Court Decision May Illuminate Ownership of Litigation Funders and Medical Clinics

A recent ruling from a federal appeals court may pave the way for insurers to uncover the true identities behind litigation financing and medical clinics allegedly involved in auto accidents and insurance fraud. However, experts in insurance litigation emphasize that further legislative action is necessary in many states to combat these escalating issues.

“This is a very beneficial and very important decision. But it’s not enough,” stated William Large, president of the Florida Justice Reform Institute, which advocates for stricter limits on third-party financing of lawsuits.

Large’s comments followed the U.S. 11th Circuit Court of Appeals’ ruling in National Small Business United vs. the Treasury Department, issued on December 16. The three-judge panel overturned a lower court’s decision, affirming that the federal Corporate Transparency Act (CTA), enacted in 2020, is constitutional and mandates certain corporations to disclose the individuals who control them.

“The district court concluded that the CTA did not regulate economic activity and, on that basis, granted the plaintiffs summary judgment. We disagree,” wrote Judge Andrew Brasher for the 11th Circuit panel in the opinion. “We believe that, by effectively prohibiting anonymous business dealings, the CTA facially regulates economic activities having a substantial aggregate impact on interstate commerce. Moreover, as a uniform and limited reporting requirement, the CTA does not facially violate the Fourth Amendment. Accordingly, we reverse.”

This ruling stands as the last stop before the U.S. Supreme Court. If not appealed or overturned, it will become a part of U.S. case law, bolstering efforts to uncover corporate ownership.

However, the path for this information to reach the public or litigants is complex. The Transparency Act mandates that some corporations report ownership details solely to the U.S. Treasury, which is not obligated to make this information publicly accessible. According to the Financial Crimes Enforcement Network, the Treasury can share information with state and local agencies involved in law enforcement, but only with court authorization, as noted on FinCen.gov.

Moreover, the Transparency Act includes several exceptions for ownership reporting. Insurance companies, banks, investment firms, and nonprofits are exempt, as are some larger corporations, as explained in the court’s opinion.

Insurance legal experts assert that more state-level disclosure regulations are essential. Critics of litigation financing have long contended that the identities and motivations of lawsuit funding groups remain obscured in states lacking regulations on behind-the-scenes financiers. In early 2025, Georgia lawmakers introduced significant litigation-funding rules as part of a comprehensive tort-reform package. States like Arizona, Colorado, Wisconsin, Kansas, Montana, Indiana, West Virginia, Oklahoma, and Louisiana have also implemented similar measures.

In contrast, Florida, often viewed as a hotspot for litigation and auto fraud, has yet to adopt such regulations. Two litigation funding disclosure bills failed to advance in the 2024 legislative session, as reported here.

Auto insurance defense attorneys in states like New York and Florida have noted that some medical clinics, accused of orchestrating staged accidents and unnecessary treatments billed to insurers, appear to be owned by the same plaintiffs’ law firms driving excessive bodily injury claims. Some clinics may even have connections to unlicensed physician practices.

According to a newsletter from two auto insurance defense law firms in South Florida, some clinics have resorted to creating fake collection agencies and marketing firms to launder settlement funds and conceal kickbacks. Attorneys assert that much of the auto fraud in the U.S. involves some form of litigation funding.

“Yes, further action by the legislature is needed to provide real transparency in litigation funding,” remarked Jordana Kahn, a former prosecutor and current defense counsel at the Burger, Meyer & D’Angelo law firm in South Florida.

While some judges have permitted limited discovery of third-party financiers during litigation, this does not match the broader requirements established by Georgia and other states. Georgia’s 2025 law mandates that financiers register with the state, provide detailed information about affiliated individuals, and prohibits them from directing expert witnesses, settlements, or the litigation process. The law also makes funding agreements discoverable and holds financiers accountable for awards or sanctions against funded consumer-plaintiffs.

In states that have not addressed litigation funding, there is a significant demand for increased transparency. Mike Nelson, a New York insurance attorney who has researched auto fraud cases, noted that the 11th Circuit’s ruling was not unexpected and that challenging the Corporate Transparency Act was a “silly” move by the appellants. He believes the law, now reinforced by the appeals court’s decision, should facilitate efforts to combat fraud.

Jessica Schmor, an expert witness who has reviewed extensive questionable medical billing and testified about fraud, expressed skepticism about the ruling’s impact on the transparency of fraudulent medical clinics. While some ownership information is accessible through state corporate registration records, many medical centers have complex layers of corporate ownership.

“Where we have issues is clinics that are owned by a corporation or entity, and that entity is then owned by an LLC in Delaware or Wyoming,” she explained. In these states, corporations are often not required to disclose their owners, and obtaining records may necessitate a subpoena, which requires convincing a judge to issue an order based on existing evidence.

Even subpoenaed records may not provide the complete picture, Schmor cautioned.

The 11th Circuit opinion can be viewed here.

Topics
Lawsuits
Legislation

A recent ruling from a federal appeals court may pave the way for insurers to uncover the true identities behind litigation financing and medical clinics allegedly involved in auto accidents and insurance fraud. However, experts in insurance litigation emphasize that further legislative action is necessary in many states to combat these escalating issues.

“This is a very beneficial and very important decision. But it’s not enough,” stated William Large, president of the Florida Justice Reform Institute, which advocates for stricter limits on third-party financing of lawsuits.

Large’s comments followed the U.S. 11th Circuit Court of Appeals’ ruling in National Small Business United vs. the Treasury Department, issued on December 16. The three-judge panel overturned a lower court’s decision, affirming that the federal Corporate Transparency Act (CTA), enacted in 2020, is constitutional and mandates certain corporations to disclose the individuals who control them.

“The district court concluded that the CTA did not regulate economic activity and, on that basis, granted the plaintiffs summary judgment. We disagree,” wrote Judge Andrew Brasher for the 11th Circuit panel in the opinion. “We believe that, by effectively prohibiting anonymous business dealings, the CTA facially regulates economic activities having a substantial aggregate impact on interstate commerce. Moreover, as a uniform and limited reporting requirement, the CTA does not facially violate the Fourth Amendment. Accordingly, we reverse.”

This ruling stands as the last stop before the U.S. Supreme Court. If not appealed or overturned, it will become a part of U.S. case law, bolstering efforts to uncover corporate ownership.

However, the path for this information to reach the public or litigants is complex. The Transparency Act mandates that some corporations report ownership details solely to the U.S. Treasury, which is not obligated to make this information publicly accessible. According to the Financial Crimes Enforcement Network, the Treasury can share information with state and local agencies involved in law enforcement, but only with court authorization, as noted on FinCen.gov.

Moreover, the Transparency Act includes several exceptions for ownership reporting. Insurance companies, banks, investment firms, and nonprofits are exempt, as are some larger corporations, as explained in the court’s opinion.

Insurance legal experts assert that more state-level disclosure regulations are essential. Critics of litigation financing have long contended that the identities and motivations of lawsuit funding groups remain obscured in states lacking regulations on behind-the-scenes financiers. In early 2025, Georgia lawmakers introduced significant litigation-funding rules as part of a comprehensive tort-reform package. States like Arizona, Colorado, Wisconsin, Kansas, Montana, Indiana, West Virginia, Oklahoma, and Louisiana have also implemented similar measures.

In contrast, Florida, often viewed as a hotspot for litigation and auto fraud, has yet to adopt such regulations. Two litigation funding disclosure bills failed to advance in the 2024 legislative session, as reported here.

Auto insurance defense attorneys in states like New York and Florida have noted that some medical clinics, accused of orchestrating staged accidents and unnecessary treatments billed to insurers, appear to be owned by the same plaintiffs’ law firms driving excessive bodily injury claims. Some clinics may even have connections to unlicensed physician practices.

According to a newsletter from two auto insurance defense law firms in South Florida, some clinics have resorted to creating fake collection agencies and marketing firms to launder settlement funds and conceal kickbacks. Attorneys assert that much of the auto fraud in the U.S. involves some form of litigation funding.

“Yes, further action by the legislature is needed to provide real transparency in litigation funding,” remarked Jordana Kahn, a former prosecutor and current defense counsel at the Burger, Meyer & D’Angelo law firm in South Florida.

While some judges have permitted limited discovery of third-party financiers during litigation, this does not match the broader requirements established by Georgia and other states. Georgia’s 2025 law mandates that financiers register with the state, provide detailed information about affiliated individuals, and prohibits them from directing expert witnesses, settlements, or the litigation process. The law also makes funding agreements discoverable and holds financiers accountable for awards or sanctions against funded consumer-plaintiffs.

In states that have not addressed litigation funding, there is a significant demand for increased transparency. Mike Nelson, a New York insurance attorney who has researched auto fraud cases, noted that the 11th Circuit’s ruling was not unexpected and that challenging the Corporate Transparency Act was a “silly” move by the appellants. He believes the law, now reinforced by the appeals court’s decision, should facilitate efforts to combat fraud.

Jessica Schmor, an expert witness who has reviewed extensive questionable medical billing and testified about fraud, expressed skepticism about the ruling’s impact on the transparency of fraudulent medical clinics. While some ownership information is accessible through state corporate registration records, many medical centers have complex layers of corporate ownership.

“Where we have issues is clinics that are owned by a corporation or entity, and that entity is then owned by an LLC in Delaware or Wyoming,” she explained. In these states, corporations are often not required to disclose their owners, and obtaining records may necessitate a subpoena, which requires convincing a judge to issue an order based on existing evidence.

Even subpoenaed records may not provide the complete picture, Schmor cautioned.

The 11th Circuit opinion can be viewed here.

Topics
Lawsuits
Legislation