Disclosure of Litigation Funding Agreements in the Lawsuits They Enable

Pre-settlement funding has become a familiar component of litigation. It can be found in cases as diverse as a single individual’s suit over an auto accident to a class action suit affecting thousands of people. Regardless of size or complexity, the idea is the same. One of the parties, most often the plaintiff, needs an infusion of cash to sustain it through the litigation. In exchange, the party agrees to sell an interest in the cause of action to the funding company for a fee, which is paid at settlement or judgment. The agreement is usually non-recourse. If the case is resolved with no money to the funding recipient, the funding company absorbs the loss.

Parties to litigation understandably resist disclosing funding agreements to others involved in the litigation. The terms of the funding agreement or even the fact that it exists, can provide valuable information to the other side. In deciding whether to invest in litigation, the funding company conducts a thorough investigation of the circumstances of the case, often evaluating the merits of claims and defenses and calculation of damages. If a litigant is forced to turn over its agreement, all of that information could potentially be revealed to opponents.

Here are some of the arguments that come up during discovery disputes when one party seeks disclosure of another’s funding agreements.

Conflicts of Interest

Proponents of disclosure argue that requiring disclosure of the agreement is necessary to ensure that conflicts of interest are not present. A conflict could arise if one funding company had been approached by litigants on opposite sides of the case and had reviewed materials from both sources. In these cases, courts generally don’t require that the agreement or supporting materials be turned over initially. The court will usually dispose of the issue by having the funded party disclose the name of the funding companies the party approached. If that reveals any potential conflict of interest, the court could either allow more extensive disclosure or require that the materials be supplied to the judge for review outside the prying eyes of the litigants.

Some litigants have argued that the funding agreement could help ferret out conflicts of interest or “bias issues” among jury members or witnesses who may have some relationship to the funders. Those, one court said, could be questioned under oath during voir dire or before they give testimony.


Proponents of disclosure argue that the only way to determine if the terms of the agreement are relevant to the litigation is to make the agreement available for the parties and the court to review. Opponents often counter that the funding terms cannot be relevant to the issues because the agreement did not exist until long after the events that gave rise to the lawsuit. But this is not true in all cases. In some instances, retention of funding is an important part of the decision to bring litigation.

Maintenance and Champerty

Some states, to varying degrees, recognize the old English doctrines of maintenance and champerty. These concepts were designed to limit the influence that some third parties would seek to exert over litigation. Maintenance occurs when someone who was not a party to a controversy unduly encourages one of the parties to bring a lawsuit against the other regardless of whether it is merited. Champterty goes a step further. It occurs when the third party buys into the litigation expecting to receive a profit once the case is concluded.

The maintenance and champerty argument has only been successful where state law specifically recognizes it, and its scope has been narrowed over the years. For the most part, litigation funding agreements are not considered maintenance because the funding company does not encourage a party to bring suit. In fact, in most cases the funder only enters the picture after circumstances arose that gave rise to the suit, and often after the case is filed.

The real issue is champerty. According to some, litigation funding is the very definition of champerty and it has been held so in a minority of jurisdictions. If a court concludes that the funding arrangement is more akin to a loan than an investment arrangement, it’s more likely to accept the champerty argument. Furthermore, most of the cases that have addressed champerty did so in a suit between the funding company and its client seeking enforcement of the agreement.

Attorney/Client Privilege

Even if the information contained in the agreement could be deemed relevant, opponents of disclosure argue that the terms of the agreement are privileged communications between attorney and client or they are attorney work product. The work product doctrine shields documents that are prepared in aid of a lawsuit, like attorney notes, legal memos, and internal expert reports. The work product doctrine is embodied in the Federal Rules of Civil Procedure:

Ordinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party’s attorney, consultant, surety, indemnitor, insurer or agent).

Fed. R. Civ. P. 26(b)(3)(A).

Disclosure proponents have tried to convince courts, without much success, that plaintiffs waive the work product or the attorney/client privilege when they disclose trial strategy and other confidential information to third-party funders. Most courts reject the waiver argument because the rule itself applies to “agents” of the litigant. Many of these cases turn on the existence of a non-disclosure agreement. As one court noted, “litigation funders have an inherent interest in maintaining the confidentiality of potential clients’ information.”

Legislative Efforts and Court Rules

In an attempt to curtail costs, bring more transparency to the process of litigation, and curb discovery abuses, many jurisdictions and individual courts have incorporated mandatory disclosures of certain types of information into their discovery plans. On the state level, in 2019 West Virginia passed a measure that requires disclosure of litigation funding agreements in consumer cases.

As of April 2018, the federal Advisory Committee on Civil Rules reported that at least six US Circuit Courts of Appeal and at least 24 of the 94 federal districts have rules that require the parties to identify litigation funders and all other parties that might have a financial stake in the litigation. Such disclosure is only for purposes of judicial recusal and disqualification.

In Congress, February 2019, Senator Chuck Grassley (R-IA) and three other sponsors introduced the Litigation Funding Transparency Act of 2019 (S.471), which would require disclosure of funding arrangements in certain actions, including multidistrict litigation and class actions. The bill was referred to the Senate Judiciary Committee, which has taken no action.

With all recent individual state legislations along with case law precedents, you might find yourself in need of legal funding contacting lawsuit loan companies who are fund you. These funding companies at best will tell you they do not know how to fund you, at worst leave you hanging. That is where Tribeca Capital Group’s funding division; Tribeca Lawsuit Loans stands out from the rest. At Tribeca, they have not only the experience but also the know how to fund in these regulated states. Call today 866-388-2288 and speak with one of knowledgeable and courteous case underwriters so we can start the funding process and get you the cash you need. And remember, no upfront fees, free consultation and lowest rates in the industry. Visit us at Tribeca Lawsuit Loan to see how we can help. It’s easy to complete the form and/or chat with one of funding specialists. We got your back, so wait, call today.