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Senators Start Asking Questions About Hedge Funds Betting on Lawsuits

The "litigation finance" industry provokes a skeptical look from two powerful Republican lawmakers
Iowa Republican Senator Chuck Grassley

Iowa Republican Senator Chuck Grassley

Tom Williams/CQ Roll Call

Hedge funds have been speculating on lawsuits, a new form of financial engineering that some business interests say encourages wasteful courtroom warfare. Now two top Republican senators—Chuck Grassley of Iowa and John Cornyn of Texas—have a few questions of their own. The lawmakers announced a move to start "examining the impact of third-party litigation financing is having on civil litigation." Their starting point is not one of enthusiasm.

"Litigation speculation is expanding at an alarming rate," Grassley, chairman of the Senate Judiciary Committee, said in a joint statement released on Thursday. "And yet, because the existence and terms of these agreements lack transparency, the impact they are having on our civil justice system is not fully known."