Wisconsin's enactment of a groundbreaking law requiring disclosure of litigation funding agreements in state court was a policy win for the U.S. Chamber of Commerce, a vocal critic of the practice. But the law also came together amid a unique set of circumstances on the ground in Madison, making a national domino effect unlikely for now.

The legislation containing the disclosure requirement, AB 773, was drafted primarily with the goal of updating the rules for class actions in Wisconsin state court. Unlike many other states, Wisconsin's statute on class actions dated back to its 19th Century “Field Code,” and was just once sentence long.

The outdated rules generated broader pressure for litigation reform. In fact, around the time AB 773 was introduced, Wisconsin's Supreme Court took it upon itself to set new rules for class actions in December. The bill went beyond those rules with the addition of pro-defendant measures, such as granting automatic appeals of class certification.

The Wisconsin Civil Justice Council, which is headed by the state's former deputy attorney general, Andrew Cook, took advantage of that pressure and drafted AB 773 last year. It then began coordinating with other organizations, including the U.S. Chamber of Commerce and the American Tort Reform Association.

“There isn't any magic formula to it,” Lisa Rickard, head of the chamber's Institute for Legal Reform, said when asked why Wisconsin became a focal point. “There was a big bill moving, and there was receptivity to it. And there's a very strong legal reform community on the ground in Wisconsin.”

The original bill addressed a variety of priorities of the Wisconsin Civil Justice Council's broad business membership. What resulted was a grab-bag of litigation reform provisions affecting discovery, class action appeals and insurance claims. But among them were two provisions affecting litigation finance.

That alone appeared somewhat anomalous. According to Michael Leffel, a partner at Foley & Lardner—one of the largest law firms in Wisconsin—litigation funding is rare.

“This is something that does not appear to be used that often in Wisconsin at this time,” Leffel said in an interview from Madison.

But it may be explained by the fact the provisions, combined, appeared to be geared toward consumer lawsuit lending—something other states have addressed. In addition to the disclosure rule, the other provision in the original version of AB 773 would have capped the rates that consumer lawsuit lenders could charge.

That section of the bill, however, was stripped out by the state Assembly in the face of opposition from a group called the Alliance for Responsible Consumer Legal Funding, which warned the caps would “eliminate” the industry in Wisconsin. But the third-party litigation funding disclosure provision remained.

Other Vehicles?

There are other states where litigation reform legislation is pending that could ostensibly serve as vehicles for similar kinds of disclosure rules, including Missouri and Oklahoma. But none appear to have included any provisions around third-party litigation funding, according to Lauren Sheets Jarrell, counsel for civil justice policy at ATRA, which tracks litigation reform legislation. ATRA does not take a stance on commercial litigation funding agreements, Jarrell said.

Although there are more states that—like Wisconsin—have Republicans in control of both the legislature and the governorship, legal reform is not always something that follows party lines. For instance, Florida is solidly red but isn't fertile ground for tort reform legislation, Jarrell noted.

“That just shows how this is not strictly a Republican-Democrat issue,” Jarrell said.

There are also elections close on the horizon, she noted, a fact that often makes state legislators wary of doing anything remotely controversial.

Justin Hakes, a spokesman for the chamber's Institute for Legal Reform, said the chamber is not working in Missouri or Oklahoma to advance disclosure rules on third-party litigation funding.

The votes in Wisconsin to pass AB 773 were cast along party lines, with all Democrats voting against the bill. But other recent votes by the state legislature suggest that's a pattern that cuts across a variety of issues. The state's lawmakers are either unanimous in their support of a bill, or break along party lines.

The provisions on litigation funding disclosure never got much attention in the Wisconsin Legislature, according to Scott Kelly, chief of staff to state Sen. Van Wanggaard, the chair of the Senate Committee on Judiciary and Public Safety.

Instead, what almost derailed the bill was Wanggaard's opposition to provisions permitting the deletion of certain data under evidence rules. “As a former law enforcement officer, he's big on the preservation of potential evidence,” Kelly said of the senator.

That led to the bill being amended in the Senate, and having to be passed back to the Assembly.

“The concern was if they amended the bill, it would essentially die in the Senate, because the Assembly wasn't going to come back,” said Cook of the Wisconsin Civil Justice Council, who is also a lobbyist at The Hamilton Consulting Group in Madison.

The possibility temporarily set off alarm bells at the chamber. In a blog post, it said the reform bill was in “peril,” accusing Wanggaard of doing the bidding of the plaintiffs' bar and introducing an amendment that would “scuttle the bill.”

The Assembly ultimately came back and voted to approve the bill. Gov. Scott Walker signed it into law on April 3, along with 63 other pieces of legislation.