April 13, 2020 Top Story

Relevance Required to Discover Funding Agreements

Court says discovery of funding agreements allowed in certain circumstances

By Martha L. Kohlstrand

Litigants must have specific reasons for the disclosure of information about their opponents’ litigation funding arrangements, a magistrate judge in the District of New Jersey has ruled. In In re: Valsartan N-Nitrosodimethylamine (NDMA) Contamination Products Liability Litigation, the court opined that absent special circumstances, litigation funding deals are not subject to discovery since they are generally irrelevant to the merits of a case. This ruling follows a trend concerning the discovery of such arrangements, ABA Section of Litigation leaders say.

Are litigants' private funding arrangements discoverable?

Are litigants' private funding arrangements discoverable?

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Defendants Seek to Discover Evidence Related to Third-Party Funding

The plaintiffs in this multidistrict litigation were a group of consumers who alleged that the defendants’ drug contained carcinogens and caused them personal injuries and economic losses. The defendants issued discovery to the plaintiffs and requested “all documents and communications related to funding or financing, if any, you or your counsel have obtained to pursue this litigation.” The plaintiffs objected to this request, arguing that their private financial information was irrelevant to their claims and defenses. However, the plaintiffs agreed to produce some documents for in camera review so the court could determine whether the litigation funding company had control or input into litigation decisions. Other than this possibility, though, the plaintiffs contended that the defendants had no legitimate need for the information.

The defendants filed a motion to compel, arguing that any third-party funding was relevant to discovering the real party in interest as to the plaintiffs’ claims. They contended that the funding information was relevant to determining: (1) the plaintiffs’ credibility and bias; (2) the scope of proportional discovery; (3) the scope of potential sanctions; and (4) the medical necessity and reasonableness of plaintiffs’ treatments. The defendants also argued that much of current mass tort litigation is plagued by undisclosed third-party involvement.

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