The sweeping lawsuits against Johnson & Johnson over talc products got a boost from at least two outside litigation funders, which have invested in hundreds of claims in exchange for a portion of any winnings.
The deals could soon pay off for Virage Capital Management and TRGP Capital, funders who teamed up with plaintiffs lawyers handling some of the claims. J&J is offering to pay $8.9 billion to settle all of the lawsuits.
The funders’ role in the multidistrict litigation is public information, because the cases are in a federal court in New Jersey. A local court rule requires parties using outside funding to disclose certain information about their backers.
Nearly two years after the rule took effect, outside funding disclosures remain rare in the state’s lone federal court. A handful of disclosures have offered minimal insight into the $12 billion business of betting on lawsuits.
“Litigation financing is a global multi-billion-dollar industry, and it operates in secret in the shadows right now,” said Page Faulk, an executive at the US Chamber of Commerce, a leading critic of outside funding for lawsuits.
Litigants have acknowledged outside funding in only nine cases since the New Jersey rule took effect, docket reviews by Bloomberg Law found. The vast majority of the more than 800 filings under the disclosure rule simply stated that there was no third-party funding.
The New Jersey rule is a trial balloon amid growing calls for regulation of litigation funders. Other courts have started to scrutinize the role of outside funding in litigation, while legislation in California and elsewhere would require the information about the deals be public.
The J&J suits are an example of how third-party funding can level the playing field between individuals and major corporations who often use their resources and size to steamroll smaller opponents in court.
The company has been hit with a slew of lawsuits by customers who say J&J’s baby powder products gave them cancer. Plaintiffs attorneys have scored a number of jury verdicts and successfully stopped the company from limiting liability through bankruptcy laws. J&J is taking another stab at the bankruptcy route as part of the new settlement offer.
Disclosures filed by attorneys from the Morelli Law Firm and the Potts Law Firm indicate that financing was used in over 500 claims. That’s a fraction of the 60,000-plus claims filed against J&J.
“Plaintiff trial lawyers continue to relentlessly advertise for talc claims, supported by millions of dollars of litigation financing, all in the hopes of a massive return on investment,” John Kim, chief legal officer of the J&J subsidiary seeking bankruptcy protection, said in an April 4 statement following the settlement offer.
‘Starting Point’
Attorney Steven Richman, a member of the New Jersey District Court Lawyers’ Advisory Committee, proposed an initial version of the rule at a committee meeting in 2019. The US District Court for the District of New Jersey later put together a subcommittee to explore possible disclosure requirements.
Litigation finance firms railed against new disclosure requirements.
Their trade association, the International Legal Finance Association, submitted a 20-page letter opposing the move.
“It will serve as a starting point, inspiring the pursuit of highly prejudicial and protected information in discovery, leading in turn to expensive and time-consuming motion practice, given the sensitive nature of the information sought,” the group said.
The prediction hasn’t panned out since the rule went into effect in June 2021.
There is no standard form for these filings, so the number is possibly an under count. Major litigation finance firms also tracking the disclosures have confirmed similar findings.
The district court said it’s not tracking the disclosures. Neither are two groups that advocated heavily for the rule: The New Jersey Civil Justice institute, an organization representing the state’s business community, and the Chamber of Commerce.
Anthony Anastasio, the president of the Civil Justice Center of New Jersey, said the rule is a first step in the right direction for disclosure requirements. He also shared some skepticism about the filings.
“Creative third-party funders and law firms could potentially restructure their arrangements to effectively circumvent the limited scope of this rule,” Anastasio said in an email.
Burford Capital, a publicly traded litigation financier, is keeping closer tabs on the filings.
Andrew Cohen, a Burford director, said he’s reviewed more than 2,000 disclosures. He also found just a handful of cases in which parties divulge using outside funding.
Cohen said he hasn’t seen followup discovery requests in the few cases where funding has been disclosed.
“I don’t know if it’s had any impact at all other than costing litigants some money to file a bunch of unnecessary filings,” he said.
Inside the Filings
The few disclosures on the books offer a rare glimpse into the types of cases deemed profitable in the notoriously secretive industry.
Lawyers at Quinn Emanuel Urquhart & Sullivan disclosed funding in an antitrust case for a generic drug treating pulmonary arterial hypertension. Proskauer Rose trial lawyers said there was financing in a court fight over a product designed to treat premature ejaculation. Kirkland & Ellis disclosed financing in a patent infringement case related to a birth control implant.
Litigation funder Legalist invested in a transgender discrimination case against Seton Hall University.
Other cases include patent infringement claims for a hair straightening brush and noise reducing headphones.
As for the Johnson & Johnson case, the proposed settlement must be supported by a large portion of claimants before it is finalized.
The Link LonkApril 10, 2023 at 05:30PM
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J&J Talc Suits' Outside Funders Unveiled Via Little-Used NJ Rule - Bloomberg Law
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