessee’s judicial system and ensuring that lawsuits are driven by the parties involved—not undisclosed financial backers.
SB2101 (Boyd)/HB2108 (Taylor) would:
- Increase transparency in litigation financing agreements;
- Prevent third-party funders who are not parties to a case from controlling key litigation decisions, including choice of counsel, legal strategy, or settlement terms; and
- Help safeguard Tennessee courts from being used as tools for improper or potentially harmful outside interests, including foreign adversaries.
These are commonsense protections designed to ensure that Tennessee’s courts remain focused on justice and fairness rather than financial speculation.
Supporting a Fair and Predictable Legal Environment
A stable and predictable legal environment is essential for businesses, job creation, and economic growth. When undisclosed third-party investors can exert influence over litigation behind the scenes, it creates uncertainty for companies and undermines confidence in the legal system.
By updating the Tennessee Code to reflect the realities of modern litigation financing, this legislation promotes transparency, accountability, and fairness—principles that benefit plaintiffs, defendants, and the broader business community alike.
We support this effort to strengthen the integrity of Tennessee’s courts and encourage lawmakers to advance these important reforms.