District of New Jersey Clarifies New Local Civil Rule Regarding Third-Party Funding Disclosures

Over the last four months, we have tracked the District of New Jersey’s proposal and adoption of a new Local Civil Rule – L. Civ. R. 7.1.1 –  requiring lawyers to disclose details about third-party litigation funding.  The Clerk of the District of New Jersey has now issued a Notice to the Bar clarifying that this new Rule only requires the filing of a statement where third-party litigation funding exists.

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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.

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

The United States District Court for the District of New Jersey has announced proposed amendments to its Local Civil Rules, including a new rule – Civ. Rule 7.1.1 – regarding “Disclosure of Third-Party Litigation Funding.”

As we previously observed on this blog earlier this year, the exact dollar amount that third-party investors infuse into U.S. lawsuits each year is unknown, but conservative estimates begin at approximately $2.3 billion.  Currently, the District of New Jersey’s Local Civil Rules are silent as to litigation funding, but the District is focused on the importance of understanding the parameters of outside litigation funding and a mechanism for requiring disclosure.

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Considerations from the ABA’s Best Practices for Litigation Funding

The exact dollar amount that third-party investors infuse in U.S. lawsuits every year is unknown, but conservative estimates begin around $2.3 billion, with agreement that the industry has room to grow. With the ongoing pandemic stretching litigation timelines and straining budgets, the litigation funding industry remains highly active. Despite the importance of litigation funding to all parties involved (lawyers, plaintiffs, and defendants), regulation varies by state, and litigation funders are largely left to self-regulate.

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Failure to Fully Disclose Expert Opinions Results in Summary Judgment

Federal Rule of Civil Procedure 26(a)(2) requires retained expert witnesses to provide an expert report which gives “a complete statement of all opinions the witness will express and the basis and reasons for them.”  Fed. R. Civ. P. 26(a)(2)(B)(i).  If a party fails to disclose information required under Rule 26(a)(2), “the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.”  Fed. R. Civ. P. 37(c)(1).  As a plaintiff in the Western District of Washington recently learned, failure to adhere to Rule 26 can be fatal to a case.

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Witness Coaching by Whisper Leads to Sanctions for Defense Witness and Attorney

As noted in two prior posts, one on May 15, 2020, and the other on May 29, 2020, the COVID-19 pandemic and the resulting explosion in the use of remote depositions present a number of novel issues for lawyers to consider, whether taking or defending depositions. Regardless of these “unprecedented times,” some things remain the same, including that it is improper for a witness to be coached about answers while the deposition is occurring.

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