LCJ has urged the Civil Rules Advisory Committee to adopt an amendment to Rule 26(a)(1)(A) to require disclosure of third-party investments in litigation (“TPLF”) at the outset of a lawsuit. TPLF occurs when a person or entity with no other connection to a lawsuit (usually a specialized investment company) acquires a right to an outcome-contingent payment from any proceeds produced by the case. Typically, the TPLF investor obtains that right by paying money to the plaintiff (or plaintiff’s counsel). In many instances, that money is used to finance prosecution of the case (e.g., discovery costs, attorneys’ fees, expert witness expenses). Often, plaintiff’s counsel takes the lead in securing the third-party investment; in addition, they sometimes receive the money and agree to make the specified outcome-contingent payment to the TPLF investor from their fee recovery.
LCJ has supported and partnered with the U.S. Chamber Institute for Legal Reform, a leader on this issue, to ensure that the federal rules require that TPLF be transparent. Please take a look at this letter signed jointly with ILR urging the Civil Rules Advisory to require disclosure of TPLF at the onset of litigation for more details.
The Advisory Committee on Civil Rules voted on November 7, 2017, to form a subcommittee to examine the need for disclosure of third-party litigation funding TPLF agreements. The Committee’s decision is an important step forward. This was the third time the Committee considered a TPLF disclosure requirement proposal, and on both previous occasions the Committee tabled the proposal. It is important that the new subcommittee will gather information about TPLF in conjunction with its effort to understand the ways in which amendments to the FRCP could provide the same protections to parties to MDL cases that the FRCP provide in all other cases. TPLF is prevalent in MDL cases, and many MDL judges understand the importance of understanding and disclosing such agreements. Although TPLF is also present in many other types of cases, and the Committee expressly contemplates gathering information about TPLF outside MDL cases as well, its effects are particularly evident in MDL cases.
For more information about this topic, please click below:
Third Party Litigation Funding Resources