General Counsel Push for Full Disclosure of Third-Party Litigation Funding in New Letter

By: Caroline Spiezio

In-house counsel from 30 major U.S. companies are backing a proposal that would require full disclosure of third-party funding in litigation.

Chief legal officers and general counsel from Google, Verizon Wireless, AT&T Inc. and other companies signed onto a letter sent Thursday to Rebecca Womeldorf, chief counsel and secretary of the Committee on Rules of Practice and Procedure for the Administrative Office of the United States Courts.

The letter supported a proposed amendment to Federal Rules of Civil Procedure 26(a)(1)(A)that would require the full disclosure of third-party funding agreements in civil actions.

“We believe the reasons for requiring full disclosure are strong and well documented in the record before the Advisory Committee,” in-house counsel wrote in the letter. “When litigation funders invest in a lawsuit, they buy a piece of the case; they effectively become real parties in interest. Defendants (and courts) have a right to know who has a stake in a lawsuit and to assess whether they are using illegal or unethical means to bring the action.”

In-house signers added “both the court and the defendant need to know who is sitting on the other side of the table,” whether it’s an individual with a meritorious case or a litigation funder aiming to satisfy investors.

The group, which includes senior litigators from Microsoft Corp. and Shell Oil Co., noted the advisory committee already requires defendants disclose insurance agreements “which some funders have described as a defense-side form of litigation funding.”

“Finally, we note that some litigation funders have contended that major companies are generally indifferent or opposed to such a disclosure requirement because corporate use of TPLF is allegedly widespread. No evidence has been proffered to support that assertion,” in-house counsel wrote.

Thursday’s letter backed an earlier petition from 30 trade associations, including the U.S. Chamber of Commerce, that renewed the proposal to require the disclosure of third-party litigation funding. The petition, sent in June 2017, was led by the U.S. Chamber Institute for Legal Reform, whose president, Lisa Rickard, commented on the latest letter in a blog post Thursday.

“TPLF, where third parties ‘invest’ in lawsuits for a cut of any judgment or settlement, has exploded into a global, multi-billion dollar business,” Rickard said in the blog post. “ILR has long warned that the practice is unregulated, can put investors’ interests ahead of plaintiffs’, leads to more lawsuits in our over-sued society, and unnecessarily prolongs litigation. Last year a major funder told The Wall Street Journal, ‘We make it harder and more expensive to settle cases.’”