A Networked Group of Civil Trial Lawyers in States Across America

Litigation Funding Agreements – Legality, Admissibilty & Evidentiary Concerns

THEMIS ANNUAL MEETING

Fontainebleau Hotel

MIAMI, FLORIDA

February 26–28, 2020

Speakers: Sara Johnson Miemiec, Schneider National

Edwin S. Norris, Protective Insurance

Joseph W. Pappalardo, Gallagher Sharp LLP

Bryan T. Schwartz, Gallo Vitucci Klar LLP

I. OVERVIEW OF THIRD-PARTY LITIGATION FUNDING

Payment of a plaintiff’s medical, legal, or other expenses related to litigation by third-parties, known as Third-Party Litigation Funding (“TPLF”),[1] has developed into a multi-billion-dollar business in the United States.[2] TPLF is a relatively new phenomenon, and its effects on litigation in general and defendants in particular are far from fully appreciated. Nonetheless, it is axiomatic that investors betting on case outcomes will increase defendants’ exposure and remove the moderating effect of a plaintiff’s reasonable needs and expectations.[3]

One form of TPLF, the type used in an Ohio case that the author is defending and which is the basis for this paper, is investing in a plaintiff’s potential recovery for medical expenses.[4] In this form of TPLF, the third-party investor orchestrates two agreements: one between the plaintiff and his medical providers, and another between the medical provider and the investor.[5] Once medical treatment has been rendered to the plaintiff, the investor prohibits the plaintiff from submitting the bill to his insurance company and instead, like an insurance company, satisfies the plaintiff’s medical bills at a drastically reduced rate.[6] Profit from this investment comes from the investor (through the plaintiff) seeking damages for 100 percent of the plaintiff’s medical bills, not the much lower amount that was actually paid.[7]

Investors engaging in this form of TPLF develop a network of doctors to whom they send all of their plaintiffs.[8] It is in those doctors’ best interests to appease the investor to keep getting referrals.[9] Because the investor’s profit is directly related to the amount and cost of the medical procedures administered/performed, the effect is artificially increased medical damages.[10] Newspapers have reported doctors encouraging patients to undergo unneeded surgeries to enhance the value of their claims.[11] In the case that the author is defending, the plaintiff has presented well over $100,000 in alleged medical expenses as damages during settlement negotiations, an improbably high number given the nature of the accident that gave rise to the lawsuit and indicative of TPLF investor involvement. The author has developed the strategies detailed below to produce a favorable outcome in this Ohio case.

Aside from medical funding, there are two additional models where investors advance loans and purchase a part of the outcome of the litigation. The first is the individual plaintiff (IP) model, where an investor advances money to the plaintiff and charges interest on a monthly or daily basis at annualized rates that can in most circumstances, exceed 100 percent of the loan value. These are non-recourse loans, meaning that if the plaintiff is unsuccessful, the investor has no claim for repayment; The loan is repaid only if the suit eventually ends in a monetary award for the plaintiff. Generally, these types of loans are made in only relatively small amounts – often less than $10,000 – and the plaintiff is usually an individual involved in a personal injury case.

The second type of litigation funding, which we will refer to as the corporate litigant (CL) model, money is advanced to the plaintiff in exchange for a predetermined pro rata share of any proceeds that result from the lawsuit. The funding company is typically a specialized investment firm or hedge fund, and the borrower, under current practice, is typically a corporate litigant. Depending on the value of the case, the sums advanced to the borrower may exceed millions of dollars.

In both models - the medical funding and the litigation investment funding - the investors are neither litigants nor advocates for the litigants; their role is solely that of a profit-seeking investor whose goal is to maximize the return on their investment.

II. TPLF DISCOVERY AND ADMISSIBILITY

Case law regarding TPLF is sparse nationwide because TPLF agreements are almost never disclosed.[12] There is no analogous rule to Ohio Civ.R. 26(B)(2) or Fed.R.Civ.Pro. 26(a)(1)(A)(iv), which require disclosure of the existence and contents of insurance agreements, for TPLF agreements. As such, most case law that generates any scrutiny or discussion of TPLF agreements are cases in which the TPLF agreements themselves were the subject of the litigation.[13]

As of the drafting of this memorandum, there is no case law discussing the discovery or admissibility of TPLF agreements in Ohio. some creative and aggressive tactics to elicit this information especially the where investor is the plaintiff’s treating physician.

Three states (Indiana, Nebraska and Vermont) have enacted statutes ensuring that litigation funding agreements do not undermine legal privileges including the work product doctrine and attorney-client privilege.

At the federal level, six U.S. Courts of Appeals have local rules which require identifying litigation funders[14]. No local rule, however, requires the disclosure or production of the litigation finance agreement itself since the basis of the disclosure requirement is predicated on the FRCP 26.1, which concerns corporate disclosure statements. Rule 26.1 requires that a party disclose “any parent corporation and any publicly held corporation that owns 10% or more of its stock or states that there is no such corporation.” These six Circuit Courts expand the disclosure requirement to include “all persons” or “other legal entities” that “are financially interested in the outcome of the litigation.[15]

1. Arguments for Discovery and Admissibility of the TPLF Agreement and Unutilized Health Insurance

In Rancman v. Interim Settlement Funding Corp., the Ohio Supreme Court analyzed whether TPLF is legal under Ohio law (see Section III). It is clear from the Court’s disapproving tone that it reviewed at least a portion of the subject TPLF agreement.[16] While the Court did not discuss the discoverability of the TPLF agreement, the Court quotes it as reading “Rancman ACKNOWLEDGES AND FULLY UNDERSTANDS THAT [the TPLF investor] MAY, WILL, AND SHOULD MAKE A SUBSTANTIAL PROFIT ON THIS AGREEMENT.”[17] This dicta of Rancman provides an argument that TPLF agreements must be discoverable and admissible in Ohio.

The Eleventh Circuit Court of Appeals ruled that evidence of a TPLF arrangement is admissible to demonstrate a doctor’s bias because of his/her financial stake in the outcome of a case.[18] For evidence of a witness’s bias to be admissible under federal law, it need only show “‘any tendency’ to make bias more probable than it would be without the evidence.”[19] The plaintiff in ML Healthcare entered into an agreement with a TPLF investor much like the apparent arrangement in the instant case. Because the injured plaintiff was uninsured, she entered into an agreement with a TPLF investor, who referred her to a doctor for “free” treatment.[20] The TPLF investor then paid the doctor a discounted rate, but assumed the right to sue for the undiscounted cost of the plaintiff’s treatment.[21] The defendants argued that the doctor had an incentive to unnecessarily inflate the plaintiff’s bill to maximize the TPLF investor’s profit and was, thus, biased.[22]

The Northern District of Georgia admitted evidence of the doctor’s potential bias, which by necessity disclosed the existence and nature of the TPLF arrangement.[23] The Eleventh Circuit affirmed admission of the evidence under the standard established by Federal Evidence Rule 401, finding that the arrangement demonstrated the doctor’s inherent desire to appease the TPLF investor to receive more referrals, and so was relevant to the issue of the doctor’s bias.[24] The court also reasoned that any tendency of the admission to prejudice the jury and cause it to award damages contrary to Georgia’s collateral-source rule (see Section III for explanation) could be mitigated by judicial instruction.[25]

While no Ohio case has addressed this issue, there is a strong argument to be made that the TPLF agreement is discoverable and admissible because it demonstrates the doctor’s bias. Ohio Rule of Evidence 401 is essentially identical to its federal counterpart, and is interpreted similarly.[26] As such, the author argues that the TPLF agreement in the case should be admitted to demonstrate the inherent bias of the plaintiff’s doctor due to his desire for more referrals from the TPLF investor.

Ohio’s federal courts each have a local rule requiring disclosure of non-parties that have a financial stake in the outcome of a case in some instances. The Northern District of Ohio requires identification of “[a]ny publicly held corporation or its affiliate that has a substantial financial interest” in the litigation.[27] In the Southern District of Ohio, “nongovernmental corporate parties … shall disclose the identity of any publically[sic] held corporations or their affiliates that are not parties to the case or appearing amicus curiae that have substantial financial interests in the outcome of the litigation by reason of insurance, a franchise agreement, or an indemnity agreement.”[28] No case discusses either of the above local rules, but it should be noted that both rules apply only to publicly-held corporations and their affiliates. It is unclear whether the TPLF investor in the instant case would fall within the ambit of these local rules, were this case litigated in federal court.

In Punter-Spencer v. Irving, that my firm handled, Gallo Vitucci Klar was successful in convincing the plaintiff to provide a copy of her funding agreement while the defendants’ motion to compel was pending before Judge Jesse M. Furman in the Southern District of New York. When the Punter plaintiff presented to the emergency room, following the subject motor vehicle accident, she complained only of lower back pain. She underwent an x-ray of her lower back and was discharged. Some three weeks later – upon her counsel’s referral - Plaintiff reported to a local motor vehicle accident clinic complaining of “injuries” to her head, neck, right elbow, right knee, right wrist and left ankle... She ultimately underwent surgeries to her lower back, neck, right wrist and left ankle; though not claimed in the lawsuit, surgery to her knees was also recommended.

At her deposition, the plaintiff testified that she obtained lawsuit cash funding in an amount that she could not recall but which exceeded $100,000 - using her lawsuit as collateral. She testified that she used this law loan to pay for some of her medical bills and her living expenses.

While neither the New York State Court nor the Second Circuit (the Federal Circuit encompassing New York, Connecticut and Vermont) has no legal precedent on the discovery or admissibility of these agreements, we argued that the funding arrangement is admissible at trial on the issue of the plaintiff’s economic damages. Specifically, in our motion to compel we argued that the agreement may be used to impeach the plaintiff’s physicians’ credibility as to the need for treatment and whether the funding company provided incentive for further additional and unwarranted treatment and to attack the plaintiff’s claims for special damages as to the actual costs paid and billed and the repayment thereof. We also suggested that the agreement is discoverable under New York Law, which prohibits certain assignments of a lawsuit, in that the funding company may be the proper party to the action in lieu of the injured plaintiff much like that of a subrogor in a property damage action.

The Punter plaintiff’s counsel was so convinced by our arguments that they simply provided all of the discovery demanded before the Court could issue a ruling on the issue.

The author argues by analogy that Federal and Ohio Evidence Rule 411 should not prevent admission of evidence of the plaintiff’s unused health insurance coverage. Evid.R. 411 prevents admission of liability (and by analogy, health) insurance “upon the issue [of] whether the person acted negligently or otherwise wrongfully.” However, “evidence of insurance against liability [is allowed] when offered for another purpose, such as … bias or prejudice of a witness.”[29] This rule is likely not applicable here, because it concerns insurance against liability, not health insurance.[30] Even if Evid.R. 411 were to apply, it would not bar admission of the plaintiff’s unused health insurance as evidence of the plaintiff’s potential bias due to being financed by a TPLF investor.[31]

III. AVENUES OF ATTACK ON A TPLF-FUNDED PLAINTIFF

1. Champerty and Maintenance

The author has discovered that the best strategy to attack a TPLF agreement in Ohio is to have it declared void as champertous and maintenous under Rancman v. Interim Settlement Funding Corp.[32] In Rancman, a woman injured in a single-car accident sued her estranged husband’s insurance company for coverage.[33] Rather than wait for her case to resolve to collect the insurance proceeds, the woman contracted with two TPLF companies for an advance of funds secured by her pending claim.[34] The companies forwarded the woman $6,000 in exchange for the first $16,800 she would recover if the case was resolved within 12 months, $22,200 if resolved within 18 months, or $27,600 if resolved within 24 months.[35] The woman had no obligation to pay if her case was not resolved in her favor.[36] After settling her case for $100,000, the woman refused to pay under the agreement, and instead repaid the TPLF companies the money that she was advanced plus interest at eight percent per annum.[37] She then filed suit against the TPLF companies seeking recession of the contract and a declaratory judgment that the companies engaged in “unfair, deceptive, and unconscionable sales practices.”[38]

After trial before a magistrate, the trial court found that the transactions were loans that violated Ohio’s usury law and R.C. Chapter 1321, the Small Loan Act.[39] It ordered repayment of the loans at eight percent per annum.[40] The Court of Appeals for Summit County agreed that the transactions were loans, but held that they were void under R.C. § 1321.02, and prohibited the TPLF companies from collecting any principal, interest, or other charges.[41]

The TPLF companies appealed to the Supreme Court of Ohio, arguing that the advance to the woman was an investment, not a loan, and thus was not subject to a statutory limit on the return on investment.[42] The woman countered that the advance was a loan that subjected the TPLF companies to virtually no risk and returned profits in excess of the legally permissible interest rate under R.C. Chapter 1321.[43] The Supreme Court of Ohio found it unnecessary to determine whether the advance was an investment or loan, because it was void as a form of champerty and maintenance.[44]

The Supreme Court of Ohio defines “maintenance” as “assistance to a litigant in pursuing or defending a lawsuit provided by someone who does not have a bona fide interest in the case,” and “champerty” as “a form of maintenance in which a nonparty undertakes to further another’s interest in a suit in exchange for a part of the litigated matter if a favorable result ensues.”[45] The doctrines of champerty and maintenance “prevent officious intermeddlers from stirring up strife and contention by vexatious and speculative litigation which would disturb the peace of society, lead to corrupt practices, and prevent the remedial process of the law.”[46] The Court noted that champerty and maintenance were largely dormant in Ohio for much of the twentieth century, because traditional champertors and maintainers were attorneys, who have been regulated by the Code of Professional Responsibility.[47]

Encouragingly, the Supreme Court of Ohio defines champerty broadly, holding that the advances “constitute[d] champerty because [the TPLF companies] sought to profit from [the woman’s] case.”[48] Similarly encouraging, the Court held that the advances constituted maintenance because the TPLF companies “each purchased a share of a suit to which they did not have an independent interest; and because the agreements provided [the woman] with a disincentive to settle her case.”[49] Because the woman would have to pay the TPLF companies a set portion of her litigation proceeds, this effectively raised the amount that it would take to settle the case by the amount of the TPLF companies’ fee.[50] The Court found “[e]qually troubling … a champertor’s earning a handsome profit by speculating in a lawsuit and potentially manipulating a party to the suit.”[51] It stated succinctly: “a lawsuit is not an investment vehicle. Speculating in lawsuits is prohibited by Ohio law. An intermeddler is not permitted to gorge upon the fruits of litigation.”[52]

Under Rancman, the current rule for TPLF in Ohio is:

Except as otherwise permitted by legislative enactment or the Code of Professional Responsibility, a contract making the repayment of funds advanced to a party to a pending case contingent upon the outcome of that case is void as champerty and maintenance. Such an advance constitutes champerty and maintenance because it gives a nonparty an impermissible interest in a suit, impedes the settlement of the underlying case, and promotes speculation in lawsuits.[53]

In West Broad Chiropractic v. American Family Insurance, the Supreme Court of Ohio considered whether a chiropractic practice could accept as payment the proceeds from a patient’s motor vehicle accident lawsuit.[54] The chiropractic practice treated the patient before any lawsuit was filed, and the patient paid by signing an agreement assigning the patient’s recovery in any future lawsuit.[55] Once a lawsuit was filed, the chiropractic practice gave notice of the assignment to the other driver’s insurance company, requesting that it name the chiropractic practice as a co-endorser on any disbursement check or to issue to it a separate check for the value of the chiropractic services performed for the patient.[56] The Court’s primary inquiry was whether the patient had any rights to assign when the cause of action had occurred but no lawsuit had yet been filed – a question it answered in the negative.[57] The Court also stated that it “disfavor[ed] such assignments based upon their similarities to champertous agreements that are void as a matter of law.”[58] While the patient would have remained liable for the medical bills if she had not settled her case, the chiropractic practice’s “interest in potential future proceeds could influence [the patient’s] interest in resolving her case, including delaying and holding out for a greater settlement because she had no current obligation to pay for her medical treatment.”[59]

Contrary to the implication in West Broad Chiropractic, some Ohio courts, when determining whether an advance of funds is champerty and/or maintenance under Rancman, appear to primarily consider whether repayment of the funds is contingent on the outcome of a lawsuit. For example, in Ohio Farm Bureau Federation, Inc. v. Amos, the court was tasked to determine whether a $500,000 loan to a farmer from the Ohio Farm Bureau to support the farmer’s peat mining operation while he challenged environmental restrictions constituted champerty and/or maintenance.[60] The court held that the loan was legal and enforceable, because while it was made in contemplation of litigation, its repayment was not contingent on the litigation’s outcome.[61] The Fifth District reached the same conclusion in Lillibridge v. Tarman, where it determined that a personal loan for living expenses given to a woman waiting for litigation from a car accident to resolve was legal and enforceable, despite the fact that the lender knew that the woman did not work and would only be able to repay the loan using litigation proceeds.[62]

Rancman and the case law that has developed under it lend the author a strong argument that circumventing insurance by using TPLF investor-chosen doctors is illegal in Ohio. The Supreme Court of Ohio has expressed a strong distaste for any arrangement that “gives a nonparty an impermissible interest in a suit, impedes the settlement off the underlying case, [or] promotes speculation in lawsuits.”[63] It is clear that encouraging the plaintiff to forego insurance and use TPLF investor-chosen doctors to seek profit from a third-party’s lawsuit is the definition of champerty in Ohio. Furthermore, any purchase of a share of a suit’s proceeds is void as maintenance in Ohio under Rancman.Finally, West Broad Chiropractic more recently affirmed the Supreme Court of Ohio’s disfavor of giving medical providers an interest in litigation, as the plaintiff in the author’s case has done.

In July 2018, the New York City Bar Association (NYCBA) issued Formal Opinion 2018-5, entitled ‘Litigation Funder’s Contingent Interest in Legal Fees’, wherein it opined that a lawyer may not enter into a financing agreement with a litigation funder, a non-lawyer, under which the lawyer’s future payments to the funder are contingent on the lawyer’s receipt of legal fees or on the amount of legal fees received in one or more specific matters”. The NYCBA reached this conclusion based on its interpretation of New York’s Rule 5.4(a) of the New York Rules of Professional Conduct which provides that “a lawyer or law firm shall not share legal fees with a nonlawyer.

The distinction between “sharing” legal fees and making payments from income derived from legal fees is unclear.

While the violation of Rule 5.4, in and of itself, will neither result in the disclosure of a funding agreement nor the terms of the agreement, a federal district court in New York held that a funding agreement is discoverable only when it is directly at issue in the case[64]. In Kaplan, the court denied the defendants’ request for discovery of a litigation financing agreement holding defendants’ alleged concerns to be “purely speculative” and, therefore, irrelevant.

Accordingly, when mounting an argument for the disclosure of the funding agreement, focus should remain on the involvement of the investor and/or treating physicians, the necessity of the treatment and the plaintiff’s actual use of the funds. To the extent a party can demonstrate that the plaintiff’s treatment changed significantly or became increasingly invasive following the execution of the funding agreement, the more likely the agreement will become relevant for discovery and ultimately for impeachment purposes at trial.

2. Failure to Mitigate Damages and Collateral Sources of Relief

Ohio law regarding damages recoverable for medical expenses is expressed in Robinson v. Bates.[65] In Ohio, the collateral-source rule provides that “the plaintiff’s receipt of benefits from sources other than the wrongdoer is deemed irrelevant and immaterial on the issue of damages.”[66] This is an “exception to the general rule that in a tort action, the measure of damages is that which will compensate and make the plaintiff whole.”[67] The collateral-source rule “prevent[s] the jury from learning about a plaintiff’s income from a source other than the tortfeasor so that a tortfeasor is not given an advantage from third-party payments to the plaintiff.”[68]

In Robinson, the plaintiff, who was injured in a slip-and-fall accident, sought to introduce into evidence the full amount of her hospital bills.[69] The defendant countered that the full amount of the bills should be excluded, and instead sought to introduce the amount that the plaintiff’s health insurer actually paid in full satisfaction of the bills, a substantially lower amount.[70] The plaintiff countered that allowing introduction of the discounted bills would run afoul of the collateral-source rule, and be akin to the defendant taking advantage of the fact that the plaintiff had responsibly purchased health insurance.[71]

The Supreme Court of Ohio reasoned that, because insurance companies negotiate discounts with medical providers in advance, such discounts are not actually paid and cannot “constitute payment of any benefit from a collateral source.”[72] The Court determined that “the fairest approach is to make the defendant liable for the reasonable value of plaintiff’s medical treatment.”[73] The reasonable value “is not necessarily the amount of the original bill or the amount paid. Instead, … [it] is a matter for the jury to determine from all relevant evidence.”[74] As such, “[b]oth the original medical bill rendered and the amount accepted as full payment are admissible to prove the reasonableness and necessity of charges rendered for medical and hospital care.”[75] Under this scheme,

[t]he jury may decide that the reasonable value of medical care is the amount originally billed, the amount the medical provider accepted as payment, or some amount in between. Any difference between the original amount of a medical bill and the amount accepted as the bill's full payment is not a “benefit” under the collateral-source rule because it is not a payment, but both the original bill and the amount accepted are evidence relevant to the reasonable value of medical expenses.[76]

Robinson did not apply R.C. § 2315.20, because it was enacted after the plaintiff’s cause of action accrued.[77] Section 2315.20(A) provides:

In any tort action, the defendant may introduce evidence of any amount payable as a benefit to the plaintiff as a result of the damages that result from an injury, death, or loss to person or property that is the subject of the claim upon which the action is based, except if the source of collateral benefits has … a contractual right of subrogation.

Contrary to common law collateral-source rule, R.C. § 2315.20 “expressly established that evidence of collateral benefits is admissible.”[78] However, the exception for sources of payment that have a contractual right of subrogation “will generally prevent defendants from offering evidence of insurance coverage for a plaintiff's injury, because insurance agreements generally include a right of subrogation.”[79] As a result,

[t]he defendant would … be liable for the full cost of the plaintiff's medical expenses, even though those expenses have been paid by insurance. The plaintiff does not receive a windfall payment, however, because the insurer has subrogation rights to recover any expenses it has already paid. This appropriately leaves the burden of medical expenses on the tortfeasor.[80]

Because “[t]his formulation is no different substantially from the common-law rule described in Robinson, … [the] common-law analysis from Robinson applies equally in the context of the statute,” even though the statute supersedes the common law collateral-source rule.[81]

No case applies Robinson or R.C. § 2315.20 to TPLF, and no Ohio case states that failure to use insurance write-offs when available constitutes failure to mitigate damages. However, it stands to reason that bills from a TPLF investor’s doctor do not represent the “reasonable value of medical expenses” under Robinson when less expensive care options through insurance are available. While a “jury may decide that the reasonable value of medical care is the amount originally billed, the amount the medical provider accepted as payment, or some amount in between” under Robinson, the Court’s rationale for this discretion was that “[a]ny difference between the original amount of a medical bill and the amount accepted as the bill's full payment is not a ‘benefit’ under the collateral-source rule because it is not a payment,” it is a discount pre-negotiated by a health insurer. This is not the case here. To support his settlement proposal, the plaintiff in the author’s case provided medical bills prepared by the TPLF investor’s doctor. These bills are likely inflated due to the doctor’s relationship with the TPLF investor (see Section I), and are inherently different from the undiscounted amounts billed by an independent doctor with no ties to the litigation that the Court contemplated in Robinson. As such, the author believes that a strong argument exists that these bills are not an indication of the “reasonable value of medical expenses.”

The Northern District of Georgia in ML Healthcare allowed the defendant to introduce evidence of the TPLF agreement to attack the reasonableness of the plaintiff’s claimed medical expenses in addition to the doctor’s bias.[82] The Eleventh Circuit did not rule on the propriety of this admission, because the defendants did not ultimately use the evidence to attack the reasonableness of the medical expenses and because it found that bias was a valid ground for admission of the evidence.[83] Nonetheless, the author argues that evidence of the TPLF agreement should be used to attack the reasonableness of the medical expenses claimed in the plaintiff’s settlement offer.

Finally, the author argues that the plaintiff could not claim that the defense is prohibited from admitting evidence that the plaintiff had medical insurance, even though the plaintiff chose not to utilize his insurance, under the collateral-source rule. The collateral-source rule “prevent[s] the jury from learning about a plaintiff’s income from a source other than the tortfeasor so that a tortfeasor is not given an advantage from third-party payments to the plaintiff,” but because the plaintiff chose not to utilize his insurance coverage, he did not receive any income from it.[84] Since the plaintiff never took advantage of his health insurance, he received no benefit from it, and it thus it could not be considered a “collateral source.”

Similarly, in Punter-Spencer, supra, we argued that the discovery of the funding agreement was clearly relevant as it also pertains to the plaintiff’s economic damages as she claimed that she used some of the loaned funds to pay for her medical bills for which she seeks reimbursement. Given that at trial the plaintiff will have testify as to having to repay the medical bills, which were continuously mounting with interest, the discovery of this information was entirely relevant and even central to her claim of special damages[85].

IV. CONCLUSION

In light of the spiking popularity of TPLF, the defense bar must find methods of admitting evidence of the often-protected TPLF agreement and attacking the notion of TPLF on all fronts. While case law on these issues remains sparse nationwide, discovery with regard to TPLF agreements are gaining momentum through the Courts and the legislatures as it is clearly relevant to establishing overtreatment and therefore witness bias under Federal Rule of Evidence 401 (or a comparable state Rule), as well as the relevancy with respect to special damages and repayment of medical treatment received as a result of the accident. Additionally, TPLF itself may be attacked by the doctrines of champerty, maintenance, failure to mitigate damages, as well as local authority opinions.

 

[1] It is also termed “Alternative Litigation Financing.”

[2] Natalie Rodriguez, Going Mainstream: Has Litigation Finance Shed Its Stigma?, Law360, December 12, 2017, available at https//law360.com/articles/992299, valuing litigation finance industry at $5 billion in 2017.

[3] David H. Levitt, Francis H. Brown III, Third Party Litigation Funding: Civil Justice and the Need for Transparency, DRI Center for Law and Public Policy, January 3, 2019, available at http://www.dri.org/docs/default-source/dri-white-papers-and-reports/third_party_litigation_10-17-18-(1).pdf?sfvrsn=2.

[4] Id. at p.10.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Alison Frankel and Jessica Dye, Special Report: Investors profit by funding surgery for

desperate women patients, Reuters, August 18, 2015, available at https://www.reuters.com/

article/us-usa-litigation-mesh-specialreport/special-report-investors-profit-by-funding-surgery-for-desperate-women-patients-idUSKCN0QN1QT20150818; Matthew Goldstein and

Jessica Silver-Greenberg, How Profiteers Lure Women Into Often-Unneeded Surgery, New

York Times, April 14, 2018, available at https://www.nytimes.com/2018/04/14/business/

vaginal-mesh-surgery-lawsuits-financing.html.

[12] Supra note 3 at p. 3.

[13] Id.

[14] The Third, Fourth, Fifth, Sixth, Tenth and Eleventh Circuits which encompass have adopted these local rules.

[15] See, e.g., 5th Cir. L. R. 28.2.1.

[16] Rancman v. Interim Settlement Funding Corp., 99 Ohio St.3d 121, 789 N.E.2d 217 (2003).

[17] Id. at 125.

[18] ML Healthcare Servs., LLC v. Publix Supermarkets, Inc., 881 F.3d 1293 (11th Cir. 2018) (applying federal law to admissibility issue).

[19] Id. at 1302 (citing Fed. R. Evid. 401(a)).

[20] Id. at 1302.

[21] Id.

[22] Id.

[23] Id. at 1297.

[24] Id. at 1302–03.

[25] Id. at 1303.

[26] See generally 1 Baldwin's Oh. Prac. Evid. § 401.2 (3d ed.).

[27] N.D. Ohio L. Civ. R. 3.13(b) (emphasis added).

[28] S.D. Ohio L. R. 7.1.1.

[29] Id.

[30] See Beck v. Cianchetti, 1 Ohio St.3d 231, 439 N.E.2d 417 (1982) (“[T]he exclusionary principle of Rule 411 applies only where liability insurance is offered to establish negligence or culpability.”) (internal quotation omitted).

[31] See Id. (evidence of liability insurance admissible to demonstrate witness’ motive to misrepresent due to pecuniary interest in case).

[32] 99 Ohio St.3d 121, 789 N.E.2d 217 (2003).

[33] Id. at 122.

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38] Id.

[39] Id.

[40] Id.

[41] Id.

[42] Id. at 123.

[43] Id.

[44] Id.

[45] Id. (citing 14 Ohio Jurisprudence 3d (1995), Champerty and Maintenance, Section 1.).

[46] Id. (citing 14 Corpus Juris Secondum (1991), Champerty and Maintenance, Section 3.).

[47] Id. at 124.

[48] Id.

[49] Id.

[50] Id. at 124–25.

[51] Id. at 125.

[52] Id.

[53] Id. (emphasis added).

[54] 122 Ohio St.3d 497, 912 N.E.2d 1093 (2009).

[55] Id. at 498.

[56] Id.

[57] Id. at 499–500.

[58] Id. at 501 (citing Rancman, 99 Ohio St.3d 121).

[59] Id.

[60] 2004-Ohio-4767 (5th Dist.).

[61] Id. at ¶¶ 32–34.

[62] 2009-Ohio-2216 (5th Dist.).

[63] Rancman, 99 Ohio St.3d at 125.

[64].See Kaplan v. S.A.C. Capital Advisors, L.P., No. 12-CV-9350, 2015 U.S. Dist. LEXIS 135031 (S.D.N.Y. Apr. 25. 2015).

[65] 112 Ohio St.3d 17, 857 N.E.2d 1195 (2006).

[66] Id. at 21.

[67] Id.

[68] Id.

[69] Id. at 18.

[70] Id.

[71] Id.

[72] Id. at 23 (emphasis sic).

[73] Id.

[74] Id.

[75] Id.

[76] Id. (emphasis added).

[77] Jaques v. Manton, 125 Ohio St.3d 342, 343, 928 N.E.2d 434 (2010).

[78] Jaques, 125 Ohio St.3d at 344.

[79] Id.

[80] Id.

[81] Id.

[82] 881 F.3d at 1304.

[83] Id.

[84] Robinson, 112 Ohio St.3d at 21.

[85] See ML Healthcare Servs., LLC v. Publix Super Markets, 881 F.3d 1293, 1301-03 (11th Cir. 2018); Thomas v. Chambers, 18-CV-04373 at p. 14 (E.D.La. Apr. 26, 2019) (holding that the funding arrangement is admissible at trial for the purposes of impeaching a plaintiff’s physicians’ credibility as to the need for treatment and whether the funding company provided incentive for further additional and unwarranted treatment)

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