How can litigation finance help lawyers and their clients achieve business and litigation objectives? Who are the parties involved? What are the steps in the funding process? What are the various investment structures? What is the role of litigation finance firms in case strategy? What is the difference between consumer and commercial lawsuit funding? How can third-party funding promote access to justice?
Litigation Finance Basics
Another Court Holds That Sharing Legal Memorandum With Potential Litigation Funders Does Not Make Them Discoverable
Marla Decker
There is a growing body of case law across multiple jurisdictions (including those that regularly see high stakes commercial litigation) holding that communications with litigation funders will not effect a waiver of work product protection, assuming the parties take common-sense precautions such as signing a non-disclosure agreement. A recent case from the Eastern District of Texas adds to that jurisprudence, holding that attorney memos prepared for and shared with prospective litigation funders are protected attorney work product, even under the 5th Circuit’s comparatively narrower test for what qualifies as work product.
Read MoreA 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.
Read MoreLitigation 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.
Read MoreWhy 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.
Read MoreCan 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.
Read MoreAnother 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.
Read MoreLitigation Funding in Bankruptcy and Distressed Situations
Marla Decker
Litigation finance can preserve or increase estate resources for creditors and enable additional recoveries. Financing can be useful for debtors (or potential debtors), but can also be useful for creditors in intercreditor disputes or other matters and especially useful for a litigation or liquidation trust seeking to prosecute ongoing claims. Fortunately, courts are recognizing that funding can play an appropriate role in bankruptcy proceedings, with two recent district court opinions leaving intact funding arrangements approved by the bankruptcy court.
Read MoreLevelling the Playing Field: The Rise of Litigation Funding in Canada
Marla Decker
Lake Whillans has been following closely the developments in Canada related to litigation funding and recently consummated its first public and court-approved litigation funding agreement in Canada. In Lilleyman v Bumble Bee Foods LLC, a class proceeding alleging violations of the Competition Act among canned tuna producers, Lake Whillans provided expenses and a cost indemnity to the plaintiff in exchange for a share of any future proceeds. We first wrote about early decisions related to litigation finance in Canada in 2015, and since then litigation funding has steadily gained acceptance amongst parties, practitioners and the courts. While litigation funding is becoming a world-wide phenomenon, each jurisdiction approaches the practice slightly differently. We asked Gavin Finlayson (Partner, Miller Thomson LLP) and Monica Faheim (Associate, Miller Thomson LLP), to provide us with an overview and insight on the Canadian viewpoint and legal framework of litigation funding.
Read MoreHow to Choose a Litigation Funder
Marla Decker
Litigation finance is growing in prominence in the legal industry, embraced not just by lawyers but also increasingly by courts and state bars. As lawyers and claimholders have come to understand the utility and flexibility of litigation finance, the demand for funding has increased, and so too has the number of funders in the market. Some funders (like Lake Whillans) focus exclusively on litigation financing, whereas others are incorporating litigation finance investments as part of a larger investment portfolio. Some funders are interested only in the highest-value disputes, whereas others target smaller investments. Some will fund a strong case in any area of commercial litigation, whereas others specialize in a more focused range of cases.
How are claimholders choosing among the increasing diversity of funding options? How should they be choosing? In this article we first present some empirical evidence on considerations in funder selection and then offer our advice, gleaned from our long experience in the litigation finance market.
Read More“State of the Rules” on Third-Party Funding in International Arbitration
Marla Decker
The role of third-party funding in international arbitrations is on the rise, in both common and civil law jurisdictions. Lake Whillans is meeting that demand with expanded capabilities and investments in the space. To help our audience understand the developing corpus of rules and guidance set forth by international arbitral institutions addressing such matters as disclosure obligations, privileges, and allocation of costs, we asked Ari MacKinnon, Aaron Gavin, and Leila Mgaloblishvili of Cleary Gottlieb to provide an overview.
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