214 Companies Call for TPLF Disclosure Rule
New Letter Urges Adoption of Rule Requiring TPLF Disclosure to Parties
In a significant show of support for third-party litigation funding (TPLF) transparency, 214 companies have signed a letter to the Advisory Committee on Civil Rules endorsing an amendment to the Federal Rules of Civil Procedure (FRCP) which requires disclosure of funding agreements to courts and parties.
The signatory companies include large and small businesses spanning a wide variety of industries, including food and agriculture, technology, healthcare, insurance, financial services, energy, transportation, logistics, automotive, aerospace, retail, hospitality, and manufacturing.
Nonparty litigation funders participate in cases — and share in judgments and settlements — without disclosing their involvement or financial interests to the court, opposing parties, or the public. The letter explains this is at odds with a core principle of the FRCP: courts, parties, and the public should be able to identify those with a financial stake in litigation.
TPLF contracts give nonparty funders a share of judgments and settlements and often provide a basis for influencing or controlling litigation and settlement decisions. An examination of TPLF contracts by Lawyers for Civil Justice found that funders frequently have significant influence over strategic and settlement decisions — and in some cases effectively exercise the same rights as the named parties. After years of denying this, some funders are now acknowledging that they have the capacity to control the litigation they fund, and that they sometimes exercise it, the letter says.
The letter rejects any suggestion that a TPLF disclosure rule should operate ex parte— disclosure to the court alone. Every current disclosure requirement — real parties in interest, corporate ownership, insurance agreements, amicus curiae — is available to all parties. A carve-out for litigation funders would be without precedent.
LCJ and ILR Urge Rule Requiring TPLF Disclosure to Parties
Lawyers for Civil Justice (LCJ) and the U.S. Chamber of Commerce Institute for Legal Reform (ILR) have jointly filed a separate Rules Suggestion urging the Advisory Committee on Civil Rules to amend the Federal Rules of Civil Procedure to require disclosure of nonparty litigation funding contracts — the same LCJ/ILR proposal that has drawn broad support from 214 companies.
LCJ and ILR point out that every disclosure required by the FRCP is made available to the parties, subject to motions for protective order. No FRCP rule calls for ex parte communications with the judge. A rule requiring disclosure only to the court would be entirely unprecedented.
The Rules Suggestion explains that FRCP-required disclosures are not “discovery” and therefore are not constrained by the Rule 26(b)(1) definition of relevance. The Advisory Committee established this distinction in 1970 when it resolved a court split over insurance contracts. The Advisory Committee concluded that the policy considerations favoring disclosure transcended relevancy — and directed disclosure to the parties, not just the court, so that “counsel for both sides” could “make the same realistic appraisal of the case.”
A rule that enshrines ex parte judicial handling of financial interests would be a novel departure with no grounding in the federal rules’ history or structure — and would fail. Instead, a rule modeled on the existing insurance disclosure framework of Rule 26(a)(1)(A)(iv), consistent with the LCJ/ILR proposal pending before the Advisory Committee would provide courts and parties with a fair, simple, and uniform procedure.