David Williams, president of the Taxpayers Protection Alliance (TPA), a non-profit organization dedicated to analyzing the government's impact on the economy, has raised concerns about third-party investors backing mass tort lawsuits while remaining anonymous. According to Williams, this practice will continue to cost the American public money until policymakers change regulations.
"Mass tort litigation has gotten out of control because the regulations governing it do not promote accountability — quite the opposite," he said. "This includes lax rules that allow third-party funders to remain anonymous, pulling the strings that manipulate cases yet staying free from disclosure and responsibility. Until state and federal lawmakers and regulators recognize this expensive drain on our economy and take action to rein it in, all Americans will continue to pay."
In an opinion piece for the Washington Examiner titled "Mass tort litigations create massive costs for society," published on January 11th, Williams claimed that mass tort lawsuits are driven by profits for attorneys and investors. He added that these lawsuits ultimately cost taxpayers more money as third-party funders increasingly provide capital needed for law firms to attract additional plaintiffs through TV and social media advertising and initiate court proceedings.
According to Williams, many corporations raise the prices of their goods and services due to these lawsuits' resultant higher liability damages. Industries such as auto manufacturing, medicine, and agriculture have been impacted by these mass tort lawsuits. Even "frivolous" lawsuits can lead to expensive court fees and settlements for defendants. The annual cost of mass tort litigation is approximately $500 billion or more than 2% of the U.S. GDP.
The Wall Street Journal reports that investors, such as hedge funds and private equity firms, have loaned up to $100 million to individual law firms in return for as much as 20% of the final settlement. Michael McDonald, a partner at financial advisory firm Morning Investments, stated that it is increasingly common for law firms to accept third-party funding for mass tort litigation. McDonald said, "In almost all the mass tort cases, you can find big law firms that have taken it, or if they haven’t, they’ve considered it. This is a space that is under the radar, but there are a lot of big players in it. Some of the biggest private-equity firms are dipping their toes in the area."
Williams has spent three decades in Washington, D.C., working to expose government waste, according to the TPA website. He has participated in government waste panels in South Korea and France and advised taxpayer groups worldwide. His work has been featured in The New York Times and on numerous radio and television outlets.
