A federal appeals court ruling last week could potentially help insurers find out who is truly behind litigation financing and medical clinics that are said to participate in auto accidents and insurance fraud. But more legislation is needed in many states to help fight growing problems, insurance litigation experts said.
“This is a very beneficial and very important decision. But it’s not enough,” said William Large, president of the Florida Justice Reform Institute, which has advocated for more limits on third-party financing of lawsuits.
Large was speaking about the U.S. 11th Circuit Court of Appeals’ opinion in National Small Business United vs. the Treasury Department, handed down Dec. 16. A three-judge panel overturned a lower court and found that the federal Corporate Transparency Act (CTA), passed in 2020, is not unconstitutional and can continue to require certain corporations to report the actual people who exercise control over the firms.
“The district court concluded that the CTA did not regulate economic activity and, on that basis, granted the plaintiffs summary judgment. We disagree,” Judge Andrew Brasher wrote 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.”
The 11th Circuit is the last stop before the U.S. Supreme Court. If the ruling is not appealed and is not reversed by the high court, it would remain U.S. case law, giving at least some support for efforts that aim to discover corporate ownership.
How that information makes its way to the public or to litigants may not be so simple, though. The Transparency Act requires some, but not all, corporations to report ownership information only to the U.S. Treasury. And the Treasury does not have to make it publicly available, according to the department’s Financial Crimes Enforcement Network. The department can release information to state and local agencies engaged in “investigation or enforcement of civil or criminal violations of law,” but only if authorized by a court, FinCen.gov noted.
The Transparency Act also contains multiple exceptions for ownership reporting: Insurance companies, banks, investment companies and nonprofits do not have to report, nor do some larger companies, the court opinion explained.
More state-level disclosure rules are needed, insurance legal insiders said.
Critics of litigation financing for years have argued that the identities and motivations of lawsuit funding groups have remained murky in states that have not placed rules on behind-the-scenes financiers. Georgia lawmakers early in 2025 included significant litigation-funding rules as part of a major tort-reform package. Arizona, Colorado, Wisconsin, Kansas, Montana, Indiana, West Virginia, Oklahoma and Louisiana have done likewise, to one degree or another.
But Florida, long considered a hotbed for litigation and auto fraud, has not taken that step. Two litigation funding disclosure bills in the 2024 legislative session died in committee.
Auto insurance defense attorneys have said in New York, Florida and other states that some medical clinics—which have been accused of playing a big role in staged accidents and unnecessary medical treatments billed to insurers—appear to be owned by some of the same plaintiffs’ law firms driving unnecessary bodily injury claims litigation. Some clinics may have ties to unlicensed physician practices, defense lawyers said.
Some clinics have gone so far as to create fake collection agencies and marketing companies to launder settlement money and disguise kickbacks, according to a newsletter circulated by two auto insurance defense law firms in south Florida. Much of the auto fraud in the United States involves some type of litigation funding, attorneys said.
Kahn
“Yes, further action by the legislature is need to provide real transparency in litigation funding,” said Jordana Kahn, a former prosecutor and now a defense counsel with the Burger, Meyer & D’Angelo law firm, which has offices in south Florida.
In some cases, judges have allowed limited discovery of third-party financiers, during litigation. But it’s not the wider net that Georgia and some other states have required of litigation funders, defense lawyers said. Georgia’s touted 2025 law requires financiers to register with the state and to provide detailed information about affiliated people, and it bars funders from directing expert witnesses, settlements, and the course of the litigation. The law also makes funding agreements discoverable and aims to make financiers responsible themselves for some awards or sanctions against the funded consumer-plaintiffs.
In several other states that have not addressed litigation funding, though, “there’s a huge cry for more transparency,” said Mike Nelson, a New York insurance attorney who has studied auto fraud cases and ways to combat it with vehicle data.
He noted that the 11th Circuit’s ruling is not surprising, and that challenging the Corporate Transparency Act was a “silly” move by the appellants. The law, now backed by the weight of the appeals court’s decision, should make it easier to fight fraud, Nelson said.
One expert witness who has combed through thousands of pages of questionable medical billing and testified about fraud said the court ruling may have only a limited effect on fraudulent medical clinics’ transparency. Some clinic ownership information already is available through corporate registration information on file with state agencies, particularly for those treatment sites owned by physicians, said Jessica Schmor, a registered nurse, certified medical coder and frequent billing investigator. But many medical centers now have layers and layers of corporate ownership.
Even if actual or “beneficial” owners are reported to the U.S. Treasury, as the Transparency Act prescribes, that information may not be made available to the public or to defense lawyers, Schmor said.
“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 Wyoming and Delaware, most corporations are not required to report who their owners are. Records often have to be subpoenaed, which involves convincing a judge to issue an order – a request that can require some type of existing evidence supporting a lawyer’s suspicions.
And even subpoenaed records may not contain the whole truth, Schmor said.
The 11th Circuit opinion can be seen here.
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