Hearing on regulating third‑party litigation financing draws debate over disclosure and consumer risk

The House Industry, Business and Labor Committee heard testimony on House Bill 13 72, a proposal to regulate third‑party litigation financing (TPLF) by requiring licensing, disclosures and consumer protections, witnesses said.

Representative Lawrence Clameen, the bill sponsor, introduced the measure as a response to growing use of litigation financing. "Litigation financiers are unregulated in North Dakota unlike other lenders," Clameen said, and the bill would require annual licensing by the Department of Financial Institutions and written contracts with specified disclosures.

Supporters, including the American Property Casualty Insurance Association (APCIA), the Greater North Dakota Chamber and the North Dakota Motor Carriers Association, said the bill is primarily about transparency. Brooke Kelly of APCIA described TPLF as a global business and argued undisclosed funder involvement can prolong litigation and divert settlement proceeds from injured plaintiffs. "This is about transparency," Kelly said, urging the committee to require funders to disclose their financial relationships so courts and parties can evaluate potential conflicts.

APCIA counsel Rhonda Hurwitz and Corey Krebs of the Department of Financial Institutions walked the committee through the bill’s major provisions: licensing and minimum net‑worth standards for funders; contract disclosures to plaintiffs; a requirement that plaintiffs or their attorneys serve copies of funding contracts on opposing parties or the court; limits intended to prevent funders from exercising direct control over case strategy; and a ban on financing by foreign entities designated as adversaries, as listed by federal authorities. The bill sets an effective date for the statute to apply to civil actions filed after Aug. 1, 2025, according to Clameen’s introduction.

Proponents said disclosure protects judges and defendants and prevents foreign investors from using litigation to obtain sensitive information. Hurwitz said funders sometimes take large fractions of awards and that the bill’s limits — including a proposed cap discussed in committee testimony — are intended to protect plaintiffs from losing most of a settlement to financiers.

Opponents included trial attorneys and plaintiff‑side groups who said the bill as written is overbroad and could criminalize ordinary conduct. Attorney Dave Schweigert, who does civil work in Bismarck, said the statute’s criminal and penalty language is unclear and could sweep in attorneys, law‑firm owners or others who advance funds for ordinary business or case expenses. "If I loan money to my law firm, am I now funding litigation?" Schweigert asked. He urged the committee to avoid creating new criminal liability or regulatory burdens that could unintentionally penalize attorneys and small businesses.

The North Dakota Association for Justice opposed the bill in its present form, saying TPLF can be an important tool for injured individuals who lack resources to pursue claims. Association executive director Jackie Hall said consumer legal‑funding products often provide small household payments — $3,000 to $5,000, witnesses told the committee — that allow a plaintiff to keep paying rent, mortgage or utilities while a case proceeds. Several consumer‑funding trade groups and a national industry representative, Eric Schueller of the Alliance for Responsible Consumer Legal Funding, urged the committee to distinguish litigation financing for businesses from consumer legal funding used to cover household needs.

Department of Financial Institutions assistant commissioner Corey Krebs told the committee DFI supports clarifying and regulating the product but that enforcement would be administrative; he said criminal penalties in statute would require a higher burden of proof and AG involvement. Krebs also gave a preliminary fiscal estimate noting a small number of licensees in other states; DFI’s initial modeling assumed roughly five companies and a modest fee revenue and expense profile, and DFI said staffing needs would be assessed if the market proves larger than expected.

Committee members asked detailed questions about the bill’s penalty language, how it would apply to attorneys and firm partners, whether the bill would unintentionally capture ordinary loans or intercompany advances, and how disclosure would work in class actions. No final action or committee vote was recorded at the hearing; sponsors and opponents signaled willingness to continue talks on amendments to address overbreadth, clarify penalties and carve out consumer legal funding products.

Why it matters: Supporters say licensing and disclosure restore transparency and protect plaintiffs and the courts; opponents say the bill as drafted could impose criminal penalties or regulatory burdens on attorneys, small firms and entities that are not the intended targets. The Department of Financial Institutions signaled readiness to administer a licensing program if the Legislature directs it but recommended careful drafting to avoid unintended consequences.

Next steps: DFI and stakeholders indicated they will continue negotiations on definitions, exemptions, and the penalty structure; the bill remained in committee with no vote taken at the hearing.