Newsom Signs Law Limiting Funders' Control Over Cases

Legal Services Transactions attorney Pippa Balestrieri was interviewed for a Daily Journal article on California's Assembly Bill (AB) 2305, a new law that aims to restrict outside investor influence on litigation decision-making. AB 2305 prevents litigation funders such as private equity investors and hedge funds from directing or influencing substantive decisions in cases they finance, including trial strategy and settlement approval. It also gives the State Bar civil enforcement authority, empowering the body to sue lawyers and corporate funders for $10,000 per violation or three times actual damages, along with attorneys' fees and other costs. Pippa observed that the measures largely repeat existing restrictions contained in California's Rules of Professional Conduct but send a clear message to the legal industry that the government is keeping an eye on outside investor activity, particularly since the legislation goes further than similar provisions enacted in other states.

"The real import of the bill is that it's a signal to outside funders that California is watching," she commented. "California's new law is more comprehensive than what has been passed so far in a bunch of other states."

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