APPLYING THE COMMON INTEREST DOCTRINE TO THIRD-PARTY LITIGATION FUNDING.

Third-party litigation funding is an emerging industry that provides financial backing to plaintiffs. Typically, third-party litigation funders provide money in exchange for a percentage of damage returns. If the plaintiff's claim fails, then the third-party litigation funder loses its investment. To decide whether a given plaintiff's claim is a good investment, the thirdparty litigation funder assesses the claim's merits by conducting due diligence over a large swath of documents. Often, these documents are protected by attorney-client privilege. Under normal waiver rules for attorney-client privilege, when privileged documents are disclosed to a third party, the privilege holder impliedly waives the privilege protection. As an exemption from normal waiver rules for attorney-client privilege, the common interest doctrine has developed, preventing a waiver when a disclosure is made to a third party sharing a common legal interest with the privilege holder. Courts vary in their approaches to defining what constitutes a common legal interest, but typically the third-party litigation funder's commercial interest in a lawsuit is insufficient. Although superficially this may appear a legitimate result (as the funders invest in a lawsuit without providing any direct legal assistance), it is largely incongruent with how courts apply the common interest doctrine for insurers and re-insurers. Most courts find that insurers of defendants (and re-insurers of insurers defending claims) have sufficiently common legal interests with privilege holders to invoke the common interest exemption from normal waiver rules. In these insurance situations, sharing liability--to the extent that it constitutes a collaborative effort towards a joint defense of a claim--is sufficient to indicate a common legal interest. These insurers allow defendants to share the inherent risks with their lawsuits. Consequently, third-party litigation funders deserve the same protection (afforded to insurers and re-insurers) offered by the common interest doctrine. Recognizing the common interest doctrine to protect documents disclosed to insurers and third-party litigation funders effectuates the policy goal of attorney-client privilege; it enables litigants to most effectively obtain legal counsel. [ABSTRACT FROM AUTHOR]