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We have seen this legal question arise before: Should injured plaintiffs be required to provide information about funding they are receiving during the course of their lawsuit? A recent opinion in the Valsartan contamination litigation, which denied the defendants a free pass to look at the plaintiffs’ litigation funding, has contributed to general case law surrounding this issue.  

In the order, U.S. Magistrate Judge Joel Schneider addresses the law regarding the permission of discovery regarding non-privileged information when it is relevant to the claim or defense and the needs of the case. Judge Schneider notes that even if a plaintiff’s funding agreement is marginally relevant, the defendant’s requested discovery would be denied because it is not “proportional” to the needs of the case. He disagreed with the defendants’ assertion that there is a shifting tide towards requiring the disclosure of third-party funding information in court. To back up his decision, Judge Schneider cites opinions in New York State, North Dakota, and Washington State.

The order does note that litigation funding discovery is not always off limits. In cases where something unexpected and inappropriate occurs, the discovery could still be considered relevant. The court will order the discovery of plaintiff funding only if there is a reason to consider it relevant in the case. Factors the court suggests be considered are the:

  1. Control the funding company has in the litigation and settlement decisions, and
  2. Amount the interests of the funder are being considered at the expense of the plaintiff.

If there is good cause to order the discovery, the Court expects plaintiffs’ counsel to call for an “in camera review,” meaning the judge will privately review the request and make a decision. The order notes that plaintiffs’ counsel should err on the side of caution and present the issues to the court. The court will consider the same application by defendants. 

As an advocate of plaintiff’s rights and a distributor of pre-settlement funding ourselves, our Foundation supports this decision by Judge Schneider to protect plaintiffs and to question the relevance in sharing this information with defense. Of course this certainly won’t be the last we hear of this debate, as litigation funding has become an increasingly hot topic this year. We’ll make sure to track any and all developments that arise.  

 

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