Arguing Class Actions is a monthly column by Adam J. Levitt for the National Law Journal.
Reprinted with permission from the October 6, 2025, edition of the National Law Journal. © 2025 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
The most recent attacks on litigation funding (the benefits and detriments of which will be more comprehensively discussed in later columns), have taken a decidedly Eastern tilt. Indeed, Sen. Thom Tillis, R-North Carolina, and Rep. Darrell Issa, R-California, among others, have recently sought to “take on” litigation financing, introducing legislation designed to curb it through, e.g., substantial taxes on “qualified litigation proceeds” meant to make it much more costly for funders to invest in U.S. cases. So far, the legislation has failed—in the latest round, those taxes were removed from a final budget by the Senate parliamentarian. But the criticism has made waves, and, as is sadly typical of the times, carried a not-insignificant tinge of jingoistic paranoia. For example, on his website, Issa highlighted “national security concerns” that allegedly arise because “China-backed funders” were investing in U.S. cases. Issa proclaims that he wants to “advance fair and equal treatment by the justice system and deter bad actors from exploiting our courts.”
This is ridiculous on multiple levels.
First, if Issa cared about actually advancing “fair and equal treatment by the justice system,” he’d full-throatedly support litigation funding. Consider what litigation funding actually is: a device that allows some litigants access to cases that they’d otherwise be cost-precluded from filing. Litigation funders issue non-recourse loans to support years-long litigation—sometimes to cover fees, sometimes just expenses. If the plaintiff wins, some portion of the proceeds go to the funder, and there’s a return on investment. If the plaintiff loses and gets nothing, the funder gets nothing. Funders can create deals with respect to individual cases or broader case portfolios. In all respects, what funders do is provide liquidity to support the years-long effort the toughest cases inevitably require. Litigation of any kind is expensive, time-consuming, and difficult. When it’s against the largest corporations in the world protecting billions in profits and fighting massive potential legal exposure(s), that difficulty only increases. The resources of our nation’s largest corporations will always outstrip those of even the most well-heeled plaintiffs, and companies have been paying their lawyers accordingly. Partners at the largest defense firms are now regularly charging fees in excess of $2,000 per hour—with some commanding hourly rates of up to $3,000, or $50 per minute. Is it really so unreasonable that, against such largesse, some plaintiffs need additional capital to unstack the deck?
Second, the so-called fear of Chinese “exploitation” of U.S.-based litigation and U.S. courts has no basis in reality. The instances of exploitation to which Issa appears to be referring is the recent (2023) revelation that a Chinese company called Purplevine IP had backed several U.S. patent lawsuits, including suits against JBL Bluetooth, a Samsung Electronics subsidiary. What harm actually comes from this backing is unclear, but that has not curbed the paranoia.
One argument is that taking “China-backed” money for patent cases allows the litigation funder to engage in some form of industrial espionage—either by stealing secrets, or by somehow disrupting critical sectors through litigation. In a letter to the chief judges of Florida’s three federal districts following the Purplevine “revelation,” then-Sen. Marco Rubio, R-Florida, contended that he was worried about foreign governments—specifically name-checking China—using funding to “advance frivolous lawsuits, needlessly and excessively prolong litigation disputes, [and] exacerbate domestic discord” and otherwise “exploit the openness of American institutions and undermine critical infrastructure sectors.” The Chamber of Commerce took it even further, overheatedly claiming that “[t]here’s nothing stopping adversarial governments from using litigation funding to pour money into cases against American companies, including defense and other sensitive industries, in order to…access their intellectual property.”
How any of this parade of horribles would actually occur goes unsaid, and anyone with any knowledge of how litigation funding does and doesn’t work would realize how ridiculous this actually is. If a lawsuit is frivolous, it will be thrown out, and there are far more efficient ways to “exacerbate domestic discord” than by filing litigation against, e.g., Samsung. As for what now Secretary of State Rubio called the exploitation of the “openness of American institutions”—one wonders about the mechanics of such a venture. Let’s say that a Chinese company really wanted to steal an American rival’s trade secrets: would the way to do that really be to file a patent lawsuit in a U.S. court? The following would have to occur: (1) the patent infringement would have to be sufficiently non-frivolous to get past a motion to dismiss, and yet “related” to a new technology worth stealing; (2) during discovery (often years after filing), plaintiff’s expert would need to get access to the secure source code for the subject technology; (3) despite years going by, this source code would have to in reality remain state-of-the-art at the time of source-code review; (4) the expert would need to be able to smuggle out the pertinent bits of source code containing the technological revelation, even though such source code review is subject to court-issued protective orders and substantial security controls, and even though it is highly unlikely the portion of the source code that’s revelatory is the portion that was related to the prior patent; and (5) the lawyers hired would have to be willing to risk their law licenses (and jail time) and provide the super-secret source code that was smuggled out by the expert to the litigation funder; who would, (6) then pass it on the Chinese company; further, (7) by doing so, the funder would be exposing itself to allegations of, among other things, treason, the Defend Trade Secrets Act/Uniform Trade Secrets Act, which criminalizes misappropriation of protected IP, and, not to mention various laws prohibiting espionage, such as 18 U.S.C. §§ 1831-1839; finally, (8) these bad-acting funds/lawyers would somehow be dissuaded by a disclosure requirement and/or additional taxation. As one funder succinctly put it, “The idea that China is going to try and conduct industrial espionage by getting a litigation finance firm to get information is … so far fetched as to be preposterous.”
Neither does a more generalized fear of “Chinese money” as an item of investment “in America” hold water. Let’s say that it’s true that Chinese citizens and/or Chinese companies or investment funds are among the investors who choose to invest in a litigation funder, or even who have their own litigation funding vehicle. How is that any different than the myriad other ways money flows into the American economy? Consider this: According to a report from the National Association of Realtors, in 2017 Chinese foreign buyers purchased more than $30.4 billion worth of residential property in the United States. According to one recent estimate, roughly $2.3 billion in new commitments were made across
the entire U.S. commercial litigation funding market in 2024—roughly half the outlay for stamp collecting over the same time period. Some estimates—which have themselves been criticized as inflated—put the entire size of the third-party litigation funding global market at $17.5 billion in 2024, or just a little more than half of the “Chinese money” that poured into U.S. real estate in a single year, some eight years ago. And let’s not even look at the amount of U.S. debt that China owns (close to $800 billion, making it the second largest holder of U.S. debt).
If the fear is direct influence on American companies—the Chamber of Commerce called it a “national security risk” that foreign-backed litigation can “tie down” American companies in litigation—even setting aside the existence of traditional hacking/industrial espionage, surely that influence is felt more directly by actual investment into those companies than through the Byzantine path of “influence-by-adversarial-patent-litigation.” Moreover, and tellingly, we don’t see Tillis or Rubio calling for every Fortune 500 company to ensure that no Chinese entities are holding their stock. Consider even the way these companies are funded in their early stages: Softbank’s Vision Fund—a $100 billion-plus behemoth called the “world’s largest technology investor,” with investments across the most important sectors in the economy, including robotics and artificial intelligence—was funded by, among others, Saudi Arabia Public Investment Fund’s $45 billion investment. Where is Issa’s call to investigate the impact of foreign money on the Internet economy? Where is the Chamber of Commerce’s “Report” on the possible infiltration by hostile foreign actors into the most important companies in the world? On those topics, their silence is deafening.
The global economy doesn’t work that way, and Tillis, Issa, Rubio, and the Chamber of Commerce know that. What they also know is that litigation financing—for all of its flaws—is a check on that corporate power. It’s that check—and not “Chinese money”—that they’re actually concerned about. If they’re prepared to speak the truth and have the fight about litigation funding on those grounds, then game on. If not, all of their pearl clutching should be written off as partisan business as usual.
Adam J. Levitt is a founding partner of DiCello Levitt, where he heads the firm’s class action and public client practice groups. He can be reached at alevitt@dicellolevitt.com
Thank you to DiCello Levitt partner Dan Schwartz for contributing to this column.
