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Delaware’s State Senate passes concurrent resolution encouraging the Delaware Judiciary to study possible third-party litigation funding (TPLF) disclosure rules

In an interesting development to watch, on June 28, 2022, the Delaware State Senate passed Delaware Senate Concurrent Resolution No. 127 entitled “Encouraging the Delaware Judiciary to Study Transparency in Third-Party Litigation Funding.”[1] This resolution, in which the Delaware House of Representatives concurred, “encourages the Delaware Judiciary to study and, if appropriate, recommend revisions to courts’ rules of procedure or statutes, if needed, to implement a disclosure requirement for third-party litigation funding.”[2]

Illinois Enacts The “consumer Legal Funding Act” New Law Regulates Various Aspects Of Third Party Litigation Funding Practices

The text of this resolution cites several items for consideration as part of its call for the Delaware Judiciary to examine the TPLF disclosure, including concerns regarding transparency, possible conflicts of interest, the potential for third-party funders to have direct or indirect control over litigation, and the fact TPLF practices remain largely unregulated at the present time.[3]     

The resolution also references the April 18, 2022 Standing Order issued by Chief Judge Colm F. Connolly for the United States District Court for the District of Delaware regarding TPLF disclosure.[4]  This Order is entitled “Standing Order Regarding Third-Party Litigation Funding Arrangements” and applies to “all cases assigned to Chief Judge Connolly.”[5]  In general, Judge Connolly’s Order requires the production of certain information regarding TPLF (but not the agreement itself).  For example, as part of this Order, parties who have made “arrangements to receive from a person or entity that is not a party (a “Third-Party Funder”) funding for some or all of the party’s attorney fees and/or expenses to litigate [an] action on a non-recourse basis in exchange for (1) a financial interest that is contingent upon the results of the litigation or (2) a non-monetary result that is not in the nature of a personal loan, bank or insurance” are required to file a statement containing  “(a) The identity, address, and if a legal entity, place of formation of the Third-Party Funder(s); (b) Whether any Third-Party Funder’s approval is necessary for litigation or settlement decisions in the action, and if the answer is in the affirmative, the nature of the terms and conditions relating to that approval; and (c) A brief description of the nature of the financial interest of the Third-Party Funder(s).”[6] 

In addition, Judge Connelly’s Order allows parties to seek additional discovery of the party’s TPLF agreement “upon a showing that the Third-Party Funder as authority to make material litigation decisions or settlement decisions, the interests of any funded parties or the class (if applicable) are not being promoted or protected by the arrangement, conflicts of interest exist as a result of the arrangement, or other such good cause exists.”[7] Further, the Order states that “[n]othing … precludes the Court from ordering such other relief as may be appropriate.”[8]   From the author’s research, Judge Connolly’s Order is similar to New Jersey Civil Rule 7.1.1 issued by the United States District Court for the District of New Jersey in June 2021 regarding the production of TPLF information in certain situations.[9]

As for other items, the resolution also references the fact that several United States District Courts have implemented TPLF disclosure requirements.[10]   While the resolution did not provide any further details on this point, the author provides a general overview of the local rules that some federal courts have implemented regarding the TPLF disclosure issue as part of the endnote to this sentence.[11]   Further,  the resolution references Wisconsin and Virginia as two states which have enacted laws regarding TPLF disclosure.[12]  Of note, while the resolution references Virginia, from the author’s research this appears to be in error and that the resolution’s sponsors likely meant West Virginia.[13]

Taking these items into consideration, the resolution states that the “Delaware General Assembly requests that the Delaware Judiciary study and, if appropriate, recommend revisions to courts’ rules of procedure or statutes, if needed, to implement a disclosure requirement for third-party litigation funding.”[14]

Going forward, it will be interesting to see if the Delaware Judiciary implements formal rules requiring TPLF disclosure and, if so, the nature and extent of such disclosure.  In the bigger picture, Delaware’s concurrent resolution on TPLF can now be included as part of other wider efforts regarding TPLF discovery currently taking place on the federal and state level.  More information on these larger efforts is provided as part of endnotes 9 and 11 in this article, as well as the author’s other recently released TPLF articles as listed in the next section.

Additional TPLF resources

For further information on Third-Party Litigation Funding, please see the author’s recent educational articles as follows:

Please do not hesitate to contact the author if you have any questions regarding the above or TPLF issues in general.


[1] 2021 Delaware Senate Concurrent Resolution No. 127, Delaware One Hundred Fifty-first General Assembly – Second Regular Session. The resolution’s sponsors are noted as Senators Gay, Townsend, and Hansen; and Representatives Griffith and Lynn.  Id. From the author’s review, this resolution was introduced on June 28, 2022 and passed that same day.  See, Westlaw “Delaware Bill Tracking” indicating as follows: “Status:  06/28/2002 Introduced in Senate [and] 06/28/2022 Passed by Senate. Votes: 20 Yes 1 Absent.

[2] 2021 Delaware Senate Concurrent Resolution No. 127, Delaware One Hundred Fifty-first General Assembly – Second Regular Session.  On this point, the resolution states as follows: “BE IT RESOLVED by the Senate of the 151st General Assembly, the House of Representatives concurring therein, that the General Assembly encourages the Delaware Judiciary to study and, if appropriate, recommend revisions to courts’ rules of procedure or statutes, if needed, to implement a disclosure requirement for third-party litigation funding.”  Id.  Further, the resolution states that “[i]n this Senate Concurrent Resolution, the Delaware General Assembly requests that the Delaware Judiciary study and, if appropriate, recommend revisions to courts’ rules of procedure or statutes, if needed, to implement a disclosure requirement for third-party litigation funding.” Id.

[3] 2021 Delaware Senate Concurrent Resolution No. 127, Delaware One Hundred Fifty-first General Assembly – Second Regular Session.

[4] 2021 Delaware Senate Concurrent Resolution No. 127, Delaware One Hundred Fifty-first General Assembly – Second Regular Session.

[5] Standing Order Regarding Third-Party Litigation Funding Arrangements, issued by Chief Colm F. Judge Connolly for the United States District Court for the District of Delaware (April 18, 2022).

[6]  Standing Order Regarding Third-Party Litigation Funding Arrangements, issued by Chief Colm F. Judge Connolly for the United States District Court for the District of Delaware (April 18, 2022), including section 1a-c.

[7] Standing Order Regarding Third-Party Litigation Funding Arrangements, issued by Chief Colm F. Judge Connolly for the United States District Court for the District of Delaware (April 18, 2022), section 2. 

[8]  Standing Order Regarding Third-Party Litigation Funding Arrangements, issued by Chief Colm F. Judge Connolly for the United States District Court for the District of Delaware (April 18, 2022), section 3.

[9] See, N.J. Civ. Rule 7.1.1 (June 21, 2021). 

https://www.njd.uscourts.gov/sites/njd/files/Order7.1.1%28signed%29.pdf

In general, N.J. Civ. Rule 7.1.1 states that all parties (including intervening parties) must file a “statement”  disclosing certain information where “any person or entity that is not a party and is providing funding for some or all if the attorneys’ fees and expenses for litigation on non-recourse basis in exchange for (1) a contingent financial interest based on upon the results of the litigation or (2) a non-monetary result that is not in the nature of a personal or bank loan.”  In this situation, the following information must be disclosed: (1) the identity of the funder(s), including name, address, and if a legal entity, its place of formation; (2) whether the funder’s approval is necessary for litigation decisions or settlement decisions in the action and [if so], the nature of the terms and conditions relating to that approval; and (3) a brief description of the nature of the financial interest.” In addition, under Rule 7.1.1 parties “may seek additional discovery of the terms of any such agreement upon a showing of good cause that the non-party has authority to make material litigation decisions or settlement decisions, the interests of parties or the class (if applicable) are not being promoted or protected, or conflicts of interest exist, or such other disclosure is necessary to any issue in the case.”

[10] 2021 Delaware Senate Concurrent Resolution No. 127, Delaware One Hundred Fifty-first General Assembly – Second Regular Session.

[11] On this point, a well-researched memorandum prepared for the Advisory Committee on Civil Rules April 2018 meeting noted that, as of late 2017, six U.S. Courts of Appeals and 24 out of the 94 federal district courts  had formulated local rules requiring identification of litigation funders, with these rules differing in terms of the cases to which the rules apply, the scope of information to be provided, the reasons for disclosure, as well as when and how this information must be disclosed. 

Regarding the U.S. Court of Appeals, see, Patrick A. Tighe, Survey of Federal and State Disclosure Rules Regarding Litigation Funding, February 7, 2018, at 210, as contained in the Advisory Committee on Civil Rules Booklet, April 10, 2018. In Appendix A, Mr. Tighe provides the following listing of local circuit court rules regarding disclosure of TPLF finance arrangements, with the scope and type of disclosure varying by circuit: “Third Circuit (3rd Cir. L.R. 26.1.1(b); Fourth Circuit (4th Cir. L.R. 26.1(2)(B); Fifth Circuit (5th Cir. L.R. 28.2.1); Sixth Circuit (6th Cir. L.R. 26.1(b)(2)); Tenth Circuit (10th Cir. L.R. 46.1(D)); and Eleventh Circuit (11th Cir. L.R. 26.1-1(a)(1); 11th Cir. L.R. 26.1-2(a).”  Id. at 220.

Regarding the United States District Courts, see Patrick A. Tighe, Survey of Federal and State Disclosure Rules Regarding Litigation Funding, February 7, 2018, at 210, as contained in the Advisory Committee on Civil Rules Booklet, April 10, 2018. In Appendix B, Mr. Tighe provides the following listing of local district court rules regarding disclosure of TPLF finance arrangements, with the scope and type of disclosure varying by district:  “Arizona (no local rule, but corporate disclosure statement); C.D. California (C.D. L.R. 7.1-1); N.D. of California (N.D. Cal. L.R. 3-15; Standing Order for All Judges of the N.D. Cal (1/17/2017); M.D. Florida (Interested Persons Order for Civil Cases 6/14/2013, only applies to some judges; no local rule or order applicable to all district court judges); N.D. Georgia (N.D. Ga. L.3.3); S.D. Georgia (S.D. Ga. L.R. 7.1); N.D. Iowa (N.D. Iowa L.R. 7.1); S.D. Iowa (S.D. Iowa L.R. 7.1); Maryland (M.D. L.R. 103.3(b)); E.D. Michigan (E.D. Mich. L.R. 83.4); W.D. Michigan (Form-Corporate Disclosure Statement; No local rule order); Nevada (Nev. L.R. 7.1-1);E.D. North Carolina (E.D. N.C. L.R. 7.3); M.D. North Carolina (Form-Disclosure of Corporate Affiliations; No local rule order); W.D. North Carolina (Form-Entities with a Direct Financial Interest in Litigation Form, No local rule or order); N.D. Ohio (N.D. Ohio L. Civ. R. 3.13(b); Form – Corporate Disclosure Statement); S.D. Ohio (S.D. Ohio L.R. 7.1); E.D. Oklahoma (Form-Corporate Disclosure Statement, No local rule order); N.D. Oklahoma (Form-Corporate Disclosure Statement; No local rule or order); N.D. Texas (N.D. Tex. L.R. 3.1(c), 3.2(c), 7.4, 81.1); W.D. Texas (W.D. Tex. L.R. CV-33); W.D. Virginia (Form-Disclosure of Corporate Affiliations and Other Entities with a Direct Financial Interest in Litigation; No local rule order); and W.D. Wisconsin (Form-Disclosure of Corporate Affiliations and Financial Interest; No local rule or order).”  Id. at 223-229.

Notably, however, none of the local rules referenced above reportedly require the production of the litigation funding agreement itself. See, Patrick A. Tighe, Survey of Federal and State Disclosure Rules Regarding Litigation Funding, February 7, 2018, at 209, as contained in the Advisory Committee on Civil Rules Booklet, April 10, 2018. Further, these rules have reportedly focused more on TPLF disclosure for the purposes of helping courts assess potential judicial recusal or disqualification issues, rather than providing defendants with third-party funding information as part of litigation discovery.  See, Patrick A. Tighe, Survey of Federal and State Disclosure Rules Regarding Litigation Funding, February 7, 2018, at 209, as contained in the Advisory Committee on Civil Rules Booklet, April 10, 2018, Two references cited include Fifth Circuit’s local rule, 5th Cir. L.R. 28.2.1 at 213, citing, C.D. Cal. L. R. 7.1-1.  Id. at 209.  

However, the United States District Courts for the Northern District of California and New Jersey are examples of two courts which have promulgated local rules aimed more at providing defendants with TPLF information as part claim litigation.  For example, in 2017 the U.S.D.C. for the Northern District of California reportedly became the first U.S. court to institute a standing order requiring disclosure of TPLF information in class actions. In general, this rule requires plaintiffs to file a “Certification of Interested Entities or Persons” disclosing certain information regarding third-party funding and imparts a continuing duty to supplement this certification during the pendency of the case. Joseph J. Stroble and Laura Welikson, Third-Party Litigation Funding: A Review of Recent Industry Developments, IADC Defense Counsel Journal, April 30, 2020.

More recently, as also outlined in n. 9 above, the United States District Court for the District Court for New Jersey issued local civil rule, N.J. Civ. Rule 7.1.1 (June 21, 2021) which states, in general, that all parties (including intervening parties) must file a “statement”  disclosing certain information where “any person or entity that is not a party and is providing funding for some or all if the attorneys’ fees and expenses for litigation on non-recourse basis in exchange for (1) a contingent financial interest based on upon the results of the litigation or (2) a non-monetary result that is not in the nature of a personal or bank loan.”  In this situation, the following information must be disclosed: (1) the identity of the funder(s), including name, address, and if a legal entity, its place of formation; (2) whether the funder’s approval is necessary for litigation decisions or settlement decisions in the action and [if so], the nature of the terms and conditions relating to that approval; and (3) a brief description of the nature of the financial interest.” In addition, under Rule 7.1.1 parties “may seek additional discovery of the terms of any such agreement upon a showing of good cause that the non-party has authority to make material litigation decisions or settlement decisions, the interests of parties or the class (if applicable) are not being promoted or protected, or conflicts of interest exist, or such other disclosure is necessary to any issue in the case.”

[12] 2021 Delaware Senate Concurrent Resolution No. 127, Delaware One Hundred Fifty-first General Assembly – Second Regular Session.  Wisconsin’s statute, codified at Wis. Stat. Ann. § 804.01(2)(bg) and West Virginia’s statute, codified at W. Va. Code Ann. § 46A-6N-6, both require production of third-party funding agreements to the defendant without a specific discovery request, unless otherwise stipulated or ordered by the court.

[13] Wisconsin’s statute, codified at Wis. Stat. Ann. § 804.01(2)(bg) and West Virginia’s statute, codified at W. Va. Code Ann. § 46A-6N-6, both require production of third-party funding agreements to the defendant without a specific discovery request, unless otherwise stipulated or ordered by the court.

These statutes read as follows:

Wis. Stat. Ann. § 804.01(2)(bg) – “Third party agreements. Except as otherwise stipulated or ordered by the court, a party shall, without awaiting a discovery request, provide to the other parties any agreement under which any person, other than an attorney permitted to charge a contingent fee representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise.”

Va. Code Ann. § 46A-6N-6: “Except as otherwise stipulated or ordered by the court, a party shall, without awaiting a discovery request, provide to the other parties any agreement under which any litigation financier, other than an attorney permitted to charge a contingent fee representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise.”

[14]  2021 Delaware Senate Concurrent Resolution No. 127, Delaware One Hundred Fifty-first General Assembly – Second Regular Session.


Mark Popolizio, J.D.

Mark Popolizio, J.D., is vice president of MSP compliance, Casualty Solutions at Verisk. You can contact Mark at mpopolizio@verisk.com.


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