Northern district of California first in US to mandate disclosure of third party funding of litigation

26th Jan 2017

The US District Court for the Northern District of California announced a “groundbreaking” new rule requiring the automatic disclosure of third-party funding agreements in proposed class action lawsuits reports The Recorder.  This is the first rule of its kind in the United States district court.

Lisa Rickard, President of the U.S. Chamber Institute for Legal Reform recently penned an opinion piece in the The Recorder, calling out third party litigation funding for “undermining our civil justice system by turning it into a risky investment platform where investors can bet on litigation”.

Although some say litigation funding analysis is rigorous, Rickard points out that TPLF companies are “investors first and foremost who base their funding decisions on the present value of their expected return”. Using the infamous Chevron v. Donziger case to support her argument, Rickard states that “TPLF providers have higher risk appetites than most contingency-fee attorneys and will be more willing to back claims of questionable merit”.

The piece also notes that TPLF firms have expanded their funding methods by investing in portfolios of cases and in law firms, while remaining largely unregulated. “At the very least, TPLF should be subject to robust disclosure requirements so that judges and observers can fully understand what sorts of impacts this practice is having on the exercise of justice in US courts”, writes Rickard.