Once a funder has decided to invest, it is possible the parties will simply rely on the common interest doctrine and share attorney-client privileged information freely. The draft model contract does not take that approach largely because under New York law, which governs it, funders and plaintiffs may not have a privilege-protecting common legal interest. Here is how the contract intends keeping the funder informed, while protecting privilege:
3.1.3 Duty to Inform: Plaintiff agrees and undertakes to keep Funder fully informed about the progress of the Claim. Specifically,
(a) Non-Privileged Information: The Plaintiff hereby irrevocably instructs Litigation Counsel, and if further instructions are needed, undertakes to instruct Litigation Counsel, to provide Funder or Funder’s Representatives with all material non-privileged information as soon as practicable, regardless of the information’s source, confidentiality or form, unless Funder already possesses or controls such information.
(b) Attorney Work-Product: Acknowledging that this Agreement contains provisions requiring the parties to protect the confidentiality of any Confidential Information disclosed to it and that such information includes attorney work product, the Plaintiff hereby irrevocably instructs its Litigation Counsel, and if further instructions are needed, undertakes to instruct its Litigation Counsel to provide Funder’s Representatives with all material attorney work product relating to the Claim as soon as practicable.
(c) Attorney-Client Privileged Information: Relying on the parties’ agreement that they share a common legal interest and that communicating attorney-client privileged information to the Funder in the furtherance of that interest does not waive the privilege, the Plaintiff undertakes to share such information on a topic by topic basis, provided that neither Plaintiff nor Litigation Counsel shall disclose attorney-client protected information to Funder or its representatives unless (i) Plaintiff has discussed with [Litigation Counsel/Independent Counsel] the information to be shared, the reason for the sharing, and the probable consequences if the sharing is ultimately held to waive the privilege; and (ii) the Plaintiff has given written consent to such information sharing.
The contract also protects privilege by requiring the funder to get prior written consent to sharing Common Interest Material with anyone that sharing such information with might result in waiver:
18.104.22.168 Notwithstanding section 4.2, Funder and its Representatives shall not disclose any Common Interest Material to anyone without prior written consent of Plaintiff. For the avoidance of doubt, this prohibition prevents disclosure without prior written consent to Funder’s investors and/or any party to whom the Funder wishes to transfer part or all of its interest in the Claim. If consent is given, Funder shall enter into an agreement with such secondary recipients to preserve the confidentiality of the Common Interest Material on terms no less restrictive than those set forth in this Agreement for Confidential Information. This provision shall survive the termination of this Agreement and remain in effect until the Conclusion of the Claim.