Best Practices for Preserving Privileged Materials in a Litigation Finance Transaction
Litigation financing provides extraordinary opportunities for litigants to reduce the risk of litigation and increase their chances of obtaining a fair recovery on their claim. But the realities of the litigation financing transaction require that both funders and litigants exercise care with how they exchange privileged information in the process of exploring and finalizing an investment transaction. As long as a few simple steps are followed during this process, the risk of waiving any privileges can be greatly minimized.
When one considers the general principles behind the attorney-client privilege and work product doctrines, as well as the case law applying those principles in the litigation finance context, it is possible to identify a set of best practices that will protect privileged communications and materials in the litigation finance context.
First, when a prospective funder and a claim holder are discussing the possibility of an investment, they should enter into a non-disclosure agreement that applies to all communications and materials exchanged in the due diligence process. This agreement will militate against any finding that potential litigation adversaries will have access to any attorney work product disclosed in the due diligence process.
Second, the claim holder should make sure that no attorney-client confidences are disclosed to any prospective funder. Until the prospective funder actually has a legal interest in the claim, it has an arms-length relationship with the claim holder, and the disclosure of confidential communications to the prospective funder will likely constitute a waiver of the attorney-client privilege.
Third, once a claim holder and a funder have reached an agreement, their contract should include a non-disclosure provision and should make it clear that the funder has a legal interest in the claim itself. Memorializing the existence of a shared legal interest in the claim will go a long way towards supporting the conclusion that the common-interest doctrine applies to post-agreement communications among the funder, the claim holder, and the claim holder’s counsel.
Topics: litigation finance, legal reform, third-party funding, attorney-client privilege, work-product privilege, litigation finance best practices
Works Cited: Maria Glover, Alternative Litigation Financing and the Limits of the Work Product Doctrine, 12 N.Y.U. J.L. & Bus. 911 (2016)
