Year: 2022

A New York Appellate Court Weighs in on Litigation Funding Disclosure: Relevance is Paramount

Marla Decker

As litigation funding becomes more normalized, the disclosure of litigation funding arrangements is a much talked-about and evolving issue. The question is simple: under what circumstances can a litigant receiving litigation financing be compelled to disclose details about the funding arrangement. Calls to require disclosure in federal courts through FRCP rule changes, while not adopted, has prompted some individual courts (notably the District of New Jersey) to require some disclosure. Arbitral institutions have also examined the question and were among the first to set forth rules, requiring modest disclosures.

The Argument for Why Counsel Have an Ethical Duty to Inform Clients About Litigation Finance

Marla Decker

Recently, I met a General Counsel of a mid-cap company who had only just learned about litigation finance. She was both intrigued about the possibilities that litigation funding could unlock for her company (as a company with an active litigation docket) and dismayed that she hadn’t heard of this option sooner: “Why haven’t my outside counsel told me about this?”

Our conversation reinforced that even though litigation finance is increasingly well-known among litigators, there remains substantial opportunity for education, especially among in-house counsel. But the GC’s question also made me consider whether the pendulum has now swung from the industry’s early days when counsel questioned whether they were ethically permitted to inform their clients about litigation funding to a point where counsel now have an affirmative duty to inform their clients about litigation funding as an option to finance litigation costs?

Litigation Funding Disclosure in Delaware: Emerging Standard?

Marla Decker

Mandatory disclosure of litigation funding has arrived in the District of Delaware — at least in the courtroom of Chief Judge Connolly. In an April standing order, the Chief Judge directed parties appearing before him to disclose the identity of any third-party funders within 45 days for currently pending cases and 30 days for newly filed actions.

What a Litigation Funder Learned from A Litigation Funding Conference

Marla Decker

I recently attended the LITFINCON conference in Houston, Texas. This was my first in-person conference I attended in 2+ years, and it was a welcome breath of fresh Texas (blissfully warm) air.

The conference organizers (Siltstone Capital and Litigo Financial) did a great job of creating a diverse set of topics and finding great panelists. Speakers included funders, law firm partners, general counsel, brokers, investors and even judges. We covered a wide range of topics including the basics of litigation funding, litigation finance as a maturing asset class, the role of brokers, rise of secondary markets, and even the intersection of litigation funding with block chain. The stars of the show were probably the judicial panelists, including two federal judges from the Southern District of Texas, and a Texas state court judge. It’s unusual to get a view from the judiciary outside of the courtroom, let alone one on litigation finance, and this panel was particularly engaged and candid about their knowledge and impressions.

Why A Delaware Supreme Court Decision Affirming Shifting a Contingency Fee to the Losing Party Could Have Applications to Recovering the Costs of Litigation Funding

Marla Decker

n general, the U.S. legal system requires parties to bear their own costs, and does not automate “loser-pays” rules like other jurisdictions or arbitral institutions. There are certain exceptions, notably when the dispute arises under a contract providing that the prevailing party will be entitled to its fees and costs. An incentive to both parties to include such a provision is so that each party will truly be “made whole” after any dispute, rather than netting from any recovery the costs of legal fees and expenses.

Can a Prevailing Party in Arbitration Recover its Litigation Funding Costs?

Marla Decker

In addition to providing finance for commercial litigation cases in the U.S. and Canada, Lake Whillans routinely funds claimants in arbitrations. In recent years there has been increasing attention to litigation funding arrangements in arbitrations, and a number of arbitral institutions have inserted rules to address the practice, both to increase transparency and to promote fairness to both sides. One emerging question in the field, where cost-shifting to the losing party is a typical part of awards, is whether tribunals will award a prevailing claimant the value of its litigation funding costs, in addition to damages and other legal costs. The confidential nature of most commercial arbitral awards makes it difficult to know how often this occurs (or has even been sought), but tribunals have permitted claimants to recover funding costs in some instances. And there is growing precedent to indicate that where tribunals award funding costs, courts will not second-guess the decision — at least for arbitrations sited in England and Wales.

Another Effort to Amend Federal Rule 26 with a One-Size Fits All Litigation Finance Disclosure Requirement Does Not Persuade the Federal Rules Advisory Committee

Marla Decker

The decision should still be up to the litigant, the Advisory Committee on Civil Rules says in a new report.

In early October 2021 — citing “challenges” in the rulemaking procedure — the Advisory Committee on Civil Rules for federal courts again declined to recommend a rule be adopted requiring the disclosure of third-party litigation financing (TPLF) agreements.

Mandatory disclosures are generally governed by Rule 26 of the Federal Rules of Civil Procedure, which requires parties to reveal a broad range of information. This includes documents and other materials the party expects to use to support its claims or defenses, the computation of categories of damages, the identity of those with discoverable information, and insurance agreements.

As it stands, the rule does not require disclosure of TPLF.

Contact Us

The best way for companies and their counsel to determine if litigation finance is an attractive option is to discuss it with us.

Lee Drucker drucker@lakewhillans.com