The U.S. Chamber Institute for Legal Reform and the New Jersey Civil Justice Institute submitted comments supporting proposed Local Civil Rule 7.1.1, which would require disclosure of third-party litigation funding (TPLF) in civil cases before the U.S. District Court for the District of New Jersey. They argue that TPLF is a rapidly growing practice that currently operates in secrecy, creating risks of undisclosed conflicts of interest, ethical issues, and lack of transparency in litigation. The proposed rule would require parties to disclose the existence and identity of funders, the nature of their financial interest, and any approval rights over litigation or settlement decisions, thereby aligning New Jersey with other federal courts that have adopted similar requirements.
The letter details several reasons why such disclosures are essential. First, transparency helps courts and counsel avoid conflicts of interest and inappropriate fee-sharing between lawyers and non-lawyers, as required by ethical rules. Second, disclosure ensures that all parties—including defendants—know who is truly behind a lawsuit, preventing hidden influences and leveling the playing field, especially in cases where plaintiffs may present themselves as under-resourced compared to corporate defendants. Third, the rule would provide courts and parties with information highly relevant to settlement efforts, class certification, and proportionality in discovery, as TPLF arrangements can affect settlement dynamics, class representation, and cost-shifting decisions.
The organizations emphasize that disclosure would also help courts assess whether funding arrangements violate state-law prohibitions against champerty and ensure that funders who control litigation can be held accountable for sanctions or costs. They reject arguments that the rule would chill litigation or create unnecessary discovery disputes, noting that similar rules elsewhere have not led to such problems. Ultimately, the letter concludes that increased transparency through mandatory TPLF disclosure is vital for the fair, efficient, and ethical functioning of civil litigation in New Jersey federal courts.
