Mandatory Disclosure of Funders Would Further Clog Overburdened Court Dockets

Supporters of efforts to force disclosure of litigation funding arrangements often fail to mention the massive strain such proposals would likely place on an already overburdened court system.

Federal trial courts had 339,000 cases pending at the end of the 2017 fiscal year, according to figures from the U.S. Administrative Office of the Courts. More than 50,000 of those cases were pending for three years or more. Since 2012, the median time to trial has increased five percent to more than two full years. Among the primary causes for delay are procedural motions about discovery disputes.

As discussed in our recent blog post about the proposed Litigation Funding Transparency Act of 2018, mandatory disclosure of funding arrangements threatens to further increase case backlogs and undermine judicial power:

• Discovery Battles: Requests for disclosure of funding arrangements are typically aimed at exposing the underlying confidential communications shared among funders, claimants and their lawyers. Understandably, claimant’s counsel vigorously oppose such efforts, often setting the stage for fights over the discoverability of the information. These battles increase the cost of litigation and generally delay its eventual resolution.

• Increased Burdens on Judges: Tangential discovery battles impose time-wasting procedural burdens on judges, forcing them to consider motions pertaining to information that has no bearing on the underlying facts at issue.

• The Erosion of Judicial Power: The broadest mandatory disclosure proposals advocate for disclosure in nearly every case backed by a funder. This strips judges of the opportunity to consider the appropriateness of the disclosure, while leaving them with the time-intensive burden of managing the disclosure process.

Judges already have the authority under their existing powers to require the disclosure of financing arrangements. Judge Dan Aaron Polster of the U.S. District Court for the Northern District of Ohio recently demonstrated this in the ongoing multidistrict litigation involving opioids. Polster mandated the disclosure of financing arrangements for his in camera review, a move that provided him with the information he needed without triggering a discovery war.

Judge Polster’s decision was in keeping with the spirit of recent efforts by the federal courts to help speed up civil cases. The Federal Rules of Civil Procedure were revised in late 2015 to require more cooperation among litigants over discovery issues and to reduce the amount of time and money spent on discovery matters.

At the time, reining in the length and costs associated with discovery had the full support of the U.S. Chamber of Commerce, a primary backer of efforts to force mandatory disclosure. In the three years since the rules were rewritten, progress has been made. Last year, for instance, the number of cases pending at the close of the fiscal year declined by six percent, according to U.S. courts data. With mandatory disclosure of funding arrangements, however, the clock is likely to be turned back.

This issue isn’t just an academic debate about judicial efficiency. Real lives, jobs, and the cause of justice are at stake. The length of time it takes for civil cases to wind through the system can mean the difference between the survival and demise of an enterprise. As Judge Lawrence J. O’Neill of the U.S. District Court for the Eastern District of California said in a 2015 Wall Street Journal article on the civil case backlog, “Over the years I’ve received several letters from people indicating, ‘Even if I win this case now, my business has failed because of the delay. How is this justice?’ And the simple answer, which I cannot give them, is this: It is not justice. We know it.”

Mandating disclosure simply adds to the injustice—placing another unnecessary burden on judges and unfairly targeting claimants using funding, many of whom could not afford access to the courts without litigation finance.

For additional insight into mandatory disclosure of funding arrangements, click here. If you would like to learn more about litigation finance, please contact one of our experienced team members to arrange a consultation.