Litigation Funding Transparency Act of 2026

Bill Number

S. 3826

Origin Chamber

Senate

Congress

119th Congress, Session 2

Status

Introduced

Latest Action

2026-02-11: Read twice and referred to the Committee on the Judiciary.

Last Updated

2026-02-25T04:53:20Z

AI-Generated Summary

Purpose

The Litigation Funding Transparency Act of 2026 aims to promote openness and accountability in how large civil lawsuits—such as class actions and mass tort cases—are financed by outside parties. It targets "third-party litigation funding," where non-parties (like investors or foreign entities) provide money to support lawsuits in exchange for a share of any winnings. The goal is to prevent hidden influences, especially from foreign sources, while ensuring courts and other parties know who is backing these cases.

Key Provisions

• Definitions:
• Covered civil actions include multidistrict litigation (MDL, where similar cases from different courts are combined for efficiency), class actions (lawsuits representing groups of people with similar claims), and coordinated proceedings with at least 100 cases.
• Third-party funder: Any business, foreign government, foreign individual, or state-owned investment fund (sovereign wealth fund) that provides money for a lawsuit or expects a return greater than what they invested, excluding simple loans with low interest or pro bono (free) nonprofit support not tied to foreign control.
• Excludes U.S. citizens or entities unless they fit the funder criteria; also exempts nonprofits funded by non-foreign donors providing free legal help.

• Disclosure Requirements:
• Parties or their lawyers must notify the court and all other parties in writing about any third-party funder's identity.
• Must reveal if the funder is foreign (e.g., a foreign government, person, or controlled business) and share copies of funding agreements for review, unless the court says otherwise.
• Disclosures go to the Administrative Office of the U.S. Courts (AOUSC) if foreign involvement is involved.

• Timing and Updates:
• Disclosures due within 10 days of signing a funding deal or when the lawsuit starts (whichever is later).
• Parties must promptly update or correct info if it changes, or if the court orders it.

• Enforcement and Penalties:
• Treated like standard discovery rules under the Federal Rules of Civil Procedure (FRCP Rule 26), with possible sanctions (fines or other penalties) for non-compliance under FRCP Rule 37.
• Courts can hold violators in contempt (a serious court punishment for disobeying orders) and use full district court powers to enforce.

• Reporting:
• AOUSC must report every 120 days (starting 180 days after enactment) to Congress, the Attorney General, and a national security official, listing foreign funders, case details, funding amounts, and totals. Reports are posted online.

• Limits on Funder Influence:
• Funders cannot control or influence lawsuit strategy, decisions, or settlement talks.
• Funders and their agents cannot access protected discovery materials (sensitive info shared during lawsuits under FRCP Rule 26 protective orders) without court approval.

• Applicability: Applies to all cases pending or started after the law's enactment.

Significant Changes to Existing Law

• Adds a new section (1747) to Chapter 115 of Title 28 of the U.S. Code, which deals with court records and evidence. Previously, there were no federal requirements to disclose third-party funding in these types of cases, allowing funders to remain anonymous.
• Introduces mandatory reporting on foreign funding to federal oversight bodies, which did not exist before.
• Expands court powers to restrict funder access to case materials and prohibit undue influence, building on but going beyond current FRCP discovery and contempt rules.

Potential Impacts

• On Government Agencies: Increases workload for courts (more disclosures to review) and AOUSC (regular reporting). The Department of Justice gains visibility into foreign-funded cases, potentially aiding national security monitoring without new investigative powers.
• On Citizens and Litigants: In class or mass actions (common in product liability, environmental, or consumer suits), plaintiffs may face more scrutiny on funding sources, possibly deterring some cases but ensuring fairer settlements by revealing conflicts. Defendants get better insight into who is driving the litigation.
• On International Relations: Could discourage foreign governments or investors from funding U.S. lawsuits against American companies, reducing perceived foreign meddling in domestic disputes. Might strain ties if seen as targeting specific countries, but promotes U.S. judicial independence.

Main Stakeholders Affected

• Litigants and Lawyers: Plaintiffs and their attorneys in large-scale cases must comply with disclosures, facing penalties for errors; this could raise costs but build trust in the process.
• Third-Party Funders: Businesses, foreign entities, and sovereign funds lose anonymity and control, potentially making funding riskier or less attractive.
• Courts and Judicial System: Judges handle more administrative tasks and enforcement, while the overall system gains transparency to prevent abuses.
• Government and Regulators: Congress, DOJ, and national security officials receive data to track trends; nonprofits providing free legal aid (if not foreign-linked) are largely unaffected.
• Defendants (Often Corporations): Gain leverage by knowing funders, which could influence settlement negotiations or defenses.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens federal discovery rules by mandating funding disclosures as automatic requirements, potentially leading to more contempt cases. It balances transparency with protections for sensitive info, but courts may see challenges over what counts as "influence" or "protected" materials.
• Constitutional: No direct conflicts foreseen; it aligns with due process (fair trials) by promoting openness without restricting speech or access to courts. However, it could face First Amendment challenges if funders argue disclosures infringe on privacy or association rights.
• Political: Addresses bipartisan concerns (introduced by Senators Grassley, Tillis, Kennedy, and Cornyn) about foreign influence in U.S. litigation, echoing national security debates. May spark debates on regulating private funding versus protecting access to justice for under-resourced plaintiffs, without altering core litigation funding legality.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Grassley, Chuck [R-IA]

Cosponsors (3)

Sen. Tillis, Thomas [R-NC], Sen. Kennedy, John [R-LA], Sen. Cornyn, John [R-TX]

Recent Actions

• 2026-02-11: Read twice and referred to the Committee on the Judiciary.
• 2026-02-11: Introduced in Senate

Bill Versions

• Litigation Funding Transparency Act of 2026 — issued 2026-02-11 — PDF (10 pages)