Grassley Litigation Funding Disclosure Letter Asks Rules Committee for a Public Rule 26 Mandate

Grassley puts his name on the Rule 26 fight

Sen. Chuck Grassley, the Iowa Republican who chairs the Senate Judiciary Committee, asked the federal judiciary's rulemakers on October 21, 2026 to amend the Federal Rules of Civil Procedure so that third-party litigation funding is disclosed publicly, not merely to a judge in chambers. The letter, docketed as suggestion 26-CV-46 and first reported by Insurance Journal and Claims Journal on October 26, adds the most senior legislative voice yet to a corporate campaign for a Rule 26 funding disclosure duty — but it changes nothing about the timetable, because no draft rule exists and the earliest any amendment could bind a federal litigant is December 1, 2029.

The Grassley litigation funding disclosure letter is short and political rather than technical. It does not propose rule text. What it does is reframe the request: the corporate coalitions that have written to the Advisory Committee on Civil Rules since 2014 asked for disclosure to the parties and the court; Grassley asks for disclosure to the public, and he justifies it on national security grounds as well as the familiar arguments about control of litigation and settlement. That framing matters for plaintiffs' firms running mass torts and for the funders behind them, because it signals what a federal statute would look like if the rules process stalls.

The timing was deliberate or at least pointed. The letter is dated the same day the Advisory Committee on Civil Rules convened in Washington with third-party litigation funding on its agenda. As of October 28, 2026, neither minutes nor a public summary of that meeting had been released, so whether the committee's funding subcommittee moved toward drafting is not yet known.

What did Senator Grassley ask the federal rules committee to do about litigation funding?

Grassley asked the Advisory Committee on Civil Rules to amend the federal rules to increase public disclosure of third-party litigation funding in civil cases. The letter is addressed to Carolyn A. Dubay, Secretary of the Committee on Rules of Practice and Procedure (the Standing Committee), which is the formal channel for any member of the public, including a senator, to submit a rules suggestion. The Administrative Office of the U.S. Courts lists it as released October 21, 2026, assigned to the civil rules committee, with the status "pending consideration."

According to the trade-press accounts of the letter, Grassley makes four points:

• Funders put their return first. He argues that commercial funders often prioritize financial return over the interests of the parties whose claims they finance.
• Foreign money creates security risk. He contends that foreign investors participate in litigation funding to reach trade secrets and sensitive business information through civil discovery.
• Disclosure deters bad actors. Mandatory disclosure, he writes, would help courts ensure fairness and discourage those with "nefarious intent."
• Secrecy is itself a signal. The letter closes on the proposition that a funding arrangement that cannot withstand public scrutiny probably should not exist.

Those four points are not new; they track the arguments in the Litigation Funding Transparency Act he introduced in February. What is new is the forum. Senators rarely file rules suggestions, and a filing from the chairman of the committee with jurisdiction over the Rules Enabling Act and the federal courts carries an implicit message: if the judiciary does not write a rule, Congress may legislate one.

Why does Grassley say litigation funding is a national security issue?

Grassley says litigation funding is a national security issue because foreign investors, including entities tied to foreign governments, can finance US lawsuits and use the discovery process to obtain trade secrets and confidential commercial information from American companies. Under the current federal rules, a defendant usually has no way to know who is financing the claim against it, so it cannot ask a court for a protective order tailored to a foreign funder's access.

That argument is strongest in patent and commercial litigation, where the opposing party's documents have competitive value, and weakest in personal injury mass torts, where the discovery a funder could see is mostly product, marketing and medical-causation material. The distinction matters for plaintiffs' firms: the national security framing is being used to justify a rule that would apply across the docket, including the multidistrict litigation where portfolio financing of contingency fee practices is concentrated.

The same theme drives state legislation. Ohio Sub. H.B. 105, which took effect on October 6, 2026, bars funding from foreign governments and foreign-domiciled entities and requires commercial litigation funders to register with the state. Several other states adopted foreign-funding restrictions in 2025 and 2026, and the Insurance Information Institute counts more than 20 states that regulate funding in some form.

What is the Litigation Funding Transparency Act of 2026?

The Litigation Funding Transparency Act of 2026, S. 3826, is Grassley's bill to impose funder disclosure by statute in the largest categories of federal civil litigation. It was introduced on February 11, 2026 with Sens. Thom Tillis, John Kennedy and John Cornyn and referred to the Senate Judiciary Committee, where no markup has been reported.

Its core provisions, as reflected in the introduced text and sponsor summaries:

• Covered actions. Class actions, cases consolidated in a Multidistrict Litigation (MDL), and other federal actions consolidated with at least 100 individual cases.
• What must be disclosed. The identity of any commercial funder with a contingent interest in the outcome, whether the funder is a foreign state, foreign person, foreign-controlled enterprise or sovereign wealth fund, and the funding agreement itself.
• To whom. The court and the other parties.
• How it is enforced. The bill deems these obligations to be disclosures required by Rule 26(a), importing the existing duty to supplement and the sanctions available under Rule 37.
• Control. It would bar funders in covered cases from controlling litigation strategy or settlement decisions.
• Carve-out. Nonprofit organizations that fund litigation pro bono with domestic donations are excluded.

Rule versus statute: the two tracks compared

Feature	Rule 26 amendment (26-CV-8 model)	S. 3826 (Litigation Funding Transparency Act)	Grassley letter (26-CV-46)
Who adopts it	Judicial Conference, Supreme Court, subject to congressional review	Congress and the President	Asks the rules committees to act
Scope	All federal civil actions (as drafted by LCJ/ILR)	Class actions, MDLs, consolidations of 100+ cases	Unspecified; civil litigation generally
Disclosure recipient	Parties (production under Rule 34)	Court and parties	Public
Foreign-funder flag	Not central	Required	Central rationale
Funder control limits	None	Prohibits funder control	Criticizes it; no text
Earliest effect	December 1, 2029	On enactment	—
Status (Oct. 28, 2026)	Under subcommittee study	In committee, no markup	Pending consideration

The table shows why the letter is more ambitious than either vehicle it supports. Neither the corporate proposal nor the senator's own bill requires public disclosure; both route funding agreements to the court and opposing counsel. A public filing requirement would raise work-product and confidentiality questions that the subcommittee has not yet addressed in its published materials.

The docket Grassley joined: who else has written to the committee

The Grassley letter is one of at least six funding-related submissions pending before the civil rules committee in 2026. The rulemakers number each suggestion, and the docket shows a campaign on both sides timed to the October meeting.

Suggestion	Submitter	Date	Position
26-CV-8	Lawyers for Civil Justice and U.S. Chamber Institute for Legal Reform	March 10, 2026	Add funder identification and production of funding agreements to Rule 26(a)(1)(A)
26-CV-30	Lawyers for Civil Justice and U.S. Chamber of Commerce	2026	Follow-up urging disclosure to parties, not only in camera
26-CV-31	214 companies	September 14, 2026	Uniform rule; disclosure to court and parties; rejects judge-only review
Ramey LLP letter	Plaintiffs' patent firm	September 28, 2026	Opposes mandatory disclosure as a matter of course
26-CV-42	International Legal Finance Association (ILFA)	October 7, 2026	Opposes automatic disclosure to adversaries; relies on FJC New Jersey study
26-CV-46	Sen. Chuck Grassley	October 21, 2026	Increase public disclosure; national security rationale

The trajectory of the corporate letters is itself a datum: 28 signatories in 2021, more than 120 in 2024, and 214 in September 2026. The Grassley filing gives that campaign a congressional sponsor inside the rules docket for the first time this cycle.

The evidence problem: what the Federal Judicial Center found in New Jersey

The strongest counterweight to the senator's letter sits in the same agenda book. At the committee's request, the Federal Judicial Center reviewed five years of experience under District of New Jersey Local Civil Rule 7.1.1, the most demanding standing disclosure rule in any federal district. The study, by FJC researcher Emery G. Lee III and covering June 2021 through June 2026, is reprinted in the October 21 materials under the third-party litigation funding item.

Local Civil Rule 7.1.1 took effect on June 21, 2021. It requires a party to disclose any nonparty funder's identity, whether the funder's approval is needed for litigation or settlement decisions, and a brief description of the funder's financial interest; anything more requires a showing of good cause.

According to ILFA's October 7 submission, which quotes the study:

• funding disclosures were filed in 104 cases over five years, about "one filing per 1,000 civil cases in the district";
• there was "simply no trend upward or downward" across the period;
• 69 of the 106 disclosures counted elsewhere in the study (65%) were filed in related cases enforcing New Jersey's Daniel's Law, the statute shielding judges' and officials' home addresses;
• no commercial litigation funder reported approval rights over litigation or settlement.

The count differs by two between passages of the document as quoted, and the figures come through an advocacy filing rather than the report itself, so they should be read with that caveat. But the direction is clear. If the only district with a five-year disclosure regime has produced roughly 20 disclosures a year, most of them in a single family of privacy cases, the empirical premise that undisclosed commercial money is steering federal litigation is harder to prove than the letter assumes. Proponents answer that low disclosure counts show evasion or narrow drafting, not absence of funding; that is the debate the subcommittee has to resolve.

What happened at the October 21, 2026 Advisory Committee on Civil Rules meeting?

What happened at the October 21, 2026 meeting is not yet public: the Advisory Committee on Civil Rules met in Washington with third-party litigation funding listed as an agenda item, but it had not released minutes or a summary as of October 28, 2026. The agenda book shows the funding item alongside the FJC New Jersey study, and the committee's Third-Party Litigation Funding Subcommittee, formed in 2024 and chaired by Judge David Proctor of the Northern District of Alabama, has reported over the past year that it is still gathering information and attending bar and academic conferences on the subject.

The most an October meeting could have done procedurally is direct the subcommittee to begin drafting. Approval of a draft for publication would ordinarily come at a spring meeting, followed by Standing Committee review in June. Practitioners should expect the subcommittee's position to surface in the agenda book for the spring 2027 meeting, which is typically posted several weeks in advance.

Is there a federal rule requiring disclosure of third-party litigation funding?

There is no Federal Rule of Civil Procedure requiring disclosure of third-party litigation funding today. Rule 26(a)(1)(A)(iv) requires initial disclosure of insurance agreements, which is the analogy proponents rely on, but it says nothing about funders. Disclosure currently depends on a patchwork:

• Local rules. A minority of districts require some disclosure, the District of New Jersey's rule being the broadest; others reach only funders with an interest under the corporate disclosure statement framework of Rule 7.1.
• Standing orders. Individual judges, most prominently Chief Judge Colm Connolly in the District of Delaware, require funding disclosure in their own cases.
• MDL case-management orders. Transferee judges in Multidistrict Litigation (MDL) proceedings can order disclosure where funding bears on settlement administration or counsel's conduct. On October 14, 2026, Chief Judge Nancy Rosenstengel ordered a plaintiffs' firm in the paraquat MDL to disclose who funds its cases after most of its clients declined a global settlement.
• State law. States including Ohio, Wisconsin, West Virginia and Montana require disclosure or production of funding agreements in their own courts.

That patchwork is the core of the corporate argument for a uniform rule, and the reason the Grassley litigation funding disclosure push targets Rule 26 rather than local rules.

When could a federal litigation funding disclosure rule take effect?

A federal litigation funding disclosure rule could not take effect before December 1, 2029, even if the committee began drafting in October 2026. The Rules Enabling Act, 28 U.S.C. §§ 2071–2077, and the Judicial Conference's procedures impose a fixed sequence:

Step	Earliest realistic date
Subcommittee drafts; Advisory Committee approves for publication	Spring 2027 meeting
Standing Committee approves publication	June 2027
Public comment period (six months)	August 2027 – February 2028
Advisory Committee final approval	Spring 2028
Standing Committee approval	June 2028
Judicial Conference approval	September 2028
Supreme Court transmits to Congress	By May 1, 2029
Rule takes effect absent congressional action	December 1, 2029

Any slippage at a single stage moves the effective date a full year, to December 1, 2030. A statute would move faster, which is why the senator's dual-track approach matters: S. 3826 could, if enacted, impose disclosure in MDLs and class actions immediately, while the rules process works on a uniform rule for everything else.

How would a litigation funding disclosure rule affect mass torts and MDLs?

A litigation funding disclosure rule would affect mass torts and MDLs more than any other part of the federal docket, because that is where portfolio financing of plaintiffs' firms is concentrated and where S. 3826 is specifically aimed. In an MDL with thousands of claimants, a funder typically finances the firm's inventory rather than any single case, so the practical questions are whether a portfolio facility "in" a case triggers disclosure, whether every short-form complaint must carry the disclosure, and whether the funding agreement's settlement-approval terms become discoverable.

Three consequences follow for mass tort practice:

1. Settlement leverage becomes visible. If defendants can see funder approval rights, they can argue that a firm's opt-out or holdout posture reflects the funder's return thresholds rather than client interests, the theory that drove the paraquat disclosure order.
2. Common benefit and fee disputes get a new exhibit. Funding agreements that grant a share of fees could be cited in Common Benefit Fund allocation fights and fee-reasonableness objections.
3. Bellwether and census practice may change. Transferee judges already use census registries and Plaintiff Fact Sheets to vet inventories; a funding field on those forms would be an easy administrative add-on, with or without a national rule.

For a Mass Tort docket in state court, none of this applies; a Federal Rule of Civil Procedure binds only federal courts, which is why the parallel state-law campaign continues.

Does litigation funding disclosure apply to mass arbitration?

Litigation funding disclosure under Rule 26 would not apply to mass arbitration, because the Federal Rules of Civil Procedure govern only actions in federal district court, and individual consumer or employment arbitrations administered by the American Arbitration Association (AAA) or JAMS are not civil actions. Neither the AAA's mass arbitration supplementary rules nor the JAMS mass arbitration procedures currently require claimants to identify a funder.

The gap is real. Funding for Mass Arbitration campaigns has grown, as the October 15, 2026 Series A raise by claims-aggregation company Chariot Claims showed. A federal disclosure rule would surface funding only when an arbitration dispute lands in court — on a motion to compel arbitration, a fee fight under California Code of Civil Procedure §§ 1281.97–1281.98, or a petition to confirm or vacate an award — and even then only to the extent the court treats funding as relevant. S. 3826 likewise covers only federal civil actions. Respondents that want funder disclosure in arbitration will continue to pursue it through clause drafting and provider rules rather than Rule 26.

What it means for plaintiffs' firms, funders and defendants

• Plaintiffs' personal injury firms. The near-term exposure is case-specific, not rule-based: transferee judges can and do order disclosure. Firms with portfolio facilities should know now what their agreements say about settlement approval and termination, because that is what a court will ask about first.
• Funders. The New Jersey evidence is the funding industry's best asset in the rules process, and ILFA has placed it at the center of its submission. The public-disclosure framing in the Grassley letter is the industry's largest risk, since it would expose pricing and terms to competitors as well as adversaries.
• Defendants and insurers. A uniform federal rule is at least three years away. In the meantime, the practical routes are local rules, standing orders, MDL case-management orders, and state statutes such as Ohio's, which requires production of commercial funding agreements to parties and insurers without a discovery request.
• Arbitration drafters. Neither track reaches arbitral proceedings. Clauses and provider rules remain the only mechanism for funder disclosure in consumer and employment arbitration.

FAQ

What did Senator Grassley ask the rules committee to do?

He asked the Advisory Committee on Civil Rules to amend the Federal Rules of Civil Procedure to increase public disclosure of third-party litigation funding. His October 21, 2026 letter is docketed as suggestion 26-CV-46 and is pending consideration.

Is the Grassley proposal a new law?

No. The letter is a rules suggestion with no binding effect. Grassley's separate bill, the Litigation Funding Transparency Act of 2026 (S. 3826), would be law only if passed by Congress; it has been in the Senate Judiciary Committee since February 11, 2026 without a markup.

What happened at the October 21, 2026 Advisory Committee on Civil Rules meeting?

The committee met with third-party litigation funding on its agenda, but no minutes or public summary had been released as of October 28, 2026, so the outcome is not yet known.

When could a federal litigation funding disclosure rule take effect?

No earlier than December 1, 2029, because a rule must pass the Advisory Committee, the Standing Committee, a six-month public comment period, the Judicial Conference and the Supreme Court before a congressional review period.

Does litigation funding disclosure apply to mass arbitration?

No. A Rule 26 amendment would govern only federal court actions, and S. 3826 covers only federal civil actions. Funding in arbitrations before the AAA or JAMS would surface only if a dispute reaches court and the judge orders it.

How many litigation funding disclosures has New Jersey's rule produced?

According to the Federal Judicial Center review cited by ILFA, 104 cases from June 2021 to June 2026, about one per 1,000 civil cases in the District of New Jersey, with most of the disclosures filed in Daniel's Law cases.