WRFH/Radio Free Hillsdale 101.7 FM - Michael Lucchese: The Need for Litagation Reform

Episode Date: October 22, 2024

In the Washington Examiner, Michael Lucchese has an essay on the pressing need for litigation reform. The shift in the 2010s to allow third-party funded lawsuits is not only a rejection of time-tested common law principles, but also a major national security threat. In this moment of global crisis, we need to be ensuring that our enemies cannot influence our economy or government — not leaving this backdoor open for them to walk right through. He talks with WRFH.

This is Radio for Hillsdale 101.7 FM. I'm Nate Gallagher, and with me here today is Michael Lucchase, author of The Pressing Need for Litigation Reform in the Washington Examiner. How you do, today, Michael? Good. It's great to be back on WRFH. I used to host a show of my own here when I was a student. So tell me a little bit about your background and how you came to learn about third-party litigation. Yeah, so I worked in the U.S. Senate for Senator Ben Sass for five years after I graduated from Hillsdale. And after that, I started a communications consulting firm, Pipe Creek Consulting, and that's my day job.

I've always sort of been interested in constitutional issues, legal issues. And I saw in Congress there's some legislation that Republicans, notably Darrell Issa from California, have been advancing to sort of combat some of the third-party litigation financing issues. I looked into the issue and I became pretty interested. It seems like a pretty vague threat to the American legal system. So I decided that I would write something about it, explore some of the options for reforming it, and what I uncovered was some pretty troubling stuff. Why do you think it's so underrepresented by the media?

Yeah. So on the one hand, it's a complicated issue. It deals with a lot of small legal questions that are somewhat difficult to answer, even a little bit impenetrable. But I do think that with Republicans in Congress starting to pay more attention to the issue, an advanced legislation, we might see some changes. Just last month, or earlier this month, I should say, Congressman Issa introduced the Litigation Transparency Act of 2024 with Scott Fitzgerald from Wyoming, from Wisconsin. And I'm optimistic that this is something

that we could see some real solutions to in future congresses. You mentioned how it got started in Australia, but how did this really get rolling in the United States? Yeah. So I think that a lot of different, there's a lot of different pressures here. The sort of best case that I could make for third-party litigation financing is the idea that some cases, the people who are trying to, win lawsuits, they don't have the kind of money to go up against big corporations or sort of

moneyed financial interests. And so the idea is that you could fund a lawsuit and get it funded by other parties for, you know, human interest reasons. That's not, I think, how this is being used mostly. I think for the most part, it's sort of created this industry of, it's created in the industry of people who are betting on lawsuits, sort of investing in them like you would in the stock market. And personally, that seems like a little bit of a perversion of legal system to me. I know that it goes against some common law precedents that are the American founders would have looked to as a way of protecting the legal system. And just generally, I think that it's sort of become a really insidious tool for some really a scummy underbelly of the American

legal world to take advantage of and make money off of. That term you mentioned their industry. It's a bit of a loaded term. What exactly do you mean when you call it an industry? Sure. So I think that basically since the introduction of third party litigation or third party litigation financing, we've seen a lot of law firms, hedge funds, these sorts of institutions put a lot of money into this, right? And so I think that, it's sort of developed into something that's much bigger than anybody who was initially advocating this kind of thing intended. And I think that it's not necessarily being used for humanitarian reasons right now. I think it's being used for financial reasons. People want to make a profit.

And that's, that's pretty troubling to me. I don't think that the legal system really should be designed to profit big hedge funds or anything like that. I think that it should be designed to help Americans litigate serious questions in a serious way, as opposed to sort of turning things into a financial game for these vested interests. You say that third-party litigation was meant for, quote, the support of individuals and entities with limited resources. How on earth did these rules get applied to high-profile cases involving national defense? Yeah. So, you know, a lot, I think there are a lot of different reasons for that, but primarily I think that a lot of our foreign adversaries, especially

adversaries with more totalitarian or authoritarian systems, the Chinese Communist Party, Vladimir Putin's Russia, the regime ruling in Iran right now. I think these groups are looking for every possible way to subvert American democracy and to subvert our strength. And I think that they got creative, right? And they started looking at the legal system. They saw the rise of third party litigation funding. And they said, we can exploit this. And especially because there's no real transparency, they're able to, right? We don't know who's funding a lot of these lawsuits. We don't know the extent to which a place like Russia or China could be interfering with the American economy through this. And so what you're seeing in a lot of cases, I think,

that are doing things with national security and defense, they start getting targeted. Intel is a good example. They've been targeted with a number of lawsuits, and we don't know who is funding all of these lawsuits. It could be people here in the United States, or it could be people in foreign countries. We just don't know. And so that's why I think the Litigation Transparency Act is so important. I think that a lot of this will, you know, sunlight's the best disinfectant. And I think a lot of this will go away if people are mandated to disclose who's funding their lawsuits.

These companies like Intel have a lot of money, capital resources. They have a lot of things to throw around and they don't want to get sued. But to my knowledge, they're not putting up much of a fight against third party litigation. Why do you think that is? I think that some of them are, in fact, and I think that's part of why. you're seeing a movement in Congress right now towards this kind of thing. But I don't know very much about the legal strategy of a company like Intel. I don't really, I've never really had a conversation with Intel's a lawyer.

So I don't know what they're doing or what their plans are in terms of lobbying. It just seems to me that this is good legislation that we should be passing. It's common today to throw around terms like traitor or colluding with foreign powers. Do you think there's any covert support for third-party litigation from the inside of U.S. politics? I don't know. Could you clarify a little bit about what you mean by covert support? I'm not sure that there's a huge constituency that's standing in favor of it. I'm just not sure that Congress has moved to act on it, which is one of the reasons why I think this legislation is important. That is exactly what I meant. Not necessarily opposing, but certainly not moving in the direction that, a sensible person would move when faced with a threat like this?

Yeah, I just don't think that most of Congress is paying attention to this issue right now. And I'm optimistic that Congressman Isis bill will get it some more attention and get Congress focused on the things that it needs to be focused on. Do you think third party litigation could stay legal so long as funders need to disclose themselves? Yeah, I certainly think that's one option. I think there are some good reasons why. you would seek third party funding for a lawsuit, as I tried to outline in the piece. But on the whole, I do think that it is a major departure from our common law tradition,

and that should give us a little bit of pause to think about why are we moving away from some of that. Why are we moving away from some of these common law traditions? And is the common law not good enough to protect Americans the way that it has for, you know, centuries. I think there are possibly ways that we could keep third-party litigation funding legal, but on the whole, I do think that it's a departure from common law, and that should give us pause. Just a reminder that this is Radio for Hillsdale 101.7 FM. I'm Nate Gallagher, and I'm talking with Michael Lukasey. What are some examples of the Alpha Group funding lawsuits that aided the Russian cause?

Yeah, so the Alpha Group is this sort of big international Russian firm. And, The way that their third-party litigation funding worked, they basically treated it as an investment opportunity so that the Russian government or sanctioned officials could make money off of the Western economy without having to report it. Right. And so here's why that presents a problem. Since the Russian invasion of Ukraine, we've been sanctioning a lot of Russia's economy and trying to put economic restrictions on them in order to dissuade them from taking further

action in Ukraine, sort of consequences for their action, right? And the Alpha Group basically used litigation as an investment opportunity so that they could continue to make money off of Western productivity without having to disclose this and then becoming subject to sanctions, right? So it's just one great example of how some of our authoritarian enemies are using loopholes in our legal system to evade the consequences that we're trying to put on them for their actions, right? And if they had to disclose this, then it seems to me that regulators would be able to stop them from evading sanctions in this way. Perhaps I just missed it in the piece, but how did this information leak? Was there a breach?

Was there an investigative journalist that leaked information? Sometimes courts can be able or are able to mandate. sometimes courts are able to mandate that litigators disclose their financing. That doesn't always happen. And I think if I recall correctly, that was just a good example of a serious investigative journalism looking into some of the investments the Alpha Group was making. But I'm not an expert on the specific case. I just sort of know that generally what's been reported.

I believe Bloomberg was the source for that. Would you say litigation reform should be of high priority? Would it not take up further time in a government that already has too much to do in too little time? Yeah, listen, there's a lot of things that the government should be doing, right? And that's a good question. I do think that it should be a high priority. But this is probably something that could get rolled in with other legislation. maybe further sanctions on Russian entities for the invasion of Ukraine. I'm not sure. I think a lot of

this has to do with legislative strategy and what makes the most sense. And Congressman Issa has a lot of experience. And I trust that he's going to be making sure that something like this can can go through the Senate. What, if anything, could the everyday person do to help this problem? Or is there just nothing outside of petitioning your legislature? Yeah, I think the best thing you can do is call your congressman, tell them to support the litigation transparency Act of 2024. I don't think that this is a particularly partisan issue. I don't think that this is something that should be a Republican versus Democrat thing. And so I think that this is the kind of bill that Congress should be able to get together around.

You know, Art Van derbyr, a longtime senator from Michigan, used to say politics stops at the water's edge. And I think this is one example of how common threat should help us over. overcome political differences. Well, thank you for coming on, Michael. Thanks so much for having me on. This was great. I've been at Gallagher with Michael Lucchase here on Radio for Hillsdale 101.7 FM.