Should California courts permit litigants to conduct discovery into litigation funding, namely whether a third party is funding their adversary’s litigation efforts?
Certainly, parties defending a case will want to know, “Who are we really litigating against, and what are their true motives?” “Who is the real party in interest here?” And even if a litigation funder is not the same thing as a plaintiff, a funder may have a significant role to play in the case. After all, “[h]e who pays the piper may not always call the tune, but he’ll likely have an influence on the playlist.” Conlon v. Rosa, No. 295907, 2004 WL 1627337, at *2 (Mass. Land Ct. July 21, 2004).
So, are litigation funding arrangements discoverable? While courts across the country are split on this issue, state legislatures and select judicial districts have begun to intervene and enact disclosure requirements relating to such funding.
Courts Across the Country Are Divided
Courts across the country are divided on whether to permit litigation funding discovery. See In re Valsartan N-Nitrosodimethylamine (NDMA) Contamination Prods. Liab. Lit., 405 F. Supp. 3d 612, 614 (D.N.J. 2019) (“At bottom, courts are split on the issue.”); IA Labs CA v. Nintendo Co., Ltd., 946 F. Supp. 2d 429, 431 (D. Md. 2013) (“Third-party litigation financing is highly controversial and for some raises core questions about legal ethics.” (Maya Steinitz, The Litigation Finance Contract, 54 Wm. & Mary L. Rev. 455, 484 (2012))).
For example, in Cont’l Circuits LLC v. Intel Corp., 435 F. Supp. 3d 1014, 1019 (D. Ariz. 2020), an Arizona district court held that the identities of a plaintiff’s financial resources should be discoverable because “[r]elevancy in civil litigation is a relatively low bar,” and such discovery “could be used to refute any David vs. Goliath narrative at trial.” See also Nelson v. Millennium Labs., Inc., No. 2:12-cv-01301-SLG, 2013 WL 11687684, at *5–6 (D. Ariz. May 17, 2013) (ordering production of a plaintiff’s fee agreements where the defendant asserted that a market competitor was funding the plaintiff’s litigation); 3rd Eye Surveillance, LLC v. United States, 158 Fed. Cl. 216, 229 (Fed. Cl. 2022) (explaining that “the mere existence of an agreement or communication with a litigation funder can be relevant and discoverable”).
These holdings make sense for situations in which plaintiffs make representations about their financial inability to pay court-ordered fees, such as attorneys’ fees, by declaring that they are indigent despite being funded by outside sources. See IA Labs, 946 F. Supp. 2d at 431. Indeed, defense-side litigators will certainly maintain that litigation funding information should be discoverable so that parties can understand the financial capabilities of their adversary and refute misleading “David vs. Goliath” narratives that influence judges and jurors. See Nunes v. Lizza, 2021 U.S. Dist. LEXIS 254428, at *4, *18 (N.D. Iowa Oct. 26, 2021) (holding that litigation funding documents “are relevant to respond to a ‘David vs. Goliath’ narrative” where the plaintiffs had “not denied that the litigation is being funded by others”).
In addition, litigation funding evidence is certainly relevant if it tends to prove that a third party is the “real party in interest.” Conlon, 2004 WL 1627337, at *2. Indeed, the court in IA Labs explicitly questioned the ethics of this type of financing arrangement, explaining that “[t]he consequence is that [plaintiff] has deliberately structured itself so that it could draw on sources of revenue from its financier when its litigation against [defendant] looked profitable, but made itself effectively judgment-proof…in the event of a[n]…award of attorneys’ fees against it.” 946 F. Supp. 2d at 432; see also Maya Steinitz, The Litigation Finance Contract, 54 Wm. & Mary L. Rev. 455, 484 (2012) (a “key concern” is that “third-party funding will diminish clients’ control over their claims generally, and in particular in connection with the decision of when and for how much to settle”).
Relatedly, litigation funders are not immune from malicious prosecution lawsuits. In the unpublished case of Kay v. Lesches, a California Court of Appeal reasoned that a litigation funder can be held liable for malicious prosecution if they “surreptitiously caused a front man to institute a lawsuit” and the court finds “a showing of clear abuse of process.” No. B330105, 2024 Cal. App. Unpub. LEXIS 7733, at *21 (Cal. App. Dec. 6, 2024) (unpublished); see also Opdyke Inv. Co. v. Detroit, 883 F.2d 1265, 1273 (6th Cir. 1989) (explaining that third parties can be held liable for causing others to institute “sham” lawsuits, such as where a lawsuit is “frivolous,” “so farfetched as to warrant the imposition of sanctions,” or where there is evidence of “reprehensible practice”). In such situations, it is axiomatic that litigation funding information is relevant to a court’s inquiry into whether a third-party funder “caused” a plaintiff to initiate a meritless lawsuit. Additionally, if this type of discovery is not allowed, parties who are being funded by outside sources can engage in unmeritorious motion practice or propound abusive discovery and then seek to avoid paying discovery sanctions based on indigency.
However, speculation about a litigation funder might not be sufficient to get discovery. In V5 Techs. v. Switch, Ltd., No. 2:17-cv-2349, 334 F.R.D. 306, 311–12 (D. Nev. 2019), the Nevada District Court rejected a defendant’s request for documents that identify the “person or entity” paying the plaintiff’s attorneys’ fees, finding that the request “amount[ed] to rank speculation.” See also VHT, Inc. v. Zillow Grp., Inc., No. C15-1096, 2016 WL 7077235, at *1–2 (W.D. Wash. Sept. 8, 2016) (rejecting motion to compel discovery responses regarding the identity of plaintiff’s litigation funder where “[n]othing more than speculation” supported defendant’s requests).
And evidentiary issues exist as well. For example, some federal courts have highlighted evidentiary limits on the discoverability of litigation funding arrangements caused by the work product doctrine and the common interest privilege. United States ex rel. Fisher v. Homeward Residential, Inc., No. 4:12-CV-461, 2016 WL 1031154, at *6 (E.D. Tex. Mar. 15, 2016) (certain litigation funding documents are protected by the work product doctrine if they are prepared to “aid in future or ongoing litigation”); Devon It, Inc. v. IBM Corp., No. 10-2899, 2012 WL 4748160, at *1 n.1 (E.D. Pa. Sept. 27, 2012) (finding that the common interest doctrine applied because the funder and the plaintiff “ha[d] a common interest in the successful outcome of the litigation”).
This ongoing split has prompted state legislatures to get involved.
Legislatures and Select Judicial Districts Take Action
As of April 2025, six states—Wisconsin, Indiana, Montana, West Virginia, Louisiana, and Kansas—have stepped in and enacted bills requiring disclosure for litigation funding, while at least 20 others are currently considering similar bills. See, e.g.,Assemb. B. 772, 2017-2018 Sess. (Wis. 2018); S.B. 269, 2023 Sess. (Mont. 2023); S.B. 355, 2023 Session (La. 2024); Jon Campisi, Third-Party Litigation Finance Disclosure Measures Triumph in Statehouses, Law.com (Apr. 10, 2025).
Congress has also taken notice of the issue. In October 2024, Representative Darrell Issa on the House Judiciary Committee introduced the Litigation Transparency Act of 2024 to “provide for transparency and oversight of third-party beneficiaries in civil actions.” H.R. 9922, 118th Cong. (2024). If this Act were enacted, all parties in civil actions would be required to disclose in writing “the identity of any person . . . that has the right to receive any payment or thing of value that is contingent on the outcome of the civil action or a group of actions of which the civil action is a part.” And in 2023, Senators John Kennedy and Joe Manchin introduced a bipartisan bill requiring disclosure of all foreign third-party litigation fundings to “increase transparency and oversight of third-party funding by foreign persons, to prohibit third-party funding by foreign states and sovereign wealth funds, and for other purposes.” S.B. 2805, 118th Cong. (2023).
While a final bill has yet to reach the President’s desk, such legislation signals a growing concern over lawsuits becoming investment vehicles for outside actors or an avenue for foreign interests to “weaponize the courts for strategic goals.” Donald J. Kochan, Editorial, Keep Foreign Cash Out of U.S. Courts, Wall St. J. (Nov. 24, 2022).
Meanwhile, the U.S. Chamber of Commerce Institute for Legal Reform and Lawyers for Civil Justice have advocated for amendments to Federal Rule of Civil Procedure (FRCP) 26 to require disclosure of litigation funding agreements just like the insurance disclosure requirements under FRCP 26(A)(iv). John H. Beisner & Gary A. Rubin, U.S. Chamber of Com. Inst. for Legal Reform, Stopping the Sale on Lawsuits: A Proposal to Regulate Third-Party Investments in Litigation 14 (2012). In fact, in October 2024, the U.S. Judicial Conference’s Advisory Committee on Civil Rules finally agreed to establish a subcommittee to examine this issue “[a]fter a decade of weighing whether it should do anything to regulate the emerging field of litigation finance.” Nate Raymond, US Judicial Panel to Examine Litigation Finance Disclosure, Reuters (Oct. 10, 2024).
A recent report from the U.S. Chamber of Commerce highlighted the key risks of third-party litigation funding and encouraged courts and legislators to “rein in the secretive industry” by requiring disclosure of all third parties with a financial interest in a case. See U.S. Chamber of Commerce Institute for Legal Reform, Grim Realities: Debunking Myths in Third-Party Litigation Funding 12–13, 20 (2024). Specifically, the report raised concerns that: (1) third-party litigation funders “exert undisclosed influence on litigation” that undermines “the professional independence of attorneys” and disrupts the duty of loyalty that attorneys owe to clients; (2) third-party litigation funding poses “serious national security concerns” because it allows “foreign investors to attack domestic businesses” and “weaken critical industries or obtain confidential” information; and (3) litigation funders “effectively wield[] veto power over settlement decisions” to the detriment of the party whose claims they are funding. Based on these concerns, the report advocates for courts to order disclosure requirements for litigation funders.
Adopting this line of reasoning, the U.S. District Court for the Northern District of California recently instituted a standing order requiring the automatic disclosure of all non-parties that have a “financial interest” in civil cases:
[E]ach party must restate in the case management statement the contents of its certification by identifying any persons, firms, partnerships, corporations (including parent corporations) or other entities known by the party to have either: (i) a financial interest 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.
N.D. Cal. S.O. 17, Standing Order for All Judges of the Northern District of California, Contents of Joint Case Management Statement (Nov. 30, 2023).
New Jersey and Delaware district courts have also implemented similar requirements. See D.N.J. L. Civ. R. 7.1.1 (June 21, 2021); D. Del. S.O., Standing Order Regarding Third-Party Litigation Funding Arrangements (Apr. 18, 2022); Joseph J. Stroble and Laura Welikson, Third-Party Litigation Funding: A Review of Recent Industry Developments, 87 Def. Counsel J. 1, 12 (2020) (“As of February 2018, six U.S. Courts of Appeals have local rules which require identifying litigation funders. Approximately 25% of all U.S. District Courts have local rules or forms that require the disclosure of third-party funding arrangements in civil actions.”).
These recent actions by federal and state courts and legislators indicate a trend to require disclosure of litigation funding agreements.
Courts in California – Some Permit Discovery of Litigation Funding, While Others Do Not
To date, courts in California have also been split on whether to permit litigation funding discovery.
An analysis of recent cases across California’s federal district courts confirms the divide. Some courts permitted the discovery. See MLC Intell. Prop., LLC v. Micron Tech., Inc., 2019 U.S. Dist. LEXIS 2745, at *4–6 (N.D. Cal. Jan. 7, 2019) (finding that litigation funding discovery should be permitted when there is a “specific, articulated” risk of bias or conflict of interest); Gbarabe v. Chevron Corp., No. 14-CV-00173, 2016 WL 4154849, at *2 (N.D. Cal. Aug. 5, 2016) (granting Chevron’s motion to compel the disclosure of the plaintiff’s funding agreement).
Other courts did not permit discovery. Nantworks, LLC v. Niantic, Inc., 2022 U.S. Dist. LEXIS 87320, at *3–4 (N.D. Cal. May 12, 2022); GoTV Streaming, LLC v. Netflix, Inc., 2023 U.S. Dist. LEXIS 91168, at *38–39 (C.D. Cal. May 24, 2023) (rejecting defendant’s argument that litigation funder information was relevant where defendant’s relevancy arguments were merely “speculative”).
As some courts have noted, discovery of the existence of a litigation funder is relevant where there is a “specific, articulated” risk of bias or conflict. MLC Intellectual Prop., 2019 U.S. Dist. LEXIS 2745, at *4–6; see also Tradeline Enters. Pvt v. Jess Smith & Sons Cotton, LLC, 2019 U.S. Dist. LEXIS 221924, at *14–15 (C.D. Cal. Apr. 15, 2019) (suggesting that defendants’ request for discovery of plaintiff’s litigation funder was relevant but that the scope of such discovery would be “determined through the normal process of resolving discovery disputes”). This rule makes sense because it allows parties to “dispel” outstanding questions that underpin litigation strategy: Who is funding and controlling this litigation, and who is the real party in interest prosecuting this case? See Nunes, 2021 U.S. Dist. LEXIS 254428, at *3–5, *13.
Additionally, the Ninth Circuit and at least one California district court have held that the identity of a party’s litigation funding sources is not protected by the attorney-client privilege. First, in Liew v. Breen, the Ninth Circuit declined to grant the attorney-client privilege where clients approached an attorney “not…for legal advice and assistance, but rather with the aim of finding meritorious litigation to finance,” because “[s]uch business activities do not involve services as an attorney and thus do not arise out of the attorney-client relationship.” 640 F.2d 1046, 1050 (9th Cir. 1981).
Then, in Finjan, Inc. v. SonicWall, Inc., the U.S. District Court for the Northern District of California declined to grant attorney-client privilege for communications shared with a litigation funder, explaining that the plaintiff’s voluntary disclosure “to a third-party investor who merely observed its board meetings” effectively “waived whatever attorney-client privilege otherwise attached to these materials.” No. 17-CV-4467, 2020 WL 4192285, at *4 (N.D. Cal. July 21, 2020); see also Conlon, 2004 WL 1627337, at *2 (“[T]he identity of an attorney’s client and the source of payment for legal fees are not normally protected by the attorney client privilege, and the identity of the person paying legal bills does not disclose any mental impressions, conclusions, opinions or legal theories of the plaintiffs’ attorneys.”).
The California Bar has weighed in on this issue as well, pointing out that “the client’s adversary may seek to compel communications between the funder and the client or lawyer and a court may hold that the sharing effected a waiver of otherwise available evidentiary privileges.” See Cal. Bar. Standing Comm. on Prof. Resp. and Conduct, Formal Op. No. 2020-204.
Finally, one exception to the “split of authority” exists in the context of patent disputes—California district courts “have generally ruled that litigation funding agreements and related documents are relevant and discoverable in patent litigation.” Impact Engine, Inc. v. Google LLC, No. 19-cv-1301, 2020 U.S. Dist. LEXIS 145636, at *4–5 (S.D. Cal. Aug. 12, 2020); see also Pres. Techs. LLC v. Mindgeek United States, 2020 U.S. Dist. LEXIS 258311 (C.D. Cal. Dec. 18, 2020) (finding litigation funding documents to be relevant for determining a patent’s valuation); Taction Tech., Inc. v. Apple Inc., No. 21-CV-00812, 2022 WL 18781396, at *5 (S.D. Cal. Mar. 16, 2022) (explaining that litigation funding documents are relevant where such documents “contain or reflect valuations of” a patent, subject to specific concerns about the attorney-client privilege and the work product doctrine).
The Future of Litigation Funding Discovery and Disclosure Requirements in California
Given California’s existing split of authority on litigation funding discovery and disclosure requirements, legislative intervention may be necessary to establish a uniform approach for courts to follow as it pertains to litigation funding disclosure requirements.
But how far should this go? And then how should courts navigate litigation funding discovery requests in the context of evidentiary objections and privileges, such as relevancy objections, the work product doctrine, and the common interest privilege?
A split of authority exists regarding the work product doctrine as well. Compare Acceleration Bay LLC v. Activision Blizzard, Inc., No. 16-453, 2018 WL 798731, at *1–2 (D. Del. Feb. 9, 2018) (refusing to apply the work product doctrine where the “primary” purpose behind the creation of the litigation funding documents was to obtain funding, not to aid in the litigation), and Fulton v. Foley, No. 17-CV-8696, 2019 WL 6609298, at *4 (N.D. Ill. Dec. 5, 2019) (holding that work product protection does not apply to litigation funding documents that contain only fact-based information and do not contain mental impressions about a case), and Conlon, 2004 WL 1627337, at *2 (“[T]he identity of the person paying legal bills does not disclose any mental impressions, conclusions, opinions or legal theories of the plaintiffs’ attorneys[.]”), with Odyssey Wireless, Inc. v. Samsung Elecs. Co., No. 3:15-cv-1738, 2016 WL 7665898, at *5 (S.D. Cal. Sept. 20, 2016) (finding that certain litigation funding and financing documents were protected work product).
Meanwhile, how courts rule on the applicability of the common interest privilege depends on whether they take a narrow view of the doctrine (e.g., parties have “a common legal interest”) or a broader view (e.g., parties have “a substantially similar legal interest” or “a common enterprise”). Compare Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711, 732 (N.D. Ill. 2014) (holding that a client’s relationship to a litigation funder is merely “a shared rooting interest in the ‘successful outcome of a case'” and thus “not a common legal interest” for purposes of the common interest privilege), and Cohen v. Cohen, No. 09-CIV-10230, 2015 WL 745712, at *4 (S.D.N.Y. Jan. 30, 2015) (describing a plaintiff’s relationship with litigation funders as “inherently financial” and concluding that the common interest privilege did not protect litigation funding documents), with Devon It, Inc., 2012 WL 4748160, at *1 n.1 (concluding that the common interest doctrine applied because the plaintiff and funder shared “a common interest in the successful outcome of the litigation”).
Nevertheless, at least one California district court has interpreted the common interest privilege narrowly and concluded that it does not apply to third-party litigation funders. See Sanchez Ritchie v. Sempra Energy, No. 10-CV-1513, 2015 WL 12912316, at *4 n.2 (S.D. Cal. Apr. 6, 2015) (rejecting “common interest” privilege when the court construed the non-party movant’s role as that of a third-party “financier” of plaintiff’s attorney’s fees and costs).
Some courts have followed in the footsteps of the U.S. District Court for the Northern District of California and implemented disclosure requirements in civil cases. See, e.g.,C.D. Cal. L. R. 7.1-1 (requiring all non-governmental parties to “list all persons, associations of persons, firms, partnerships, and corporations (including parent corporations, clearly identified as such) that may have a pecuniary interest in the outcome of the case”). This is the first step to ensuring that parties cannot manipulate their adversaries by presenting misleading “David vs. Goliath” narratives or declaring that they are indigent despite being funded by outside sources.