Subject: Litigation Funding

District of Delaware Chief Judge’s New Standing Order Requires Disclosure of Third-Party Litigation Funding

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The District of Delaware is the latest in a series of courts to require disclosure of third-party funding arrangements, a subject we have previously explored. The Chief Judge in the District of Delaware now joins other courts like the District of New Jersey and the Northern District of California in requiring these disclosures.

On April 18, 2022, Chief District Judge Colm F. Connolly of the United States District Court for the District of Delaware issued a standing order requiring litigants to disclose whether their cases are being financed by third parties. The standing order requires that, “where a party has made arrangements to receive from a person or entity that is not a party (a ‘Third-Party Funder’) funding for some or all of the party’s attorney fees and/or expenses to litigate th[e] action on a non-recourse basis,” either for “a financial interest that is contingent upon the results of the litigation” or “a non-monetary result that is not in the nature of a personal loan, bank loan, or insurance,” the party must disclose certain details of the funding relationship within 45 days of the entry of the standing order (i.e., by June 2, 2022) for existing cases, or within 30 days of the filing of an initial pleading or transfer of a new matter into the District.

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

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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

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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

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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

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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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