Testimony Before the Tennessee Senate Commerce and Labor Committee on SB 2101
Tim Benson, Senior Policy Analyst
Heartland Impact
March 10, 2024
Chairman Bailey and members of the Committee:
Thank you for the opportunity to share our serious concerns with any potential changes today on SB 2101.
As introduced, SB 2101 is a narrow administrative bill. It simply extends from 30 days to 35 days the time a litigation financier has to amend its registration with the Secretary of State when information becomes inaccurate or incomplete. That is a modest change, and we urge the Committee to keep the bill in that narrow form rather than importing the broader House language adopted in HB 2108.
The House amendment is not a technical cleanup. It is a major policy rewrite. It would create a new framework for “commercial litigation financiers,” require registration and bonding, require commercial litigation financing contracts to be filed with the court and provided to other parties, impose joint-and-several liability for certain costs and sanctions, and cap annual fees at 10 percent.
We respectfully oppose bringing that approach into the Senate bill because it would make it harder for ordinary Tennesseans, small businesses, and public-interest litigants to stand up to well-heeled defendants with vast legal resources.
That is the central issue here. Litigation is expensive. Modern complex cases often require years of discovery, teams of lawyers, expert witnesses, appeals, and extensive motion practice. Wealthy corporate defendants and major institutions know this. In many cases, they can use the sheer cost of litigation as a weapon. They do not always need to win on the merits if they can make it too expensive for the other side to continue.
That is why litigation finance matters.
Litigation finance can be one of the only tools available to help a claimant with a strong case stay in the fight against a global corporation, a major financial institution, or another deeply capitalized defendant. Without outside financing, many claims that may be entirely valid never get fully heard. They are abandoned, discounted, or settled under pressure because one side can afford to outlast the other.
That concern is especially important for conservatives today.
Across the country, conservatives increasingly rely on litigation to challenge DEI mandates, ESG pressure campaigns, ideological shareholder activism, discriminatory corporate practices, politicized lending and underwriting standards, and the use of private power to impose policies that could not survive the democratic process. Those cases are often not cheap. They are often brought against large and sophisticated actors with global reach, powerful law firms, public-relations machinery, and the ability to turn every case into a war of attrition.
In that environment, litigation finance is not some abstract financial product. It is often a practical tool that allows challenges to entrenched institutional power to move forward at all.
If Tennessee adopts a broad regime that chills or suppresses litigation finance, it will not only affect commercial disputes in the abstract. It will make it harder to mount serious legal challenges against some of the most powerful ideological and economic actors in the country. It will favor scale, incumbency, and entrenched power. And in practice, that means it can make it harder to push back against DEI and ESG in the courts.
Just as troubling are the disclosure requirements in the House amendment.
The amendment would require a party or the party’s legal representative to file a commercial litigation financing contract with the court and provide a copy to the other parties, with the possibility of requesting a protective order.
That is not a minor procedural detail. It is a real threat to long-established principles of donor privacy and associational privacy.
For many litigants and supporting organizations, privacy is not incidental. It protects individuals and institutions from retaliation, harassment, blacklisting, intimidation, and politically motivated pressure campaigns. Once financing arrangements must be filed and shared, the opposing side gains insight into how a case is being supported, who may be involved, where vulnerabilities may exist, and how best to increase pressure outside the courtroom. Even if a contract does not identify every upstream supporter by name, compelled disclosure creates a pathway for intrusive discovery fights and strategic efforts to unmask or deter support.
That is exactly why Tennessee should be cautious here. Disclosure rules aimed at financiers can easily become disclosure rules affecting the supporters, allies, and networks behind sensitive or controversial litigation. In practice, that can collide with the same donor-privacy values conservatives have long defended in other contexts.
And it is unnecessary.
Existing judicial practice already gives courts ample tools to police the legitimate concerns sometimes raised about litigation finance. Courts can address conflicts of interest. Courts can police champerty-related or control-related abuses where relevant. Courts can sanction misconduct. Courts can enforce ethics rules against lawyers. Courts can enter protective orders where confidential information truly must be exchanged. In other words, the legal system already has mechanisms to deal with case-specific problems without imposing a broad statutory disclosure regime that risks exposing sensitive relationships and chilling lawful support.
That is the better path.
If there is evidence in a particular case that a financing arrangement has created a real conflict, undermined attorney independence, distorted settlement incentives, or otherwise created a genuine litigation problem, judges already have tools to address it. What Tennessee should not do is presume that
financing is inherently suspect and require broad disclosure up front in a way that threatens privacy and deters support for meritorious claims.
The House amendment also risks drying up funding through its cumulative burdens. Registration, bonding, fee caps, disclosure mandates, and expanded liability together create a hostile environment for capital formation in this space. The predictable result is fewer financing options, less competition, and less support for difficult but legitimate claims. That is a serious policy choice, and it should not be smuggled into a narrow Senate bill that currently does none of those things.
SB 2101, as introduced, is modest and limited. It changes a deadline from 30 days to 35 days. That is all. The Senate should resist turning it into a vehicle for a much broader proposal that would tilt the playing field further toward large defendants, chill support for meritorious cases, and threaten donor and associational privacy in the process.
We respectfully urge the Committee to keep SB 2101 in its current narrow form and to reject any amendment modeled on the House approach.
Thank you for your time and consideration.
