Litigation Finance and Attorney Work Product

Just earlier this year, the District of Delaware shocked the litigation finance world with a ruling that emails and other documents provided to a litigation funder in connection with their due diligence process are categorically not attorney work product.

As previously discussed on the blog, attorney work product has been a common question that’s come with the increased demand for litigation finance in the United States.  However, it seemed as though everyone was on the same page.  Litigation funders were only contacted in anticipation of litigation because why would you need funding for litigation if you didn’t anticipate it in the first place.  Therefore, any communication between funder and claimant or claimant’s attorney should be covered by work product doctrine.

At least that’s what we thought until the District of Delaware said in Acceleration Bay v. Activision Blizzard, that the documents were prepared with a primary purpose of obtaining a loan and that they were prepared for a nonparty to the litigation.  However, it is important to consider the facts of the case when looking at this decision.  First, the plaintiffs had previously represented to the court that the documents at issue did not existed and that they were not claiming any privilege if the documents did exist.  Additionally, the communications at issue seem to have been exchanged before any agreement was reached, even a nondisclosure agreement.  These facts make this case very unusual because it is general practice to obtain a nondisclosure agreement and a signed term sheet before engaging in any due diligence.

So while even though it appears Acceleration Bay is an outlier case.  It is still important to note that prior federal authority is uniformly against the decision from the District of Delaware.  In fact, the District of Delaware had even previously ruled that documents disclosed to a prospective litigation funder are protected work product in Ioengine LLC v. Interactive Media Corp.

There have been cases were a work-product objection was raised and litigation funding documents were ordered to be produced.  However, in these cases there was a threshold finding that the documents were in fact attorney work product; it was just that the defendant showed a substantial need under the circumstances.  Usually in that situation, the documents are produced in redacted form.  Therefore, I believe that documents shared between litigation funders and claimants or attorneys will continue to remain protected work product as long as they are handled the correct way.

Topics:  litigation finance, alternative litigation finance, third party funding, case law

Works Cited:  David Gallagher, Put The Brakes On Acceleration Bay Litigation Funder Ruling, Law360 (February 15, 2018).