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In the civil justice system, the ongoing debate about litigation funding spans a variety of issues. In the high-profile NFL concussion litigation, for example, Judge Anita Brody voided all existing litigation funding agreements between the former football players and lending companies. This was on the grounds that the football players who are the plaintiffs in this litigation have undergone serious brain injuries and thus are not of the right state of mind to enter into agreements such as these. In another recent instance, Senate Judiciary Committee Chairman Chuck Grassley (R-IA) introduced an act that would require third-party litigation funders to disclose whether they advanced money to class action plaintiffs under an agreement that would allow the companies to collect interest on the recovery. Now, questions about transparency with litigation funding has reached a lawsuit against Google.

unnamedWhat’s Going On with Google?

Space Data is alleging in a lawsuit that Google used confidential information and infringed three of the company’s patents. Google filed a motion in the Northern District of California to compel the disclosure of Space Data’s potential third-party litigation funding agreements. The court denied the motion, arguing that Google failed to establish how revealing potential litigation funding would be “relevant to any party’s claim” or “proportional to the needs of the case.”

Space Data did say that it did not have any third-party litigation financing in this case, but the court said that’s besides the point. Even if knowledge about funding agreements were relevant information, “potential litigation funding is a side issue at best.”

Why Would a Defendant Want to Know About Funding?

Knowledge about a plaintiff’s third-party funding could offer the defendant some helpful information. For example:

  • Knowing about funding arrangements could help determine if the agreements between the third-party financier and the plaintiff has given the funder implied or actual control over the litigation.
  • Litigation funding can help a plaintiff go the distance with their lawsuit. Thus, knowledge about a funding agreement may prepare the defendant for a lengthier litigation than originally anticipated.
  • On the other hand, many for-profit, non-recourse companies often tack on staggering compound interest that can influence how long a plaintiff is willing to stay in a lawsuit — an issue that can certainly give a defendant the upper hand.

However, if the non-recourse funding industry were a regulated environment, companies would be more apt to function on the ethos of transparency, disclosure and fairness. If that were the case, third-party funding agreements could simply be the lifeline plaintiffs need to make ends meet, so they can go the distance with their lawsuit.

The debate still wages on about whether litigation funding must be disclosed, and there are valid points to both sides of that argument. However I think it’s safe to agree that mandating the disclosure of potential litigation funding is taking it a step too far.

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