WASHINGTON (Legal Newsline) – A total of 124 companies have sent a letter to the Advisory Committee on Civil Rules urging creation of a new rule that would require a uniform process for the disclosure of third-party litigation funding in federal cases nationwide.
The Advisory Committee on Civil Rules will meet October 10 and plans to discuss whether to move ahead with the development of a new rule addressing third-party litigation funding.
The letter, organized by Lawyers for Civil Justice, comes at a time when third-party litigation funding has grown into a $15 billion industry and invests funding in an increasing number of cases. That, according to LCJ, has triggered a growing number of requests from litigants asking courts to order the disclosure of funding agreements in their cases.
The letter is signed by industry leaders in healthcare, technology, financial services, insurance, energy, transportation, automotive and other sectors
The letter contends that courts are responding to these requests with a “variety of approaches and inconsistent practices (that) is creating a fragmented and incoherent procedural landscape in the federal courts.” It says a rule is “particularly needed to supersede the misplaced reliance on ex parte conversations; ex parte communications are strongly disfavored by the Code of Conduct for U.S. Judges because they are both ineffective in educating courts and highly unfair to the parties who are excluded.”
LCJ is a national coalition of defense trial lawyer organizations, law firms and corporations that works to promote excellence and fairness in the civil justice system to secure the just, speedy and inexpensive determination of civil cases.
LCJ and the U.S. Chamber of Commerce’s Institute for Legal Reform submitted a separate comment letter to the Advisory Committee that also advocates for a “simple and predictable rule for TPLF disclosure.” (EDITOR’S NOTE: Legal Newsline is owned by the ILR.)
“The Advisory Committee should propose a straightforward, uniform rule for TPLF disclosure,” LCJ General Counsel Alex Dahl said in a press release. “Absent such a rule, the continued uncertainty and court-endorsed secrecy of non-party funding will further unfairly skew federal civil litigation. The support from 124 companies reflects both the importance of a uniform disclosure rule and the urgent need for action.”
The corporate letter advances a number of additional reasons why TPLF disclosure is needed in federal courts. They are:
Control: The letter argues that parties “cannot make informed decisions without knowing the stakeholders who control the litigation… and cannot understand the control features of a TPLF agreement without reading the agreement.” While many funding agreements state that the funder does not control the litigation strategy, companies are increasingly concerned that they use their growing financial leverage to exercise improper influence.
Procedural safeguards: The companies maintain that the safeguards embodied in the Federal Rules of Civil Procedure (FRCP) cannot work without disclosure of TPLF. One example is that courts and parties today are largely unaware of and unable to address conflicts between witnesses, the court, and parties on the one hand, and non-parties on the other, when these funding agreements and the financial interests behind them remain largely secret.
Appraisal of the case: Finally, the letter reasons that the FRCP already require the disclosure of corporate insurance policies which the Advisory Committee explained in 1970 “will enable counsel for both sides to make the same realistic appraisal of the case, so that settlement and litigation strategy are based on knowledge and not speculation.” The companies maintain that this very same logic should also require the disclosure of TPLF given its growing role and impact on federal civil litigation.
LCJ says it also is intensifying its efforts to have companies and practitioners to ask about third-party litigation funding in their cases and to press for a uniform federal rule to require disclosure. LCJ is launching a new website that will serve as a hub for its new campaign Ask About TPLF later this month.