The Debate Over Disclosure in Third-Party Litigation Finance: Balancing the Need for Transparency with Efficiency

Authors

Alec J. Manfre

Abstract

The market for third-party litigation financing (TPLF) in the United States is facing unprecedented growth and popularity. The ever-increasing complexity and cost of legal disputes, especially in the commercial context, has made third-party financing an invaluable resource for both litigants in need of capital and investors seeking to diversify their portfolios with nontraditional assets. However, as the market continues to boom, so does the risk that TPLF will be used unethically. Critics of the industry are calling on regulators at both the state and federal levels to implement comprehensive disclosure requirements for TPLF at the outset of all civil litigation as a means to prevent financiers from exerting control over the funded litigation and to expose conflicts of interest. To the contrary, members from within the TPLF community are adamantly opposed to over-broad disclosure requirements that would serve only to add a layer of unnecessary time and expense to funded parties in the midst of litigation. How can we ensure that TPLF is used ethically without burdening courts and parties with unwarranted disclosure? In recognition of the need for uniform regulations regarding the disclosure of TPLF information, yet in acknowledgement of the need for judicial economy and to preserve confidential financial information, this note proposes a solution that would strike a balance between transparency and efficiency. Instead of a mandatory disclosure requirement for TPLF agreements in full, the initial disclosure requirement should be limited merely to the identity and existence of third-party funding. Upon a showing of a particular need for additional disclosure of TPLF information, the court should conduct an in camera review prior to allowing adverse parties to access privileged information. In doing so, the court may independently determine whether or not additional discovery is necessary and can prevent unnecessary consumption of party resources.

Recommended Citation

Alec J. Manfre, The Debate Over Disclosure in Third-Party Litigation Finance: Balancing the Need for Transparency with Efficiency, 86 Brook. L. Rev. 561 (2021).
Available at: https://brooklynworks.brooklaw.edu/blr/vol86/iss2/9