North Carolina Enacts First Statewide Ban on Third-Party Litigation Funding

North Carolina became the first jurisdiction to ban third-party litigation funding when the General Assembly overwhelmingly passed HB 315. The measure targets a model where outside investors finance lawsuits in exchange for a share of any recovery, a practice critics say diverts cases from genuine merit. The Taxpayers Protection Alliance warned that the lack of disclosure and preferential tax treatment fuels this industry and urged the International Trade Commission to require transparency.

While the ban curtails one financing avenue, experts note that the paid-expert-witness market persists, often relying on speculative science. The state’s earlier shift to Daubert standards under Federal Rule of Evidence 702 illustrates the need for rigorous gatekeeping. Enforcement of these evidentiary rules is viewed as the next hurdle to prevent meritless claims from reaching juries.