Key Takeaways
The Judicial Advisory Committee has established a subcommittee to study the necessity of a federal rule for disclosing third-party litigation funding in civil cases. However, based on the development timeline for recent new and amended federal rules, it may take several years for any uniform rule to be proposed and ultimately adopted.
On October 10, 2024, the U.S. Judicial Conference’s Advisory Committee on Civil Rules agreed to create a subcommittee to study whether the Committee should propose a federal rule requiring the disclosure of third-party litigation funding information.
The Committee’s decision follows a letter from more than 120 companies urging the Advisory Committee to amend the Federal Rules of Civil Procedure to include a “straightforward, uniform rule” for disclosing third-party litigation funding agreements. As we previously reported in Re:Torts, the letter described the authors’ concerns about inequitable disclosure obligations and the impact of third-party funding on settlement activities. Mandatory disclosure of litigation financing is also the subject of a proposed federal law, the Litigation Transparency Act of 2024.
The timeline for the Civil Rules subcommittee to evaluate whether to recommend a federal rule on third-party litigation financing disclosure remains uncertain. However, the development of other rules may offer some insight.
For instance, the Judicial Conference recently approved Federal Rule 16.1 to address multidistrict litigation (“MDL”) proceedings seven years after the formation of the MDL Subcommittee in 2017. After a number of subcommittee meetings, a preliminary draft Rule 16.1 was published for public comment in August 2023, proposed revisions were released on March 22, 2024, the Advisory Committee voted on the rule on April 9, 2024, and the Committee on Rules of Practice and Procedure gave final approval on June 4, 2024. The new Rule is expected to take effect at the end of 2025.
The most recent amendment to Rule 26 provides another example. Five years after the Advisory Committee appointed a subcommittee, Rule 26(b)(1) was approved in 2015 and introduced a “proportionality” test to determine the scope of allowable discovery. See Hon. Elizabeth Laporte & Jonathan Redgrave, A Practical Guide to Achieving Proportionality Under New Federal Rule of Civil Procedure 26, 9 Fed. Cts. L. Rev. 19, 32 (2015). The initial draft rule was released in spring of 2012 and published for comment on August 15, 2013. See id.
Given these timelines, litigants should not expect a federal rule on third-party litigation financing disclosure to take effect in the near term. The prospect for and timeline of a rule will likely become clearer once the subcommittee completes its initial work.
