U.S. Chamber lobbies Supreme Court about hazards of secret litigation funding

December 9, 2021

December 9, 2021

U.S. Chamber lobbies Supreme Court about hazards of secret litigation funding

The U.S. Chamber of Commerce has argued in an amicus brief filed with the U.S. Supreme Court that undisclosed litigation funding agreements endanger the American justice system.  

The case under review, Bank of America Corp v. Fund Liquidation Holdings LLC, involves a split among the federal circuits on whether a district court can salvage a case, in which the original plaintiff lacked standing, by adding a proper plaintiff via Federal Rule of Civil Procedure 17. When two hedge funds filed a class action accusing multiple international banks of rate manipulation, the initial complaint did not disclose that both funds had been dissolved and had assigned their litigation rights to Fund Liquidation Holdings, the true party in interest who had been running the litigation from the start. Dismissed as a nullity at the district court, the case was revived on appeal to the 2nd Circuit, which concluded that because the real party in interest had standing at all relevant times, it could step into the dissolved entities’ shoes without initiating a new action (which would have been time-barred). “Only if the real party in interest either fails to materialize or lacks standing itself should the case be dismissed for want of subject-matter jurisdiction.”

The amicus brief alleges that, for years, “the only party pulling the strings” in the case “was not subject to scrutiny by the defendants or the court.” It argues that by legitimizing the true plaintiff’s concealed control of the litigation, the 2nd Circuit’s ruling would allow funders to use sham plaintiffs to secretly advance their interests or to circumvent statutes of limitation by filing proxy suits while searching for viable plaintiffs.  

Anticipating objections, the 2nd Circuit opinion indicated that the discretion of trial judges to dismiss suits in which plaintiffs were not properly identified in original pleadings for “nefarious reasons,” would be an adequate check on abuses.

It is somewhat ironic that the Chamber’s main objection to the holding is the ability to obfuscate a real party in interest, given the anonymity enjoyed by members that fund the Chamber’s amicus briefs. A recent Yale Law Review article noted that the Chamber, more than any other amicus filer, routinely submits influential briefs to the Supreme Court, which adopted the position for which the Chamber advocated in ten out of the twelve cases in which it participated during the 2020-2021 term. Because the Chamber does not disclose its members to the public and the rules exempt the disclosure of contributions from an amicus filer’s members, parties—such as the defendant banks in this case—can channel money through groups to which they belong to secretly fund briefs in support of their position.  

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Source material: U.S. Chamber warns SCOTUS of litigation funding peril, Fund Liquidation Holdings LLC v. Bank of Am. Corp., A Flood of Judicial Lobbying: Amicus Influence and Funding Transparency

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