Privilege doctrines in litigation funding

Safeguarding your privileged information when seeking litigation funding

How is privilege affected by litigation finance? How can attorneys prevent information they share in pursuit of litigation funding from being accessed during discovery? While, as a general rule, attorney-client privilege and other protections against disclosure are waived whenever protected information is disclosed by a client to a third party, a growing number of cases have affirmed that information shared with litigation funders is protected under work product doctrine or common interest doctrine.

Most recently, in "In re International Oil Trading Company, LLC", the US Bankruptcy Court in the Southern District of Florida found that information shared between a claimant and a litigation funder were protected from disclosure where "the third party possesses a common interest with the client," and, in the case of attorney work product, when the documents reflected "communications between a client, the clients attorney, and a litigation funder whose participation depends on assessments of the merits of litigation."

Common Interest doctrine is defined as follows: "If two or more clients with a common interest in a litigated or non-litigated matter are represented by separate lawyers and they agree to exchange information concerning the matter, a communication of any such client that otherwise qualifies as privileged . . . that relates to the matter is privileged as against third persons." - Rest. 3d § 76; In re Grand Jury Subpoenas, 89-3 & 89-4, John Doe 89-129, 902 F.2d 248-49 (4th Cir. 1990).

While the common interest doctrine is not universally recognized, and important legal exceptions by lower court judges exist, many courts have begun to recognize the importance of allowing litigants to share privileged information and work product with litigation funders. Those that do recognize a "common enterprise" approach, which focuses on whether the client and third party to whom the privileged information had been disclosed were engaged in a common enterprise, and whether the information shared relates to that enterprises goal.

In In re International Oil Trading Company, LLC, the court used a three-part inquiry to determine whether communications with a litigation funder fell under common interest doctrine: 1) Whether the disclosures were necessary to obtain informed legal advice that might not have been obtainable absent the attorney-client privilege 2) Whether the nature of the communication between attorney, client, and litigation funder indicate that disclosure to third parties was not intended (as demonstrated by the use of an NDA) 3) Whether the information was exchanged for the limited purpose of facilitating the shared interest

Ultimately, the US Bankruptcy Court in the Southern District of Florida found that the communications with the litigation funder satisfied all three.

Work product doctrine protects from discovery "documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent)." -Fed. R. Civ. P. 26(b)(3)(a).

Later courts expanded the reach of work product from physical documents to "attorneys thought processes and mental impressions" Sandra T.E. v. S. Berwyn Sch. Dist. 100, 600 F.3d 612, 621–22 (7th Cir. 2010). Information provided by an attorney to a litigation funder is similarly protected under Work Product Doctrine, as recently affirmed by the US District Court in the Northern District of Illinois, Viamedia Inc. v. Comcast Corporation et al.

Like other federal courts, the US District Court in the Northern District of Illinois affirmed Viamedias contention that the Court "cannot conclude that Viamedias disclosure made it substantially more likely that its work-product protected information would fall in the hands of its adversaries." See Miller UK, 17 F. Supp. 3d at 737–39; Doe, 2014 WL 1715376

Thus, recent case law is strong in favor of work product doctrine as a robust protection from discovery if sufficient measures are put in place by the litigation funder.

Legalist is careful to protect all information disclosed by attorneys and plaintiffs with robust NDAs that include common interest provisions. All information disclosed to Legalist is kept securely in encrypted servers, and to date has never been subject to discovery in any cases funded.