The closely watched case of Gbarabe v. Chevron — a class action against the oil giant based on an oil rig explosion off the coast of Nigeria — has been portrayed as a cautionary tale for the world of litigation finance. The defense attorneys’ dogged pursuit of the details of plaintiff’s outside funding, the story goes, succeeded, and aided in the attack on the adequacy of plaintiff’s counsel. The defense did successfully defeat class certification, but litigation funding ultimately played little or no role in the case’s demise.

The casual reader learning about Gbarabe might assume that litigation finance arrangements are routinely disclosed or discovered. As discussed recently, there is currently no automatic disclosure regime for litigation finance. The litigation finance arrangements in Gbarabe came to light only because of the narrow circumstances presented there: the court had to determine whether counsel could adequately represent the class, counsel conceded litigation funding had relevance to that inquiry, and counsel did not assert privilege over the funding agreement. Gbarabe is an outlier. In nearly every case where similar discovery has been sought, it has been denied.

Those courts faced with the disclosure issue have generally found that a party’s communications with actual or prospective funders are shielded from production based on the work product doctrine, which protects “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). As explained in a recent case, Viamedia, Inc. v. Comcast Corp., the doctrine serves “to protect an attorney’s thought processes and mental impressions against disclosure.” Communications between a party, its attorneys and actual or prospective litigation funders necessarily contain and reflect “opinions by . . . counsel regarding the strength of . . . claims, the existence and merit of . . . defenses, and other observations and impressions regarding issues that have arisen in this litigation,” and fall squarely within this protection. Doe v. Society of Missionaries of Sacred Heart (N.D. Ill. May 1, 2014). The “the terms of the final agreement—such as the financing premium or acceptable settlement conditions” similarly “reflect an analysis of the merits of the case.” Carlyle Investment Management v. Moonmouth Co. (Del. Ch. Feb. 24, 2015).

Parties seeking disclosure of communications between claimants and funders argue that even if they do constitute work product that protection has been waived. This argument has been repeatedly rejected. While disclosure to a third-party can result in waiver, it generally will not when the disclosure is done pursuant to a non-disclosure agreement and steps are otherwise taken to control the confidential information. As explained in Viamedia, “the point of the protection is not to keep information secret from the world at large but to keep it out of the hands of one’s adversary in litigation.” In that case, the court concluded that the disclosure to litigation funding firms pursuant to an NDA did not result in a waiver because it did not make it “substantially more likely that its work-product protected information would fall in the hands of its adversaries.” As several courts have observed, “litigation funders have an inherent interest in maintaining the confidentiality of potential clients’ information.” See, e.g., U.S. ex rel. Fisher v. Ho (E.D. Texas March 15, 2016).

Viamedia is the latest of numerous cases that have examined the issue of work product protection for communications or agreements with actual or prospective funders and reached similar conclusions. (A partial list follows; please visit this page for a comprehensive list of relevant cases that will be regularly updated.)

In a patent infringement case, the IP holding company that owned the patent at issue reached out to various “investment brokers and potential investors with slide presentations and other documents that contained disclosures of Inpro’s licensing and litigation strategies and also estimates of licensing and litigation revenues.” The court rejected the argument that these documents were not created for litigation purposes but rather for “business advice” and found the work product protection applicable because the documents were prepared “with the intention of coordinating potential investors to aid in future possible litigation.” Because the documents were shared pursuant to an NDA the protection was preserved. Mondis Technology, Ltd. v. LG Electronics, Inc. (E.D. Texas May 4, 2011).