National insurance groups are hailing the signing of a new law in North Carolina, one that makes the state the first to place an outright ban on third-party funding of lawsuits.
House Bill 315, signed by Gov. Josh Stein this week, “is an important measure that will help protect North Carolinians from predatory commercial third-party f
unders looking to profit off lawsuits at the expense of businesses and consumers,” the American Property Casualty Insurance Association said in a statement Wednesday.
“Third-party litigation investment has become an increasingly significant driver of legal s
ystem abuse, injecting profit motives into disputes that should be resolved on their merits,” the Insurance Information Institute’s Mark Friedlander said. “North Carolina’s h
istoric action sends a clear message that the civil justice system is not an investment vehicle.”
At least 11 U.S. states have enacted some restrictions on litigation financing, including disclosure requirements, “no-influence-the-outcome” measures, an
d a bar on foreign interests. Georgia’s governor in 2025 signed a bill that now requires financiers to register with the state Department of Banking and Finance and t
o provide information about principals and affiliations with foreign interests. It also bars funders from making legal decisions about attorney representation, settlements
and expert witnesses, and requires disclosure in discovery of litigation financing agreements.
A Florida bill this year would have barred conflicts of interest by funders, banned funders from picking lawyers and witnesses, and would have limite
d amounts that third-party financiers could recover. That measure died in committee this spring.
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North Carolina’s law takes prohibitions to a new level.
“It is unlawful for a person to engage in litigation investment in this State or to furnish litigatio
n investment to a party or counsel of record in a civil proceeding in this State,” the law reads.
The statute takes effect July 1 and applies to lawsuits arising on or after that date. It invests the state attorney general with the authority to bring legal action against vio
lators, and to impose penalties of $50,000 per violation.
Perhaps ironically, the measure could lead to some litigation of its own.
“A person injured by a violation of this Article may bring an action to recover damages and is entitled to elect at judgment between common law damages a
s measured by the trier of fact and statutory damages as measured by treble the amount of the full pot
ential litigation investment contemplated by the investor,” the law reads.
The injured person is also entitled to recovery of court costs and reasonable attorneys’ fees.
House Bill 315, with multiple sponsors on both sides of the political aisle, was approved by the North Carolina General Assembly in June, with only one “nay” vot
e. Supporters and news media in the state credited the North Carolina Chamber of Commerce with lobbying hard for its passage during the spring legislative session.
