A bill moving through the Iowa Legislature is raising serious concerns about a little-known practice of foreign and out-of-state investors quietly profiting from lawsuits filed against Iowa businesses.
Senate File 2419 would require disclosure when a third party is funding a lawsuit in Iowa courts. Third-party litigation funding occurs when outside investors pay the legal costs of a lawsuit in exchange for a share of any settlement or court award.
Supporters say the practice has expanded rapidly in recent years to the tune of becoming a $16 Billion business, attracting investment firms from across the country and around the world. Those investors often have no connection to the underlying dispute or the communities affected by the lawsuit. Their only interest is financial return.
Without disclosure requirements, Iowa businesses defending themselves in court may never know who is actually financing the lawsuit against them.
Backers of Senate File 2419 say that lack of transparency creates an opening for foreign money and out-of-state investors to quietly target Iowa companies, particularly small businesses that may not have the resources to withstand prolonged and expensive litigation.
“Family businesses like mine are built over generations,” said Matt Geise, a fourth-generation small business owner in northeast Iowa. “When outside investors or foreign entities start looking at lawsuits against Iowa businesses as an investment opportunity, it puts a target on companies that are simply trying to provide jobs and serve their communities. We should not allow foreign money to secretly bankroll lawsuits against Iowa businesses just to make a profit.”
Supporters of the bill say the costs of defending against lawsuits backed by outside investors can be substantial. For small businesses operating on thin margins, even the threat of prolonged litigation can create major financial pressure. Those costs do not stop at the courthouse door. Legal expenses, insurance costs and settlement pressures often ripple through the economy, burdening the average American family with more than $5,000 per year in higher costs.
The concern about outside influence in litigation is also gaining national attention. U.S. Senator Chuck Grassley of Iowa has introduced federal legislation to address the issue and bring transparency to third-party litigation funding in federal courts.
While Congress debates federal reforms, supporters of Senate File 2419 say Iowa does not need to sit on the sidelines. They argue that Iowa lawmakers can act now to protect the state’s legal system and ensure that lawsuits filed in Iowa courts are not quietly driven by hidden financial interests from outside the state or overseas.
Importantly, Senate File 2419 does not ban third-party litigation funding. Instead, it requires transparency. If a lawsuit is being financed by an outside investor, that relationship must be disclosed so judges and defendants know who has a financial stake in the case. Supporters say that simple step can help courts identify potential conflicts of interest and ensure lawsuits are decided based on the merits of the case rather than the financial strategies of outside investors.
At a time when Iowa small businesses are already dealing with rising costs, workforce challenges and economic uncertainty, the prospect of foreign-funded or out-of-state investors targeting them with profit-driven lawsuits is a risk many say cannot be ignored.
Supporters of Senate File 2419 say the solution is straightforward. Bring transparency to litigation funding and make sure Iowa courts are not used as a vehicle for hidden outside interests seeking profit at the expense of Iowa businesses and the consumers who rely on them.
