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By: Joshua Ferguson
Continuing a nationwide trend, this past month the U.S. District Court for the District of New Jersey rejected a discovery request into the plaintiff’s litigation funding arrangements. Re: Valsartan N-Nitrosodimethylamine Litigation, MDL Docket No. 2875, No. 19-2875, D. N.J., Camden Vicinage.
Litigation funding is where a third party provides the financial resources to enable Plaintiff’s litigation or arbitration cases to proceed. The litigant obtains all or part of the financing to cover its legal costs from a private commercial litigation funder, almost always with repayment at exorbitant interest rates. It seems a natural conclusion that these same litigation funders would have an “interest” in the results of the outcome to secure their “risk”, but the courts have concluded otherwise on several occasions.
Similar to arguments in other matters involving concerns over litigation funding, defendant in the New Jersey District court action argued disclosure was necessary to determine whether the plaintiffs were the “real parties in interest” in the case.
The court noted a “plethora of authority” from courts across the United States concluding that such information is irrelevant to the claims and defenses at issue.
The “plethora of authority” includes numerous cases, including a 2019 decision in Northern District of California that noted that “the courts simply held that fee and litigation funding agreements could be discoverable when there was a specific, articulated reason to suspect bias or conflicts of interest.” MLC Intellectual Property LLC v. Micron Technology, Inc., No. 14-cv-03657, 2019 WL 118595 (N.D.Cal. Jan. 7, 2019)
Until and unless the Government steps to slow litigation funding through regulation, any chance of success on securing discovery as to litigation funding will require actual proof of bias or conflict of interest.
If you have any questions or would like more information, please contact Josh Ferguson at [email protected].