North Carolina becomes first state to ban third-party litigation investment
RALEIGH, NC (WWAY) — North Carolina has become the first state in the country to prohibit third-party litigation investment after Gov. Josh Stein signed House Bill 315 into law.
The legislation, which received overwhelming bipartisan support in the General Assembly, makes it unlawful for outside investors to provide money for civil lawsuits in exchange for a financial interest tied to the outcome of the case. The law also authorizes the state attorney general to seek injunctions and civil penalties against violators.
Third-party litigation investment, sometimes called litigation finance, is a growing industry in which investors fund legal cases in return for a share of settlements or judgments. Supporters of the new law argue the practice can increase costs and allow outside financial interests to influence litigation. Critics have argued such funding can provide access to legal resources for parties who otherwise might not be able to pursue claims.
The bill passed the House unanimously and cleared the Senate with a 45-1 vote before being sent to the governor.
According to legislative documents, the law defines litigation investment as providing money for the fees, costs or expenses of a pending or potential civil proceeding in exchange for compensation contingent on the outcome of the case. Certain activities are excluded from the prohibition.
Business groups, including the NC Chamber and the U.S. Chamber of Commerce’s Institute for Legal Reform, backed the measure and said it would strengthen North Carolina’s legal and business climate.
Other states have considered measures aimed at increasing transparency around litigation funding, but North Carolina is the first to enact an outright ban on the practice.
