Is a Litigation Funding Agreement Discoverable Under Rule 26?

How courts have applied the relevance and work-product standards of Rule 26 to discovery requests targeting funding arrangements.

Can an opposing party obtain a litigation funding agreement through discovery? Generally no, absent a specific showing of relevance beyond the funder's mere existence — most federal courts that have addressed the question have denied discovery into funding arrangements, reasoning that a funder's financial interest in an outcome, standing alone, does not satisfy Federal Rule of Civil Procedure 26(b)(1)'s requirement that discovery be relevant to a claim or defense and proportional to the needs of the case.

The leading early decision, Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711 (N.D. Ill. 2014), addressed a related but distinct question: whether case materials shared with a prospective funder during due diligence remained protected by the work-product doctrine. Magistrate Judge Jeffrey Cole held that sharing work product with a funder to secure financing did not waive the protection, because the funder and the funded party shared a common interest in the litigation's outcome, and the disclosure did not create a meaningful risk that the material would reach an adversary. The decision has been influential in confirming that pursuing litigation funding does not, by itself, force a party to waive privilege or work-product protection over the materials shared during underwriting.

On the narrower question of discovering the funding relationship itself, courts have generally required the requesting party to show more than curiosity about a funder's existence. In MLC Intellectual Property, LLC v. Micron Technology, Inc., 2019 WL 118595 (N.D. Cal. Jan. 7, 2019), the court denied a request to compel disclosure of the plaintiff's funder, finding the identity of the funder not relevant to any claim or defense in the underlying patent infringement action, and noting that concerns about juror conflicts of interest could be addressed through voir dire rather than pretrial discovery. Courts applying this reasoning generally distinguish between discovery aimed at a funder's identity or general terms, which is typically denied, and discovery aimed at showing a funder holds actual control over litigation or settlement decisions, which courts are more willing to permit on a specific factual showing.

The analysis is different where disclosure is independently required by a local rule such as D.N.J. Local Civil Rule 7.1.1 or a standing order like Delaware's. Those provisions establish an initial identification obligation as a matter of course, separate from the ordinary Rule 26 relevance analysis, and typically require the requesting party to show good cause before obtaining the underlying agreement's specific financial terms, layering a heightened standard on top of the baseline identification requirement rather than eliminating it.

The most commonly successful basis for compelling deeper discovery into a funding agreement is a claim that the funder exercises actual control over litigation strategy or settlement authority, since that allegation goes directly to issues such as the real party in interest, standing, or professional-responsibility compliance rather than merely to the funder's financial stake, which is why non-interference provisions in a funding agreement are not just an ethics safeguard but also a practical discovery defense.

Practitioners on both sides of a discovery dispute over funding materials should understand what is actually being litigated when a motion to compel is filed. A party seeking discovery rarely wants the funding agreement for its own sake; the underlying strategic goal is typically one of a handful of things: establishing that the funder controls the litigation in a way that affects standing or the real party in interest, showing a conflict of interest relevant to a juror or judge, or building a narrative for the fact-finder about who is actually driving the case. Courts have generally been skeptical of the third goal in particular, treating it as an attempt to inject an irrelevant, potentially prejudicial issue into the litigation rather than a legitimate discovery purpose, which is part of why courts applying the Rule 26(b)(1) relevance and proportionality standard have denied the large majority of these requests.

The practical takeaway for a funded party is that maintaining clean documentation around the funding relationship — a well-drafted agreement with explicit non-interference language, and a factual practice of actually not directing case strategy — does more to defend against a discovery challenge than any procedural argument alone. A funder whose actual conduct is inconsistent with its agreement's non-interference language creates the exact factual predicate courts have been willing to use to compel deeper discovery, since the argument then shifts from a request to explore the funder's bare existence toward a request to test whether the litigation is genuinely being controlled by the named parties and their counsel, which is unambiguously a relevant question under Rule 26.

Funded parties who want to be in the strongest position if a discovery fight over the funding relationship does arise generally take a few concrete steps well before any motion to compel is filed. Correspondence with the funder is kept in a file separate from privileged case-strategy communications, so that producing funder-related materials in response to a narrow discovery request does not require sorting through material that also touches privileged legal strategy. Reporting to the funder is limited to the case updates the funding agreement actually requires, rather than including the funder in strategy discussions as a matter of convenience, since the existence of a broader pattern of consultation is precisely what a party seeking discovery will look for once it has any factual toehold. And counsel handling the underlying case typically prepares a short factual record — dates of funder reporting, confirmation that settlement authority remained with the client throughout — before any dispute arises, since reconstructing that record for the first time in response to a motion to compel is considerably less persuasive than having maintained it contemporaneously as ordinary case administration.

Sources: Fed. R. Civ. P. 26(b)(1); Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711 (N.D. Ill. 2014); MLC Intellectual Property, LLC v. Micron Technology, Inc., No. 14-cv-03657, 2019 WL 118595 (N.D. Cal. Jan. 7, 2019); D.N.J. L. Civ. R. 7.1.1.

Criterica Capital drafts funding agreements with explicit non-interference and independent-judgment provisions specifically because those terms both satisfy professional-responsibility requirements and provide the clearest defense against discovery arguments premised on funder control. Firms facing a discovery request targeting their funding arrangement can contact our institutional team to discuss how our agreements are typically positioned in response.

Discuss your matter with our institutional team.