Legal Groups Push for Mandatory Disclosure of Litigation Funders

"Funders have flatly told the Advisory Committee that they exercise no control over the lawsuits they finance, but say the opposite to their investors and to courts. TPLF contracts typically give a nonparty funder the right to benefit from the outcome of a lawsuit and provide tools for such funders to exercise varying degrees of control or influence over litigation and settlement decisions."

"Federal courts are deeply divided on TPLF disclosure, with federal district courts granting 40% of disclosure motions and denying the remaining 60%, according to a study by the International Legal Finance Association. Some federal appellate and district courts have adopted local rules requiring automatic disclosure of TPLF use or of any persons with financial interests in a case, but these rules vary significantly."

"The proposed rule aims to guide courts and litigants in TPLF disclosure while preserving judicial discretion and protecting privilege assertions. Federal courts currently lack uniform procedures for addressing TPLF disclosure, and courts are divided on whether the relevance standard of Rule 26(b)(1) bars disclosure of TPLF agreements."

Lawyers for Civil Justice and the U.S. Chamber of Commerce Institute for Legal Reform proposed amending Federal Rule of Civil Procedure 26(a)(1)(A) to mandate disclosure of third-party litigation funding in federal civil litigation. Federal courts currently lack uniform procedures for addressing TPLF disclosure, with district courts granting only 40% of disclosure motions while denying 60%. Courts are divided on whether Rule 26(b)(1)'s relevance standard permits TPLF agreement disclosure. Some courts have adopted local rules requiring automatic disclosure, but these vary significantly. TPLF contracts grant nonparty funders financial benefits and control over litigation decisions. The proposed rule aims to guide courts and litigants while preserving judicial discretion and protecting privilege assertions.

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