Northern District of California rejects discovery of litigation funder identity on relevance grounds
Last week, the U.S. District Court for the Northern District of California denied as irrelevant defendant Micron Technology’s demand that plaintiff MLC Intellectual Property disclose the identity of any third party funder backing MLC’s patent infringement lawsuit. MLC Intellectual Property LLC v. Micron Technology, Inc., No. 14-cv-03657, 2019 WL 118595 (N.D.Cal. Jan. 7, 2019). This result is not surprising. Judge Susan Illston simply confirmed what essentially every court considering this issue has already concluded: absent a specific showing of relevance, litigation funding arrangements should not be disclosed. This decision adds to the growing list of precedent rejecting attempts to delve into the identity of litigation funders, the substance of their arrangements and their communications with claimants.
Judge Illston denied Micron’s motion, holding that the discovery was irrelevant, and that MLC had complied with the local rules. She found that “Micron’s assertions of potential bias and conflicts of interest are speculative” because MLC confirmed that the non-party witnesses were not funding the litigation, and if the case were to proceed to trial, the court could “question potential jurors in camera regarding relationships to third party funders and potential conflicts of interest.”
In practice, funding arrangements are rarely relevant to the claims and defenses of the underlying litigation. A long line of federal court decisions, including elsewhere in the Ninth Circuit, has recognized this fact. See, e.g., Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711 (N.D. Ill. 2014) and its progeny; see also VHT, Inc. v. Zillow Group, Inc., No. C15-1096JLR, 2016 WL 7077235 (W.D. Wash. Sept. 8, 2016). Yet this opinion is an important piece of jurisprudence in this area: despite earlier rulings touching on relevance in the context of funding arrangements, it is the first published decision in the Northern District of California directly weighing in on this issue. Compare Telesocial Inc. v. Orange S.A., No. 3:14-cv-03985 (N.D. Cal. Sept. 30, 2016) (denying, in minute order, defendant’s motion to compel production of documents and communications between plaintiff and litigation funder); Space Data Corp. v. Google LLC, No. 16-cv-02360, 2018 WL 3054797 (N.D. Cal. June 11, 2018) (denying defendant’s motion to compel production of documents and communications about potential litigation funding).
In a perfect world, the parade of decisions rejecting discovery forays into litigation funding would serve as a deterrent to the adversaries of financed litigants. Unfortunately, these efforts will almost surely continue—albeit with similarly favorable outcomes for litigation funders and their counterparties.
Click to read Bentham IMF's opinion piece on this topic, Courts Are Getting It Right On Litigation Funding Discovery, published by Law360.