Today, Judge Connolly issued four new standing orders. These orders include:
- A requirement to disclose third-party litigation funding arrangements on the docket;
- A requirement in diversity cases to disclose the name and citizenship of every individual and corporation with a direct or indirect interest in every party;
- An order expanding disclosure requirements under Federal Rule of Civil Procedure 7.1 for non-governmental joint ventures, LLCs, partnerships, and LLPs;
- A requirement for the defendant in ANDA cases where there was a Paragraph IV certification to produce the ANDA when responding to the complaint;
The above are numbered only for reference below.
Each of these orders explicitly applies only in Chief Judge Connolly cases.
Order 1: Litigation Funding
The first of the orders is likely to cause the biggest waves, as it requires the parties to disclose certain litigation funding sources and information:
in all cases assigned . . . where a party has made arrangements to receive from a person or entity that is not a party (a "Third-Party Funder") funding for some or all of the party's attorney fees and/or expenses to litigate this action on a non-recourse basis in exchange for (1) a financial interest that is contingent upon the results of the litigation or (2) a non-monetary result that is not in the nature of a personal loan, bank loan, or insurance:
a. The identity, address, and, if a legal entity, place of formation of the Third-Party Funder(s);
b. Whether any Third-Party Funder's approval is necessary for litigation or settlement decisions in the action, and if the answer is in the affirmative, the nature of the terms and conditions relating to that approval; and
c. A brief description of the nature of the financial interest of the Third-Party Funder(s).
Why do parties need this information? In a patent action, if a litigation funder can control settlement or material litigation decisions, but isn't joined as a party, the party asserting infringement may lack standing. This has led to disputes about discovery of third-party litigation funding information because savvy defendants want to test plaintiffs' standing, while smart plaintiffs want to avoid any chance that a defendant may challenge their ability to bring the case.
The order itself sets forth that parties may be entitled to discovery if the litigation funder has a sufficient interest:
2. Parties may seek additional discovery of the terms of a party's arrangement with any Third-Party Funder upon a showing that the Third-Party Funder has authority to make material litigation decisions or settlement decisions, the interests of any funded parties or the class (if applicable) are not being promoted or protected by the arrangement, conflicts of interest exist as a result of the arrangement, or other such good cause exists.
The order makes clear that there is more to this than just standing in patent actions. It applies in all cases, including non-patent cases, and it applies to both sides, plaintiffs and defendants. And the discovery portion states that a party may get discovery on litigation funding not just when there is a standing issue, but also 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.
The deadline for existing cases is 45 days from today. So mark this deadline on your calendar for June 2, 2022, when this funding information is due in Chief Judge Connolly cases.
The order contains no specific enforcement information, and no requirement to file anything if there is no third-party funding. So I don't think the Court will be able to tell from the docket whether a party has failed to make its disclosures. But I expect that defendants in patent cases, at least, will be eager to follow up with plaintiffs to get any information that might reveal a standing issue, and that they'll be quick to raise this issue with the Court if plaintiffs do not make their disclosures.
Order 2: A Requirement to Produce the ANDA
The second order is a simple requirement for defendants in ANDA actions to produce the full ANDA when responding to the complaint:
[E]ffective immediately in cases assigned to Judge Connolly arising under 21 U.S.C. § 355 where all patents alleged to be infringed were the subject of a Paragraph IV certification of noninfringement and/or invalidity by the Defendant(s), upon the filing of a responsive pleading to the Complaint, Defendant(s) shall produce to Plaintiff(s) the entire Abbreviated New Drug Application(s) or New Drug Application(s) that is(are) the basis of any alleged infringement.
This should help avoid discovery disputes about the timing & scope of defendants' ANDA productions.
Heads up on Order 3: You May Need to File an Updated FRCP 7.1 Statement for Many Non-Corporate Entities
Two of Chief Judge Connolly's other standing orders issued today go to somewhat similar disclosures.
Like the above, these apply only to Judge Connolly cases.
This third order updates FRCP 7.1 to require additional disclosures from certain kinds of parties in Judge Connolly cases:
in all cases assigned to Judge Connolly where a party is a nongovernmental joint venture, limited liability corporation, partnership, or limited liability partnership, [each] 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.
This plugs a hole in Rule 7.1 in that it normally applies only to corporate entities. I know at least one other nearby jurisdiction instituted a somewhat similar fix by local rule.
The plain language of the rule seems to apply to existing cases. Unlike the litigation funding order, this order does not include deadlines for compliance, but FRCP 7.1 requires a party to "promptly file a supplemental statement if any required information changes."
Order 4: Diversity cases
The third standing order uses similar language, but applies to all parties in diversity actions:
in all cases assigned to Chief Judge Connolly where a party filed the action in this Court or removed the action to this Court based on diversity of the parties' citizenships, that the party shall file within 14 days of initiating the case in this Court a Certification of Diversity Jurisdiction in which the party identifies the name and citizenship of every owner, member, and partner of every party to the case that is a joint venture, limited liability corporation, partnership, or limited liability partnership, proceeding up the chain of ownership until the name and citizenship of every individual and corporation with a direct or indirect interest in every party has been identified.
This will provide parties and the Court with an opportunity to ensure complete diversity earlier in the action, before getting deep into discovery. This is important, obviously, to make sure that the party bringing the action can actually support diversity jurisdiction.
Unlike the previous two orders, this disclosure requirement applies only to the party filing or removing the action. That makes sense, given that it's going to be the other side who is contesting jurisdiction.
Note that, as above, the language seems to apply to existing cases, but there is no explicit deadline for compliance. Personally, though, I'd probably get moving...
ALSO: Updated Form Scheduling Orders
Finally, Judge Connolly also issued updated form scheduling orders today, for non-Hatch Waxman patent cases. We'll talk about those later in the week.
It's good to be back!
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