California Court Gets Automatic Funding Disclosure Right

Bentham IMF’s San Francisco team, Matt Harrison and Priya Pai, published an op-ed in Law 360 discussing the U.S. District Court for the Northern District of California’s (“N.D. Cal.”) consideration, and eventual denial, of a broad proposal requiring automatic disclosure of third-party funding agreements in all civil matters filed there.

In mid-2016, the N.D. Cal invited public comment on whether to revise Local Rule 3-15[i] (“LR 3-15”) requiring an individual to file a “Certification of Interested Entities or Persons” at the inception of a case, to include disclosure of litigation funders. Keeping in line with the approach taken by the Advisory Committee on Rules of Civil Procedure rejecting a similar proposal to revise FRCP Rule 26 – as well as applicable case law – the N.D. Cal. likely determined that the existence of a funding arrangement in every civil matter is irrelevant. Instead, the N.D. Cal opted to focus only on matters in which it deemed disclosure was necessary by modifying its global standing order to require disclosure of a litigation funder only in a “class, collective or representative action.”

For an in-depth discussion regarding the myriad of reasons why mandatory disclosure of third-party funding agreements is unwarranted and why the N.D. Cal got it right, read the Law 360 op-ed here.

[i] N.D. Cal Local Rule 3-15 states: “The certification must disclose any [persons or entities] other than the parties themselves (including litigation funders) known by the party to have either: (i) a financial interest of any kind in the subject matter in controversy or in a party to the proceeding; or (ii) any other kind of interest that could be substantially affected by the outcome of the proceeding.” (Emphasis added to proposed language.)