Digging Didn't Help - Court Decision Supports Commercial Litigation Funding


The recent decision of Miller UK Ltd and Miller International LTD. (“Miller”) v. Caterpillar, Inc. handed down in the United States District Court for the Northern District of Illinois gives the litigation funding industry the support it needs to quell America’s fears about the presence of a litigation funder in a pending lawsuit.  In this post, we will focus on the importance and necessity of entering into a Non-Disclosure Agreement, or confidentiality agreement, with your litigation funder.

At the heart of the case in Miller v. Caterpillar, Miller alleged that Caterpillar misappropriated its trade secrets.  Caterpillar hotly contested Miller’s contentions at every turn, as in any fierce lawsuit, the discovery process became a battlefield of its own.  As a result, Miller looked to alternative litigation financing to assist with the costs of continuing his suit against Caterpillar.  One of the issues to be determined was whether the documents exchanged between Miller and its litigation funder were subject to discovery.

In discussing whether the Work Product Doctrine shielded documents between Miller and its litigation funder from discovery, the court pointed out that Miller had either an oral or written confidentiality agreement with some, but not all, of the prospective litigation funders it sought a relationship with.  Keep in mind a waiver of the Work Product Doctrine occurs when the “protected communications are disclosed in a manner that substantially increases the opportunity for potential adversaries to obtain the information.”  Appleton Papers, Inc. v. E.P.A., 702 F.3d 1018, 1022 (7th Cir. 2012).  In laymen’s terms, a waiver occurs when the confidential documents are disclosed to a third party in a way that increases the chance your opponent will see them.

In the discovery process, Caterpillar, the defendant, wanted access to documents that had been exchanged between Miller and the litigation funders that were considering funding the case.  The court ordered only those documents which were NOT subject to a confidentiality agreement to be produced to Caterpillar and exempted from disclosure those documents exchanged pursuant to a confidentiality agreement finding them to be protected under the Work Product Doctrine.  The nondisclosure agreement made it less likely, not more likely, that the documents would end up in the hands of Miller’s adversary.

The court noted that Miller could have argued that he had  a reasonable expectation of confidentiality when the documents were exchanged with prospective funders.  Such an argument might have saved the day as a disclosure to an adversary on the part of a litigation funder could eviscerate all its future business prospects.  Alas, Miller failed to present such an argument and the court treated it as waived, relegating this approach dicta.   Consequently, it remains best to play it safe and always enter into a signed confidentiality agreement .

Moral of this story?  Get all your ducks in a row and be sure to enter into a written confidentiality agreement with all prospective litigation funders prior to the exchange of any documents.