Delaware finds litigation funding-related documents either irrelevant or covered by the work product doctrine.

Woodsford’s Dan Kesack assesses the latest developments in the Delaware relating to discovery and litigation funding-related documents:

A pair of decisions from the District of Delaware provide comfort that litigation funders and their counterparties can engage in thorough discussions about a potential litigation without fear of discovery in the district.

The first decision comes from Judge Stark, who issued an order on June 12, 2020 denying a motion to compel production of litigation funding materials.  United Access Techs., LLC v. AT&T Corp., No. CV 11-338-LPS, 2020 WL 3128269, at *1 (D. Del. June 12, 2020).  Defendants had sought production of three categories of documents including (1) the identity of litigation funders, (2) communications between plaintiff and potential litigation funders, and (3) quarterly updates to third parties regarding the plaintiff’s current lawsuits.  Id.  The Court ordered an in camera review of documents in categories 2 and 3 to determine whether such documents were relevant to the case, with the parties coming to their own agreement on the information within category 1.

The Court placed the burden of demonstrating relevance on the defendants, and rejected their argument that documents in categories 2 and 3 are unconditionally “relevant to central issues like validity and infringement, valuation, damages, royalty rates, and whether plaintiff is an operating company.”  Id.  Instead, the Court held that the defendants were required, but failed, to demonstrate that the requested documents were relevant to the claims and defenses of that specific case.  The Court’s own review of the documents also found the documents lacked relevance to the issues in the case.  Id.  The holding that litigation funding documents are not per se relevant will require defendants to demonstrate why such documents would be relevant to their particular case.  Id. at *2.   

Helpfully, the Court went a step further on November 19, 2020, in an order by Magistrate Judge Jennifer Hall denying a motion to compel documents related to litigation funding.  ELM 3DS Innovations LLC v. Samsung Elecs. Co., Case No. 14-1430-LPS, Dkt. No. 372 (D. Del. Nov. 19, 2020).  Here, Defendants sought production of information in four categories: (1) litigation funding agreements, (2) communications with third parties that did not provide litigation funding, (3) pre-suit communications with third parties that did provide litigation funding, and (4) post-suit communications with funders.  The Court denied defendants motion as to all four categories.

With respect to category 1, and acknowledging a split in authority, the Court found that litigation funding agreements are not relevant to patent litigation disputes.  Id. at p.2.  However, after reviewing the documents in categories 2-4, the Court found they had only marginal relevance to the asserted claims and defenses.  Id.  Yet the Court still denied the motion to compel, finding that each of these categories were protected work product.  Id.  It found that categories 2 and 3 were clearly created in anticipation of litigation, and therefore were protected work product under any test, and that category 4 documents are also generally protected work product.  Id.  And in a footnote the Court indicated that it would have rejected any argument that work product protection was waived by disclosure of the documents to a third party.  Id. at n.1.  This is consistent with other districts that have also found no such waiver.  See, e.g., Cont’l Circuits LLC v. Intel Corp., 435 F. Supp. 3d 1014, 1022 (D. Ariz. 2020) (“Consistent with this conclusion, several courts have held that work product protection for litigation funding documents is not waived when such documents contain confidentiality provisions and are disclosed to litigation funders with common interests.”).

In sum, over the last six months, Delaware has made clear that whether litigation funding documents are relevant to a litigation will depend on the specific facts of a case, but that any such documents or communications covered by work product protection because are created either in anticipation of or during a pending litigation need not be produced in discovery.  These orders from Delaware follow other recent precedent from other districts generally finding litigation funding documents to be protected by the work product doctrine.  See, e.g., Fulton v. Foley, No. 17-CV-8696, 2019 WL 6609298, at *3 (N.D. Ill. Dec. 5, 2019) (“Courts that have examined this issue have generally held that litigation funding documents are protected by the work product doctrine.”); Hoist Fitness Sys., Inc. v. TuffStuff Fitness Int’l, Inc., No. EDCV171388ABKKX, 2018 WL 8193374, at *8 (C.D. Cal. May 14, 2018) (“Several courts have found that the attorney work product protection that attaches to litigation financing/insurance documents is not waived when these documents are disclosed to third-party litigation funders or insurers.”); United States v. Ocwen Loan Servicing, LLC, No. 4:12-CV-543, 2016 WL 1031157, at *6 (E.D. Tex. Mar. 15, 2016) (“The Court finds that the litigation funding information is protected by the work product doctrine.”).