Litigation finance disclosure done right

An order released today in the opioids multidistrict litigation by Judge Dan Polster provides a welcome example of litigation finance disclosure done right.

Disclosure is a topic occasionally raised in relation to litigation finance, but all too often without a clear rationale. While it’s clear that there is some desire in some corners of the American legal system for there to be disclosure of litigation finance arrangements in certain US court proceedings, especially those involving multiple claimants such as class actions and MDLs, current calls for disclosure tend to be sponsored by special interests seeking tactical advantage and framed in a discriminatory way.

If we are to have disclosure in some cases, Judge Polster has gone about it in the right way.

First, the judge has called for the disclosure to be made ex parte and in camera to him.  In other words, he will know about the financing, but the defendant will not – and no defendant yet has come up with any justification for being told about a plaintiff’s sensitive financial arrangements other than pure voyeurism.

Second, Judge Polster makes clear that the purpose of the disclosure is simply to affirm to him that there is no conflict and the funder exercises no control over the matter.

Third, he has said in advance that no discovery will be permitted into the litigation finance arrangements, which he recognizes constitute protected attorney work product.  This is exactly right, and it removes one of Burford’s principal objections to disclosure – that it is misused to create expensive and time-wasting frolics and detours in litigation as a tactical device by defendants.

It is widely recognized that litigation finance has become a part of the legal mainstream, and routine disclosure of litigation finance arrangements, especially in single cases, remains both unjustified and unnecessary. Proponents of such disclosure have failed to make the case about why litigation finance is any different than other capital provision.  No one is calling for banks to disclose their security interests over fee receivables in law firms, but that is just as much “litigation funding” as what specialists like Burford do – and probably happens in significantly greater volume.

But in those special circumstances when some disclosure is desired, Judge Polster has created a model for other judges to follow.


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