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California AB 2305 — Litigation Funding Restrictions
California's AB 2305 restricts third-party litigation funders from influencing litigation strategy decisions, part of a growing national trend of scrutiny over corporate litigation funding arrangements.
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## Overview
California Assembly Bill (AB) 2305, signed into law by Gov. Gavin Newsom, restricts corporate litigation funders' ability to influence litigation strategy and decisions, adding Article 7.5 to the state's Business and Professions Code (Holland & Knight, September 21).
## Key Facts
- The law draws a line between permissible financial participation in litigation and impermissible funder control over litigation decisions (Holland & Knight, September 21).
- It applies to third-party litigation funding arrangements common in mass tort, commercial, and class action litigation (Holland & Knight, September 21).
- The legislation follows a broader national trend of scrutiny over third-party litigation funding (TPLF) disclosure and control issues (Holland & Knight, September 21).
## Significance
Third-party litigation funding has grown into a multi-billion dollar industry, and California's law is among the more prominent state-level efforts to regulate funder influence over case strategy, settlement decisions, and attorney independence. This is relevant for law firms, funders, and corporate defendants tracking litigation funding regulation trends across states, as similar bills are likely to be introduced elsewhere.
## Outlook
Expect continued state-level legislative activity on litigation funding transparency and funder control restrictions, and potential legal challenges or industry pushback from funders and plaintiffs' firms.