Sept 13 (Reuters) – A Johnson & Johnson attorney told the U.S. House Oversight and Accountability Committee on Wednesday that outside funding of mass torts personal injury claims has turned the civil justice system into “a money play: driven, funded and distorted by legal and financial entrepreneurs.”
In written testimony, J&J assistant general counsel Aviva Wein urged Congress to enact laws (or endorse proposed changes to the federal rules for civil litigation) to require disclosure when outside financiers are backing plaintiffs. She also asked lawmakers to take on the job of regulating the litigation finance industry and to curb allegedly misleading advertisements designed to generate mass tort claims.
A bevy of business groups, including the U.S. Chamber of Commerce, the National Association of Manufacturers and the Pharmaceutical Research and Manufacturers of America, also saw Wednesday’s oversight committee hearing as a chance to alert Congress to what they regard as the danger of third-party litigation funding. The groups submitted letters hailing the committee for convening the hearing and echoing J&J’s plea for intensified congressional scrutiny of the litigation finance industry. Both NAM and PhRMA joined J&J in calling on Congress to require disclosure from litigation financiers.
But based on questions from both sides of the aisle during Wednesday’s hearing, Congress is in no hurry to do so.
The three-hour hearing, entitled “Unsuitable Litigation: Oversight of Third-Party Litigation Funding,” featured testimony from, in addition to Wein, litigation finance scholar Maya Steinitz of Boston University, legal ethics expert Kathleen Clark of Washington University in St. Louis, and representatives from the offshore energy and Minnesota mining industries, who talked about how litigation by environmental groups has slowed business initiatives.
A few Republican representatives, notably Lisa McClain of Michigan, and William Timmons and Russell Fry, both of South Carolina, posed substantive questions, particularly to Steinitz and Wein about how Congress might regulate litigation funding. Timmons, for instance, asked whether lawmakers should consider imposing a “loser pays” model. Other Republicans highlighted the paucity of hard data on the magnitude of litigation finance and the risk that foreign countries like China might secretly be financing cases to advance their own geopolitical interests.
But oversight committee Democrats, starting with an opening statement from Jamie Raskin of Maryland, showed no interest in J&J’s assertion that litigation has run amok or in claims by their Republican colleagues that left-leaning activists have “hijacked” congressional and federal agency power by funding “sue and settle” impact cases that impose new regulations on businesses.
Oversight committee Democrats repeatedly defended litigation funding as a means for individual plaintiffs to access the court system to vindicate claims against big corporations like J&J, criticizing Republicans for suggesting that mass tort defendants need congressional help to ward off lawsuits.
“Shame on Republicans for holding this hearing,” said Florida Democrat Max Frost.
Illinois Congressman Raja Krishnamoorthi pressed J&J’s Wein on why her company had proposed an $8.9 billion settlement of claims by talc plaintiffs if all of their claims were meritless. (Wein said several times that J&J talc products do not contain asbestos and are safe. The proposed settlement, she said, was in the context of a global bankruptcy proposal.)
It’s notable that the lone witness called by Democrats at Wednesday’s hearing, ethics professor Clark, devoted most of her testimony not to third-party litigation at all but to what she called “the ethics crisis currently facing the U.S. Supreme Court,” after revelations that Republican-appointed justices failed to disclose travel and other gifts from wealthy patrons.
Democrats on the oversight committee pounded away at that theme, arguing that if there is a “dark money” crisis in civil litigation, it is rooted on the conservative side of the political spectrum, where activists have backed litigation to overturn abortion rights and affirmative action. (Indeed, last spring a group of Republican state attorneys general sent a letter to Republican lawmakers, opposing disclosure requirements for litigation funders because of the potential chilling effect on conservative activists. The letter was not mentioned at Wednesday’s hearing.)
“Our colleagues seem confused,” Raskin said in his opening statement. “No one has a right to bribe judges or load them up with fancy gratuities, but people do have every 1st Amendment, due process and equal protection right to raise money to make their case in court.”
South Carolina Republican Nancy Mace, filling in for committee chair Comer near the end of the hearing, expressed exasperation with Democrats’ insistence that “dark money” has tainted the Supreme Court.
“How many times is the left going to talk about dark money?” she said.
Mace proceeded to spend several minutes outlining the oversight committee’s broad-stroke “dark money” allegations against President Joe Biden. She then said she would “try to get back on topic,” and eventually called for the letters submitted by the business groups to be entered into the congressional record.
But her diversion to criticize Biden was telling: Republicans on the oversight committee, and their fellow congressional Republicans, are preoccupied with matters far afield from the disclosure of third-party litigation funding.
The oversight committee couldn’t keep a single hearing focused on the purported abuses described by J&J and its allies. That doesn’t bode well for any actual lawmaking.
I asked a J&J spokesperson after the hearing if the company thought the session was productive. J&J, she said, was “grateful for the opportunity to shine a light,” adding, “We applaud the chairman’s resolve to continue to investigate.”
Reporting By Alison Frankel; editing by Leigh Jones
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