Investors who underwrite lawsuits for other people may now find their cloak of invisibility peeled back. Without much case law to rely on, it pays to be extra cautious. Los Angeles-based insurance defense attorney Jon Colman, an expert on investor funded litigation, addressed its potential pitfalls at the 2021 Combined Claims Conference.
First, a little background. In 2013, Hulk Hogan sued Gawker Entertainment for invasion of privacy, with a secret financial assist from Silicon Valley tech titan Peter Thiel. After the $140 million jury verdict and $31 million post-judgment settlement, confidential sources divulged Thiel’s participation and the press reported it.
But a leak to the media is no longer the only avenue for exposure. More officially, a few states and federal court districts have enacted legislation that requires disclosing litigation funding agreements. And both the American and California bar associations issued direction on appropriate and ethical handling of cases with financial sponsors.
When interviewed for an article on the topic in Claims Journal, attorney Jon Colman pointed out that lawyers who share case information with a funder can trigger a situation where they’re forced to disclose the financial relationship.