EDTX Denies Discovery of Litigation Funding Documents

July 14, 2022

Chief Judge Gilstrap of the Eastern District of Texas recently adopted a majority rule by denying a motion to compel production of litigation funding documents. [1] The court found that such funding agreements are not relevant to any party’s claims or defenses absent a prior good faith challenge to standing.

In Fleet Connect Solutions v. Waste Connections US, Inc., the defendant brought a motion to compel production of any litigation funding documents relating to the ongoing patent infringement litigation or the patents asserted in that litigation. [2] The defendant contended that such documents were relevant to whether Plaintiff “negotiated away any ownership rights to the Asserted Patents, which is relevant to whether Plaintiff can meet its burden to show standing.” [3] Defendant also contended the terms of any litigation funding agreements were “relevant to expert bias, motivations of witnesses, and the realistic appraisal of the case.” [4]

The Court found that Defendant failed to show that litigation funding agreements, if any, were relevant to the claims or defenses in the case. [5] The Court was not convinced by Defendant’s contention that litigation funding documents could be relevant to Plaintiff’s standing, emphasizing Defendant’s failure to make any prior good faith standing challenges. [6]  The Court found that “in demanding such documents under the guise of determining ownership of the Asserted Patents, Defendant attempts to engage in a fishing expedition.”  [7]

The Fleet Connect Solution decision demonstrates that mere speculation regarding the relevance of litigation funding agreements is insufficient to compel the production of such documents. While defendants may continue to demand discovery into litigation funding documents, they do so against a growing body of caselaw holding that such disclosure is improper. [8]

[1] See, e.g., Worldview Ent. Holdings, Inc. v. Woodrow, No. 159948/14, 2022 WL 1249050, at *1 (N.Y. App. Div. Apr. 28, 2022) (holding defendant failed to establish “how discovery about litigation financing and witness payments would support or undermine any particular claim or defense”); MLC Intellectual Prop., LLC v. Micron Tech., Inc., No. 14-CV-03657, 2019 WL 118595, at *2 (N.D. Cal. Jan. 7, 2019) (denying defendant’s motion to compel because although litigation funding agreements may be discoverable when there is a specific, articulated reason to suspect bias or conflicts of interest, there was no such reason, so discovery into persons and entities that had a financial interest in the litigation was not relevant).

[2] No. 2:21-CV-00365-JRG (E.D. Tex. June 29, 2022).

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] See, e.g., Elm 3DS Innovations LLC v. Samsung Elecs. Co., No. 14-1430-LPS, 2020 U.S. Dist. LEXIS 216796, at *3-4 (D. Del. Nov. 19, 2020); Art Akiane LLC v. Art & Soulworks LLC, No. 19 C 2952, 2020 WL 5593242, at *3-4 (N.D. Ill. Sep. 18, 2020); United Access Techs., LLC v. AT&T Corp., 2020 WL 3128269 (D. Del. June 12, 2020); V5 Technologies v. Switch LTD, 2020 WL 1042515 (D. Nev. March 3, 2020); Pipkin v. Acumen, No. 1:18-CV-00113-HCN-PMW, 2019 U.S. Dist. LEXIS 206233, at *3 (D. Utah Nov. 26, 2019); Benitez v. Lopez, 2019 WL 1578167, at *2 (E.D.N.Y. Mar. 14, 2019); MLC Intellectual Property, LLC v. Micron Technology, Inc., 2019 WL 118595, at *2 (N.D. Cal. Jan. 7, 2019); Mackenzie Architects, P.C. v. VLG Real Estate Devs., LLC, No. 1:15-CV-01105-TJM-DJS, 2017 WL 4898743, at *3 (N.D.N.Y. Mar. 3, 2017); Kaplan v. S.A.C. Capital Advisors, L.P., No. 12-CV-9350 VM KNF, 2015 WL 5730101, at *3-5 (S.D.N.Y. Sept. 10, 2015).

*Validity Summer Fellows MacKenzie Philbrick and Matthew Rasson assisted with the preparation of this post.