A proposed rule in the Northern District of California could require parties in civil suits to disclose the presence of litigation funders.

And reactions to the proposal demonstrate just how far apart groups in the legal community are on the issue of third-party investment in lawsuits.

…

As long as the rule is applied equally to both parties in a lawsuit, it’s a fine first step, but doesn’t go as far as major third-party funding critics would probably like, Deborah Hensler, a Stanford Law School professor, told the Northern California Record.

Hensler is an expert in litigation funding for high-value commercial lawsuits. Because California requires defendants to disclose that they have insurance — a form of litigation funding — she said she believes asking plaintiffs to disclose investments is fair.

“On its face, the proposed rule seems quite modest,” she said. “It does not require parties to disclose the amount of funding or specific provisions of the funding agreement, which I believe are what critics of third-party litigation funding would like to see. Those disclosures would raise more significant issues, worthy of policy debate.”