While litigation financing is becoming more common, and often remains confidential, its disclosure in court remains a risk. Parties obtaining third-party litigation funding rarely know for certain whether the court will require details of the funding arrangement to be disclosed.
The status quo of the case law has been generally stable: Disclosure is usually not compelled. Courts generally hold that financing agreements are not materially relevant to the issues in the case, and/or that information shared with a litigation finance company is protected by the work product doctrine, attorney-client privilege, or common interest privilege. But courts make disclosure determinations on a case-by-case basis.
Results from Bloomberg Law’s 2020 Litigation Finance survey confirm both the uncertainty surrounding disclosure and the higher likelihood that it will not be compelled. A plurality of lawyers said they are not sure about the frequency of disclosure, but 40% said they are rarely or never required to disclose funding.
The uncertainty can lead to concern among lawyers who use or are considering using litigation financing. Survey responses showed that 47% of lawyers considering funding for the first time included disclosure of financing as one of their biggest concerns.
Two recent decisions show that disclosure is indeed still a risk — perhaps especially so in IP cases. Last month, the U.S. District Court for the Eastern District of Pennsylvania said that there was no common interest protection between a funding company and plaintiff, and that patent valuation documents shared with funders could be relevant to the determination of damages in the patent infringement case. (The court withheld final judgment on whether attorney work product might apply to protect certain funder-client communications). And in August, the U.S. District Court for the Southern District of California in a patent infringement case filed against Google ordered that all non-privileged documents relating to third-party funding be turned over, because of funding agreements’ particular relevance in IP disputes.
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