A recent attempt by a Canadian e-commerce software company to impose the contentious litigation funding disclosure rules set by a Delaware federal judge on the Western District of Texas has been unsuccessful. In recent times, litigation funding has come under increasing scrutiny, particularly in the context of class action lawsuits, where it is often leveraged to fund the high cost of litigation.
For context, litigation funding involves third parties providing funds to plaintiffs or law firms to conduct expensive lawsuits. These funders, in return, receive a share of the judgment or settlement proceeds. This model has allowed even financially weak plaintiffs the chance to pursue justice against well-funded defendants.
The litigation funding disclosure rules sought to be imported by the Canadian firm required parties to disclose the details of any agreements with third-party litigation financiers. The impact of such disclosure rules would have opened up the proceedings involving litigation funders to increased scrutiny and perhaps would have imposed new limits on their involvement.
Given the Delaware judge’s rules have drawn significant controversy, the unsuccessful attempt of the Canadian company to have them adopted in Texas can be seen as a victory for litigation funders. The consequences of this decision will surely become a central point of the ongoing conversation on litigation funding and its disclosure.
More details regarding this latest development can be found in the original report by Law360.