A proposed amendment to Federal Rule of Civil Procedure 7.1, which had previously required information so judges could determine if they had a conflict of interest, would require a party in a diversity action to name and disclose the citizenship of every individual or entity whose citizenship is attributed to that party. Chief Justice Roberts submitted the proposed amendment on April 11, 2022.

Accordingly, a party may obtain discovery when “the interests of any funded parties or the class (if applicable) are not being promoted or protected by the arrangement,” and when the funding causes conflicts of interest.Importantly, the funding disclosure requirement applies to existing cases and not just new cases. The disclosure deadline for existing cases is 45 days from entry of the order, or 2 June2022.C. Change to FRCP 7.1 DisclosuresChief Judge Connolly also issued a new standing order covering FRCP 7.1, which applies only to his cases, that mandates additional disclosures that identify the ultimate owners for various entities and business ventures. Unlike the litigation funding order, there is no set deadline to file updated 7.1 statements.

November 18, 2010 Content originally posted on MGLAW.netMany litigators today find themselves in state court one day and federal court the next. While many of the Rules of Civil Procedure mirror each other, there are some very important differences ranging from the opening of a case to pretrial disclosures. This article will provide a general outline of those differences.I. The Complaint is FiledWhen a Complaint is filed in federal court, attorneys should be aware of four differences from Tennessee state court:Corporate Disclosure Statements must be filed.The court will issue a Notice of Setting initial Case Management Conference.Written discovery is not permitted yet.The attorneys must have a Rule 26(f) conference.First, Rule 7.1 of the Federal Rules of Civil Procedure requires two copies of a "Disclosure Statement" to be filed by a nongovernmental corporate party that:identifies any parent corporation and any publicly held corporation owning 10% or more of its stock; orstates that there is no such corporation.Fed. R. Civ. P. 7.1(a). This statement is due with the first appearance, pleading, petition, motion, response, or other request addressed to the court. Fed. R. Civ. P. 7.1(b)(1). If any information changes, it is the party's responsibility to update the court accordingly. Fed. R. Civ. P. 7.1(b)(2). No such statement is required in state court.Second, the court usually issues via ECF a Notice of Setting of Initial Case Management Conference. The contents can vary from court to court and judge to judge, but generally, the Notice of Setting Initial Case Management Conference includes the following features:It is entered the same day the Complaint is filed.The plaintiff must serve a copy of it on each defendant with the Complaint and summons.It se

. All rights reserved.Patent litigation brought by nonpracticing entities, or NPEs, has seen exponential growth. These cases are often filed against large retailers or service providers, assert patents that are close to the end of their term and are disposed well before addressing the merits.Nimitz Technologies LLC's patent assertion campaign against CNET,[1] BuzzFeed Inc.,[2] Imagine Learning Inc.[3] and Bloomberg LP,[4] among others, is one example.With a little help from Chief U.S. District Judge Colm F. Connolly of the U.S. District Court for the District of Delaware, however, Nimitz's campaign inadvertently provided litigants with unprecedented insight into how NPEs shield themselves from the penalties of bad faith litigation. With a peek behind the curtain, litigants should learn and adapt.But first, how did we get here? Nimitz's cases were filed in the District of Delaware and assigned to Judge Connolly. Two of Judge Connolly's standing orders are relevant. The first relates to Federal Rule of Civil Procedure 7.1 and requires disclosure of "the name of every owner, member and partner of the party, proceeding up the chain of ownership until the name of every individual and corporation with a direct or indirect interest in the party."[5]The second relates to third-party litigation funding agreements.It mandates disclosure of:The identity, address and place of formation of the third-party funder;Whether any third-party funder's approval is necessary for litigation or settlement decisions in the action, and if so, the nature of the terms relating to such approval; andA brief description of the nature of the financial interest of the third-party funder.[6]The court issued a series of reminders regarding Nimitz's compliance with the standing orders. Eventually, Nimitz identified Mark Hall as "the sole owner and member of Nimitz," and represented that Nimitz "has not entered into any arrangement with a Third-Party Funder."[7]Nimitz added that its interpretation of the standing orders "does not requir

e Court denied the defendant’s attempt to secure Neural Magic’s litigation funding documents. There, the court recognized that litigation funding documents may be relevant to some issues such as damages and the valuation of certain intellectual property. However, the court declined to compel the plaintiffs to produce their litigation funding documents, in part, because (1) the weight of authority holds against disclosing litigation funding documents and (2) other documents already produced addressed the same valuation information the defendant sought.In protecting the confidentiality of litigation funding documents, other courts have also weighed factors such as the existence of an executed nondisclosure agreement, the type of information requested, and the funder’s role in the litigation.Some critics argue that parties have been treated unequally in terms of financial disclosure. For instance, while courts consistently uphold work product protection over litigation funding documents, Federal Rule of Civil Procedure 7.1 requires that nongovernmental corporate parties file disclosure statements identifying “any parent corporation and any publicly held corporation owning 10% or more of its stock.” Rule 7.1 applies automatically to any nongovernmental corporate party and a Rule 7.1 filing must be made before or at the same time as the party’s first filing. Federal Rule of Civil Procedure 26 also mandates disclosure of “any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment.Addressing the InequityCalls for a reciprocal rule for plaintiffs to disclose litigation funding have grown over the years. In May 2018, Republican Senators introduced a bill entitled “The Litigation Funding Transparency Act of 2018.” The bill sought to require any claimants in federal class actions or multidistrict litigation proceedings to reveal the existence of litigation funding. More

With everyone busy wrapping up the 2022 calendar year, many may be surprised to hear that there are amendments to the Federal Rules of Civil Procedure that took effect on December 1, 2022!What’s that, you say? You didn’t know that the Federal Rules were amended? Well, fear not, for most of us these amendments will have no practical impact on our practices. Unlike the changes to the Federal Rules in 2015, which broadly redefined the rules for e-discovery, these 2022 amendments are minor.Federal Rule of Civil Procedure 7.1 has been modified to extend corporate disclosure requirements to nongovernmental corporations seeking to intervene. Additionally, a new rule under FRCP 7.1 has been introduced that requires parties or interveners in a diversity case to file a disclosure statement that names and identifies the citizenship of every individual or entity whose citizenship is attributed to that party or intervener.The Federal Rules of Appellate Procedure were also amended. FRAP 25 was modified to extend the privacy protections of FRCP 5.2 for Social Security cases to Railroad Retirement actions. The amendment to FRAP 42 restored an old requirement that the circuit clerk must dismiss an appeal if all the parties file a signed dismissal agreement specifying how costs are to be paid, and the parties pay any court fees that are due. Last, supplemental rules for Social Security Review Actions under 42.U.S.C.§405(g) now establish a simplified procedure to review a final decision of the Commissioner, and clarify

This makes the information asymmetry described above particularly problematic for parties seeking to establish federal diversity jurisdiction.A new amendment to Federal Rule of Civil Procedure 7.1, set to go into effect December 2022, seeks to remedy this problem. It provides as follows:In an action in which jurisdiction is based on diversity under 28 U.S.C. § 1332(a), a party or intervenor must, unless the court orders otherwise, file a disclosure statement.

[9] Finally, several provinces in Canada routinely require TPLF arrangements be disclosed and judicially approved, particularly in class action cases, but in certain nonclass cases as well.[10]FRCP 7.1 Requiring disclosure of a litigant’s financial relationships in a case is not an original concept. Since 2002, the Federal Rules of Civil Procedure have required nongovernmental corporate entities to disclose “any parent corporation and any publicly held corporation owning 10 percent or more of its stock.”

The case, Backertop Licensing LLC v. Canary Connect, was originally patent litigation filed in 2022—one of a series of twelve cases filed by Backertop, and also part of a much larger set of cases (at least ninety-seven) filed by affiliated entities that, as the Federal Circuit panel put it, all “seem to be associated with IP Edge, a patent monetization firm, and Mavexar, an affiliated consulting shop.” But this particular case landed on the desk of Chief Judge Colm Connolly of the District of Delaware, whose standing order contains very particular real-party-in-interest disclosure requirements: an LLC, joint venture, or partnership appearing in his court as a party “must include in its disclosure statement filed pursuant to Federal Rule of Civil Procedure 7.1 the name of every owner, member, and partner of the party, proceeding up the chain of ownership until the name of every individual and corporation with a direct or indirect interest in the party has been identified.”Judge Connolly takes this requirement seriously, and when parties submit what appear to be insufficient disclosures, he investigates. Thus, as the Federal Circuit noted, “[o]ver the past year and a half, the Chief Judge . . . has identified potential attorney and party misconduct in dozens of related patent cases” filed by LLCs apparently associated with IP Edge and Mavexar. Indeed, Judge Connolly’s investigations suggest that “those real parties in interest perpetrated a fraud on the court by fraudulently conveying to a shell LLC [the patents] and filing a fictitious patent assignment with the PTO designed to shield those parties from potential liability they would otherwise face in asserting [the patents] in litigation”—as well as failing to abide by the court’s own disc

settlement or judgment. 6 For example, the Northern District of California adopted a standing order in 2017 requiring parties to disclose the existence of third-party litigation financing in any proposed class, collective, or representative action. Standing Order for all Judges of the Northern District of California, Contents of the Joint Case Management Statement (adopted January 23, 2017), paragraph 18, https://www.cand.uscourts.gov/wp-content/uploads/judges/StandingOrder_All_ Judges_1.17.23.pdf. 7 New Jersey’s rule goes a step further, requiring all parties to further disclose the scope of the funder’s rights to approve of litigation decisions or settlement decisions; and a brief description of the funder’s financial interest in the litigation. See Rule 7.1.1(a)(1)-(3) at https://www.njd.uscourts.gov/sites/njd/files/Order7.1.1%28signed%29.pdf?ref=firm-market- news 8 United States District Court for the District of Delaware, Standing Order Regarding Disclosure Statements Required By Federal Rule of Civil Procedure 7.1(D. Del. Apr. 18, 2022). 9 Nimitz Tech. LLC v. CNET Media, Inc., No. 21-1247-CFC, Memo. Order (D. Del. Nov. 30, 2022) (Connolly, J). 10 The district court had ordered Plaintiff Nimitz Technologies LLC (“Nimitz”) to certify it had complied with the standing orders. Because Nimitz failed to timely respond, it resulted in the court issuing an order “to show cause why it should not be held in contempt.” Nimitz then filed an updated disclosure statement naming Mark Hall as the sole owner and member of Nimitz, along with representing to the court that Nimitz had not entered into any arrangement with a Third- Party Funder. After founding an exhibit that indicated that Mr. Hall had a connection with IP Edge LLC, the court ordered Mr. Hall and Nimitz’s counsel to explain the connection. 11 In re Nimitz Technologies LLC, 2023-103, at 2 (Fed. Cir. Nov. 17, 2022) (on petition for writ of mandamus to the United States District Court for the District of Delaware in Nos. 1:21-cv-01247-CFC, 1:21-cv-01