Michigan’s courts should run on fairness and justice, but that’s not always the case. Shadow cash from secret investors is playing a concerning role in our courtrooms as lawsuits are increasingly being treated as perverse investment opportunities.

Third-party litigation funding – where outside investors funnel money into legal action – is spreading nationwide. In Michigan, it operates in the dark. Defendants, judges, and sometimes even the people bringing the lawsuits are kept in the dark about shadow cash funding the case.

This secret rot within our legal system is why I introduced House Bill 5281, the Third-Party Litigation Funding Transparency Act.

If you’re injured or cheated, you have the right to seek accountability. That won’t change under my plan. But we must take action to clear up a legal gray area and offer financial protection and basic transparency to residents.

HB 5281 does not block lawsuits, restrict legitimate claims, or deny anyone their day in court. It simply ensures that when an outside organization is financing and profiting from a lawsuit, that partnership agreement must be disclosed. It doesn’t even prevent someone from using the practice, just specifies they can’t hide it.

There is obvious incentive for investors who only make money when lawsuit payouts are high. These shadow cash deals add pressure to drag cases out, reject reasonable settlements, and prioritize returns over fairness.

Courts are supposed to be fair and focused on the rule of law, not whoever has the deepest pockets. When shadow cash gets involved, everyone loses – even people who have never stepped foot in a courtroom.

When secret spenders try to milk cases for every penny, those costs get pushed onto higher insurance premiums, healthcare costs, and consumer prices.

My plan ensures the state treats shadow spending like what it is: a high-cost financial product marketed to people in distress. The legislation caps shadow cash spending, requires clear contracts, mandates meaningful disclosures, and includes a 10-business-day cancellation window. These are protections Michigan consumers deserve, especially when they’re staring down difficult court proceedings.

The proposal also bans kickbacks, referral fees, and the kind of backroom profits that corrupt trust and integrity.  

Supporters of third-party litigation funding claim it’s harmless. If that’s true, they should have no problem with making their deals transparent.

HB 5281 requires disclosures and ensures accountability. It also prevents outside shadow cash funders from controlling litigation decisions. Settlement decisions should be made by the injured person and their attorney. Period. Not by an investor chasing a thick wallet.

If someone is profiting from your lawsuit, the court should know. If a deal is influencing the case, all parties should know. Justice should not have secret shareholders.

HB 5281 also bars foreign adversaries from participating in Michigan litigation funding.

Court proceedings can expose sensitive information, including business strategy, pricing structures, and trade secrets. Foreign adversaries don’t need to steal documents with a mask and a flashlight if they can legally take it through shady financial arrangements.

Our court system must not operate as a side door for economic exploitation.

In Michigan, we require transparency for lobbying. We regulate financial products. We prohibit deceptive practices. We impose ethics rules for a reason.

So, why should lawsuit funding be the one place where secrecy gets a free pass?

HB 5281 is a pro-consumer, pro-safety, pro-transparency reform designed to protect people at their most vulnerable moments and preserve trust in the justice system.

In Michigan, we can’t let shadow cash rot our courts from within.

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