Information Sharing in the Dugal Contract v. the Model

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The Canadian contract we posted last week (used by the plaintiffs in the Dugal matter) addresses information sharing in slightly different ways than our draft model, presumably because privilege law is different. It is not obvious which contract mandates greater disclosure.

In the draft model, plaintiff must disclose all material information prior to the initial funding and on an on-going basis, except that information protected only by the attorney-client privilege cannot be shared without the informed, written consent of the plaintiff. That restriction is imposed notwithstanding the fact that the parties agree sharing the information among themselves would not, as a matter of law, waive the privilege, because the state of New York law on point is unsettled. In addition, the plaintiff represents the disclosure has been complete and accurate, and has the anti-fraud provisions of the securities laws in the background if they do not.

In the Dugal contract, the plaintiff makes no representations about the information disclosed to date, nor does it make very detailed commitments about the information to be shared over time. The full obligation to share information with the funder is in 3.1:

“Plaintiffs irrevocably direct the Lawyers to advise the Funder with regard to any significant issue in the Proceeding such as prospects, strategy, quantum, proof and any material change thereof. The Plaintiffs also irrevocably direct the Lawyers to promptly respond to any reasonable request by the Funder for information relating to the Proceeding.”

It is possible that material information would neither fit within “prospects, strategy, quantum, proof and any material change thereof”, and that the funder might not think to request it. If so, the draft model requires greater disclosure. However, as mentioned, the draft model does not require disclosure of information protected solely by attorney client privilege. The Canadian contract contemplates that such information will be shared.

First, in 3.3 of the Canadian contract the plaintiffs agree that all information shared with funder is subject to privilege, where privilege is defined to include “solicitor-client privilege, litigation privilege and settlement communication privilege”. Then in 5.1, under “Privilege and Confidentiality” the Canadian contract says that to preserve privilege, funder shall protect the confidentiality of the information and give access to it only to the “Funder’s directors, officers and/or employees who are engaged in functions connected to the implementation of this Agreement”, a limitation that would be protective of American attorney-client privilege but not needed for American work product protection.

Beyond these terms dealing with information about the substance of the claim, the Canadian contract, like the draft model, requires additional disclosure, namely about impairment/encumbrance of the claim. The fact that in section 9 the plaintiffs warrant that the Net Resolution Sum is not encumbered and they will not encumber it without prior written consent of the Funder simply highlights the fact that the contract does not otherwise require the plaintiff to warranty its disclosures.

Presumably the relatively limited nature of the Funders’ financial commitment–Cdn$50,000 plus bearing the risk of adverse cost orders–underlies this approach to information sharing. That is, when being paid to bear the risk of adverse cost orders, a Funder needs sufficient information to assess that risk, both up front and on an on-going basis. However that information is possibly significantly less information than a funder financing the conduct of the claim itself would need to evaluate whether or not it wanted to continue financing.

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