Companies seek rule for disclosure of litigation funders' agreements

A group of large companies, including several California technology giants, have sent a letter to the Administrative Office of the U.S. Courts asking for a uniform rule requiring disclosure of the identity of third-party litigation funders and their agreements with plaintiffs.

The letter -- sent Wednesday to the federal courts' Advisory Committee on Civil Rules by the presidents and chief legal officers of 124 companies in sectors from technology to insurance to pharmaceuticals -- said such disclosure is needed so they know how to defend against plaintiffs' lawsuits.

"We know from experience that when [third party litigation funding, or TPLF] is present in our cases, it fundamentally alters the dynamics and has a major impact on whether the dispute can be resolved through settlement," the unsigned letter stated.

"We cannot make informed decisions without knowing the stakeholders who control the litigation -- and we cannot understand the control features of a TPLF agreement without reading the agreement," it continued.

Christopher Bogart, CEO of Burford Capital LLC - one of the leading litigation funding companies in the nation - expressed disdain Thursday at what he described as his adversaries' attempts to gain an advantage.

"I used to represent big companies like this. They don't care about transparency - indeed, they resist it when their own activities are [at] issue," he said in a statement.

"What they want is to keep their unfair advantage in the justice system and to drive up costs for anyone who sues them - which is exactly what they do whenever they find out about the identity of a litigation funder," Bogart added.

Tony Rowles, a partner with Irell & Manella LLP who represents plaintiffs and defendants in intellectual property litigation, said a few judges - especially in the Northern District of California and in Delaware - require litigation funding companies to disclose their involvement in lawsuits but none have local rules mandating they reveal their agreements with plaintiffs.

Other judges, such as those in Texas district courts - which are popular venues for plaintiffs in patent infringement lawsuits -- impose no disclosure requirements, he added in a phone interview Thursday. Rowles said a mandate forcing disclosure of agreements by the litigation funding companies with plaintiffs would be a new step.

"That would be broader than just about any judge in the country currently requires," he said.

The bid to ask courts to amend the rules of civil procedure is a new effort by companies that have expressed frustration about litigation funding companies providing the financial backing for lawsuits against them, although similar legislation was introduced in Congress in July.

"It's been brewing for a while," Rowles said.

Signatories of the letter include California companies Gilead Sciences Inc., Alphabet Inc.-owned Google LLC, Cisco Systems Inc. and Meta Platforms Inc.

U.S. Rep. Darrell Issa, R-Escondido, introduced the bill that would mandate disclosure of such agreements in federal civil lawsuits and said it would achieve transparency and reveal the involvement of funders backed by the People's Republic of China.

"If a third-party investor is financing a lawsuit in federal court, it should be disclosed at the onset of the case," he wrote in a statement when the bill was introduced. "Awareness by all parties will help ensure fair and equal treatment by the justice system and deter bad actors from exploiting our courts."

The companies, in their letter, said they are at a disadvantage under the current system and need a uniform rule in federal courts across the country.

"Absent such a rule, the continued uncertainty and court-endorsed secrecy of non-party funding in our cases will further unfairly skew federal civil litigation," they wrote.