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New Jersey District Court Adopts Rule Requiring Broad Disclosure of Litigation Funding

Client Alert | 1 min read | 07.07.21

The U.S. District Court for the District of New Jersey adopted a new local rule, starting on June 21, 2021, requiring disclosure by litigants regarding the use of litigation funding. While several federal courts have implemented rules requiring disclosure of the existence and identity of litigation funders, New Jersey’s rule goes much further, requiring all parties to further disclose:

  • the scope of the funder’s rights to approve of litigation decisions or settlement decisions; and
  • a brief description of the funder’s financial interest in the litigation.

The new rule is designed to promote transparency in the litigation process and thereby ferret out the “true” decisionmakers in the litigation. It may be used to prevent ethical violations by counsel as well as to ensure compliance with state laws against champerty and maintenance.

The new rule contains a number of ambiguities, however, that raise concerns that it may unnecessarily delay the litigation by increasing the frequency of motion practice over discovery. For example, following the mandatory disclosures cited above, the new rule specifically contemplates the possibility of further discovery upon a showing of “good cause,” or where “such other disclosure is necessary to any issue in the case.”

In addition, as drafted, the rule may require disclosure of contingency-based attorney engagements, as it requires disclosure of “any person or entity that is not a party” who is funding litigation costs in exchange for “a contingent financial interest based upon the results of the litigation.” Similarly, the rule may encompass common contractual indemnification agreements, as it requires disclosure of non-parties providing litigation funding in exchange for any “non-monetary result that is not in the nature of a personal or bank loan, or insurance.”

The new rule goes into effect immediately, applies to all pending cases, and requires the filing of the required disclosures on or before August 5, 2021. In the coming year, New Jersey federal courts will likely be called upon to resolve a number of disputes over the scope and effect of the new rule.

Insights

Client Alert | 4 min read | 08.07.25

File First, Facts Later? Eleventh Circuit Says That Discovery Can Inform False Claims Act Allegations in Amended Complaints

On July 25, 2025, the Eleventh Circuit Court of Appeals issued its decision in United States ex. rel. Sedona Partners LLC v. Able Moving & Storage Inc. et al., holding that a district court cannot ignore new factual allegations included in an amended complaint filed by a False Claims Act qui tam relator based on the fact that those additional facts were learned in discovery, even while a motion to dismiss for failure to comply with the heightened pleading standard under Federal Rule of Civil Procedure 9(b) is pending.  Under Rule 9(b), allegations of fraud typically must include factual support showing the who, what, where, why, and how of the fraud to survive a defendant’s motion to dismiss.  And while that standard has not changed, Sedona gives room for a relator to file first and seek out discovery in order to amend an otherwise deficient complaint and survive a motion to dismiss, at least in the Eleventh Circuit.  Importantly, however, the Eleventh Circuit clarified that a district court retains the discretion to dismiss a relator’s complaint before or after discovery has begun, meaning that district courts are not required to permit discovery at the pleading stage.  Nevertheless, the Sedona decision is an about-face from precedent in the Eleventh Circuit, and many other circuits, where, historically, facts learned during discovery could not be used to circumvent Rule 9(b) by bolstering a relator’s factual allegations while a motion to dismiss was pending.  While the long-term effects of the decision remain to be seen, in the short term the decision may encourage relators to engage in early discovery in hopes of learning facts that they can use to survive otherwise meritorious motions to dismiss....