District of New Jersey Adopts Local Civil Rule Requiring Disclosure of Third-Party Litigation Funding

The U.S. District Court for the District of New Jersey has adopted new Local Civil Rule 7.1.1, requiring lawyers to disclose details about third-party litigation funding.  On June 21, 2021, Chief Judge Freda L. Wolfson signed the order formally amending the Rule to include Section 7.1.1.

As we previously explored, under the new Rule, all parties are required to file statements setting forth information about any non-party that is “providing funding for some or all of the attorneys’ fees and expenses for the litigation on a non-recourse basis” in exchange for either “a contingent financial interest based upon” the litigation’s results or a “non-monetary result that is not in the nature of a personal or bank loan, or insurance.”  These statements must include:  (1) the identity of the funder(s), including name, address, and place of formation (if a legal entity); (2) whether the funder’s approval is “necessary for litigation decisions or settlement decisions,” and if so, “the nature of the terms and conditions relating to that approval”; and (3) a description of the nature of the financial interest involved.

In new cases, such statements must be filed within 30 days of the filing of an initial pleading or removal.  For all cases that were pending in the District of New Jersey prior to adoption of Rule 7.1.1, these disclosure statements must be filed “within 45 days of the effective date of th[e] Rule” – i.e., by August 5, 2021.

The new Rule provides that a party may seek discovery “of the terms of any such agreement upon a showing of good cause that the non-party has authority to make material litigation decisions or settlement decisions, the interests of the parties or the class (if applicable) are not being promoted or protected, or conflicts of interest exist, or such other disclosure is necessary to any issue in the case.”