Mr. Bates vs. The Post Office Sheds Light on Secretive Third Party Litigation Funding

The gripping drama that has taken the UK by storm, Mr. Bates vs. The Post Office, has made its way to U.S. screens and is now airing on Masterpiece on PBS every Sunday at 9/8c.

The series portrays the real-life account of the Post Office Horizon software scandal, in which UK sub-postmasters were wrongly accused of theft and accounting discrepancies over nearly two decades, with over 700 prosecuted. It has also brought attention to the secretive world of third party litigation funding (TPLF), where hedge funds and other financiers secretly invest in lawsuits in exchange for a percentage of any settlement.

Shockingly, one of the episodes revealed that litigation funders and lawyers took a staggering 80 percent of the postmasters' settlement, leaving the postmasters with a mere 20 percent - approximately £20,000 per victim. This fraction of the award hardly compensates for the financial ruin and personal devastation endured by those unjustly accused.

While this series portrays the dangers posed by undisclosed third party litigation funders to consumers in the UK, the issue of secretive litigation funding is also increasingly concerning in the U.S.

There are no uniform transparency requirements in the U.S., which means judges, defendants, and often plaintiffs don't know if a lawsuit has funding or if funders are the ones making litigation decisions like turning down reasonable settlement offers. Funders want to maximize their returns, and prolonging litigation increases the chances of bigger paydays. When cases are settled, plaintiffs are paid after the funders and lawyers take their cut, just like what happened to Bates and his colleagues.

There's also a mounting worry about the influx of foreign money into U.S. courts via TPLF, which could pose significant national and economic security risks. Recent reports indicate that sovereign wealth funds and foreign governments are already using litigation funding to fund U.S. litigation against American companies. For instance, a recent Bloomberg Law report revealed that an investment firm tied to Russian billionaires secretly funded lawsuits in U.S. court cases through TPLF to evade sanctions. Additionally, PurpleVine IP, a Chinese third-party litigation investment firm, has financed multiple IP lawsuits against Samsung and its subsidiary in U.S. courts in Delaware and Texas.

The growing concern about litigation funding is causing federal and state lawmakers to act. For example, Sens. John Kennedy (R-LA) and Joe Manchin (D-WV) and Speaker Mike Johnson (R-LA), introduced the Protecting Our Courts from Foreign Manipulation Act of 2023 which would, among other things, ban foreign governments and sovereign wealth funds from investing in U.S. litigation. Montana, Indiana, and West Virginia all recently enacted legislation to bring transparency and accountability to TPLF agreements, with other states like Louisiana, Kansas, and Oklahoma considering similar measures.

The real-life story behind Mr. Bates vs. The Post Office highlights the importance of enacting commonsense reforms in the UK. We should learn that same lesson in the U.S. before it's too late.