On Friday, May 21st, NJCJI and the U.S. Chamber of Commerce’s Institute for Legal Reform (“ILR”) submitted a joint comment to the United States District Court for the District of New Jersey (“USDNJ”) in support of Proposed New Local Rule 7.1.1, which promotes transparency in third-party litigation funding (“TPLF”). In recent years, the presence of TPLF has grown rapidly across the country; especially in the context of class action and mass tort litigation. This proposed rule seeks to reduce TPLF’s pernicious effect on the fair and efficient resolution of disputes.
The proposed rule was posted by the USDNJ’s Lawyers’ Advisory Committee on April 14, 2021. The rule requires parties to file a statement, shortly after the commencement or transfer of a matter to the court, containing information about any non-parties funding the litigation. Specifically, the rule mandates disclosure of the identity of the non-party funder; whether the funder’s approval is necessary for litigation decisions or settlement, and the nature of that required approval; and a description of the nature of the funder’s financial interest in the outcome. While the rule does not require production of the actual agreements between non-party funders and parties to the litigation, it does allow parties to seek discovery of the terms of those agreements upon a showing of good cause that the funder has the authority to make material litigation or settlement decisions, the interests of the parties (or class) are not being promoted or protected, or conflicts of interest exists, or such other disclosure is necessary to any issue in the case.
Currently, there are 24 other federal district courts that mandate disclosure of TPLF. Also, six United States appellate courts have mandated disclosure (the Third, Fourth, Fifth, Sixth, Tenth and Eleventh circuits). However, TPLF has remained unregulated in the USDNJ, and its presence and effect on litigation decisions and settlement dynamics there have been unknown. Recently, a ruling by former USDNJ Magistrate Judge Joel Schneider, in multidistrict litigation over the blood pressure drug Valsartan, noted that no binding authority compelled disclosure of litigation funding arrangements among the plaintiffs. That decision prompted consideration of Proposed New Local Rule 7.1.1. A copy of NJCJI’s and ILR’s joint comment can be found here. Please contact NJCJI’s President, Anthony Anastasio, with any questions about this proposed rule or the broader effort to promote transparency in TPLF.