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Litigation finance disclosure deemed a “side issue” despite “parade of horribles”

October 9, 2019
Danielle Cutrona

A September 18 US federal court ruling refutes common rationales for blanket disclosure of litigation finance.1

In the multidistrict litigation (MDL) concerning recalls of a generic drug used to treat blood pressure, the US District Court for the District of New Jersey said that litigation finance is irrelevant to the claims and defenses in the case and is therefore not discoverable.

According to the court, the fact of plaintiffs’ funding is a “side issue” that is unrelated to the facts and theory of liability. The court reached this conclusion despite the efforts of defendants to raise “a parade of horribles” that could hypothetically arise in case where a party has obtained financing.

The court further opined that calls for disclosure of these financing agreements are not only irrelevant but also burdensome discovery requests. In this instance, even if the fact of finance had been relevant, the defendants asked for far for more disclosure than would be merited under the proportionality requirement of Rule 26. Although only a limited set of documents would in theory be needed to achieve their stated purpose, the defendants asked for everything relating to the plaintiffs’ finance arrangements.

The court is right to identify such attempts as needless and burdensome. As Burford has noted, calls for disclosure tend to be sponsored by special interests seeking tactical advantage and are framed in a discriminatory way. When defendants make overly burdensome discovery requests about a party’s financing, they are misusing disclosure as a feint to create expensive and time-wasting frolics and detours in litigation as a tactical device.

Citing an earlier ruling by Judge Dan Polster, which Burford has described as an example of disclosure done right, the court agreed to a limited in camera review—but only if the parties could show that there were, in fact, arrangements that allowed the financier control of or input into litigation or settlement decisions that would interfere with the funded party’s lawsuit or the attorney-client relationship. Very interestingly, the court left it to the discretion of the lawyers to decide if review was necessary in any specific instance.

1 Valsartan N-Nitrosodimethylamine (NDMA) Contamination Prods. Liab. Litig., 2019 BL 350972, D.N.J., No. 19-2875, 9/18/19.