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Discovering Third-Party Funding in Class Actions: A Proposal for In Camera Review

Third‐party funding increasingly is a feature of litigation in the United States. One of the issues raised by third‐party litigation funding is whether outside funders will positively or negatively impact the American judicial system. In particular, some commentators have observed that third‐party funding arrangements have the potential to create conflicts of interest between attorneys and their clients due to the control that outside funders may attempt to exert over litigation. This Comment addresses how those conflict‐of‐interest concerns impact discovery rules in the class action context. It ultimately concludes that because there is a potential for third‐party funders to impair class counsel’s adequate representation of absent class members, a class relying on third‐party funding should be required to disclose the arrangement to the court for in camera review.

This Comment begins with an overview of third‐party litigation funding in the United States and the rules of discovery regarding a class’s financial resources during the class certification phase of litigation. Next, it describes the debate over whether third‐party funding will positively or negatively affect class counsel’s ability to adequately represent the interests of absent class members. It also explains that because the empirical data on the issue is scarce, courts should develop discovery rules to help ensure that they will learn when and how third‐party funders are supporting the litigants before them. Finally, after considering alternative potential discovery rules, this Comment concludes that requiring disclosure of third‐party funding arrangements to the court for in camera review is the means most likely to balance the interests of class action plaintiffs and defendants, while simultaneously assisting the court in assessing the adequacy of representation under Rule 23.