On April 3, 2020, the United States District Court for the Southern District of Florida issued an order in the pending Zantac multidistrict litigation (”MDL”) requiring disclosure of funding arrangements and funding documentation between plaintiffs’ counsel and third-party litigation financiers. This order represents some increased traction in favor of arguments seeking to require disclosure of third-party funding arrangements in MDLs.
The Zantac MDL, In re Zantac (Ranitidine) Prods. Liab. Litig., MDL No. 2924, was originally formed by the Judicial Panel for Multidistrict Litigation on February 6, 2020. The plaintiffs sued various defendants, including manufacturer Sanofi and its distributors, alleging that the active ingredient in the heartburn medication Zantac breaks down to form a carcinogen that caused personal injuries. Included in the MDL are also six putative classes of consumers who sought refunds and economic damages based on their purchase of Zantac. Due to a number of actions already pending in the Southern District of Florida, the Panel transferred the remaining actions to that court to be assigned to the Honorable Robin L. Rosenberg.
Once underway, Judge Rosenberg issued Pretrial Order No. 16 to address certain administrative issues, including disclosures by plaintiffs’ leadership counsel applicants. In Re Zantac (Rantidine) Prods. Liab. Litig., 2020 U.S. Dist. LEXIS 62805, *39 (S.D. Fla. April 3, 2020). The court noted that the “unique nature of an MDL, and particularly one of this potential size, warrants transparency and the highest regard for potential conduct, and confidence in the leadership and in the manner in which the case is handled by all parties.” Accordingly, the court required any applicant for plaintiff’s leadership counsel to make broad disclosures regarding certain financial interests in the outcome of the litigation.
Among those interests was “any financing contingent upon this litigation.” If plaintiffs did obtain outside financing, the court asked whether the funder had “any control (direct or indirect, actual or apparent or implied) over the decision to file or the content of any motions or briefs, or any input into the decision to accept a settlement offer.” Next, the court asked whether financing created any “conflict of interest for counsel,” undermined “counsel’s obligation of vigorous advocacy,” affected “counsel’s independent judgment,” gave to the lender “any control over litigation strategy or settlement decisions” applied to both individual actions or common benefit work done by counsel, and whether the arrangement affected “party control of settlement.” Additionally, the Court required counsel to explain the nature and amount of the financing they received and to submit a copy of the financing documentation to a Special Master for review.
While this area is still evolving and there are certainly obstacles to obtaining disclosure of or discovery on third-party litigation funding, this order comes on the heels of certain other recent developments tending in favor of disclosure of such arrangements. In May 2018, U.S. District Judge Dan Polster in the U.S. District Court for the Northern District of Ohio ordered the production of documents relating to financing arrangements for in camera review as part of the In Re National Prescription Opiate Litigation MDL. Further, in October 2019, the Advisory Committee on the Federal Rules of Civil Procedure moved its consideration of third-party litigation funding disclosure out of the MDL subcommittee for full consideration at the committee level, signaling openness to a possible change in disclosure requirements in the future.
Ultimately, while courts have generally been reluctant to require disclosure of third-party funding arrangements, these recent decisions towards requiring disclosure indicate court willingness in some instances to provide consideration of a number of potential impacts from litigation funding, including potential bias, conflicts of interest, and the third party financiers’ control of decision-making in multidistrict litigation. The issue of disclosure of third-party funding arrangements will continue to gain importance, particularly in the current environment where both MDLs and third-party funding arrangements are only growing.
For more information on recent developments in third-party litigation funding, please see “Why Reformers Want Disclosure of 3rd-Party MDL Funding” at https://www.duanemorris.com/articles/why_reformers_want_disclosure_3rd_party_MDL_funding_0120.html.