I agree with the proposed rule changes.

Paige A. Martin (she, her) | Assistant City Attorney
State Bar ID 013320
City of Phoenix Law Department
City Hall, 200 W. Washington St., 13th Floor, Phoenix, AZ 85003
Direct: 602.262.4414 | Cell: 480.448.6277
Email: [email protected]

On behalf of the Medical Professional Liability (MPL) Association and its more than four dozen domestic medical professional liability insurers and self-insured members, including entities domiciled and/or doing business in Arizona, I am writing in regard to the proposal to amend the Arizona Rules of Civil Procedure to require limited disclosure of third-party litigation funding agreements.

By way of introduction, the MPL Association is the nation’s leading trade association representing insurance companies, risk retention groups, captives, trusts, and other entities owned and/or operated by their policy holders, as well as other insurance carriers with a substantial commitment to the MPL line. MPL Association members insure more than 2.5 million healthcare professionals around the world— doctors, dentists, oral surgeons, nurses and nurse practitioners, podiatrists, and other healthcare providers. MPL Association members also insure more than 3,000 hospitals and 50,000 medical facilities and group practices globally.

MPL Association members are committed to ensuring a fair and equitable system of justice for both healthcare professionals and those who suffer from adverse outcomes resulting from medical procedures. For this reason, they support numerous reforms to reduce litigation and make our justice system more efficient and effective. Unchecked third-party litigation funding, however, may have exactly the opposite effect, drawing out litigation and making resolution far more difficult to achieve. This is especially true when such funding arrangements are hidden from those involved in pending litigation.

In this regard, we wish to express our support for the proposal to add a new subsection (j) to Rule 8 of the Rules of Civil Procedure to require limited disclosure of third-party litigation funding agreements to parties to a claim.

We applaud the amendment’s requirement that a certificate disclosing the existence of a third-party litigation funding agreement be filed promptly with the filing of a complaint or upon execution of such an agreement if it occurs after the complaint is filed. We also applaud the requirements for the contents of the certificate, especially the obligation to disclose the nature of the funder’s financial interests and whether the agreement permits the funder’s involvement in any aspect of the litigation, including decisions about whether or for how much to settle a claim. All of this information is directly relevant to the litigation/settlement process and is vital to ensure an efficient resolution process.

When parties to an MPL lawsuit attempt to achieve an appropriate resolution, it is important that all the facts are available to both parties. If a plaintiff owes a substantial portion of a potential award or settlement to a third party, that is a critical fact that will undoubtedly play a role in influencing the course of negotiations aimed at resolving the claim. If the defense is unaware of such an arrangement, however, it is impossible to accurately assess the plaintiff’s needs. This can lead to both needless confusion and frustration as negotiations play out. We believe that the new subject (j) will help address this issue.

We would also recommend two adjustments to the proposal to further the effort to improve the litigation system. First, we recommend deleting paragraph (j)(2)(B) from the proposal. While we understand, and appreciate, the intent behind exempting funding that is used for items such as living expenses or medical needs, the justice system is not well served when third-party interests to litigation are not revealed. Applying subsection (j) to all circumstances in which a third party has an immediate, vested financial interest in the outcome of legal proceedings will bring needed transparency to the justice system. Second, we recommend deleting “In extraordinary circumstances and” from subsection (j)(4). We believe the decision as to whether the funding agreement itself should be disclosed should not be limited to only “extraordinary circumstances,” but would be best left in the judge’s discretion based on the specific circumstances of the litigation. The limitations on disclosing such agreements found later in (j)(4) are sufficient to protect all of the plaintiff’s relevant interests while allowing for more detailed disclosure as appropriate.

We appreciate this opportunity to comment on behalf of the medical professional liability community. The court system in Arizona and its stakeholders would be well served by the addition of subsection (j) to Rule 8 of the Rules of Civil Procedure.

Thank you again for this opportunity to comment.

Sincerely,

Michael C. Stinson, JM
Vice President, Public Policy and Legal Affairs
Medical Professional Liability Association
2275 Research Blvd., Ste. 250
Rockville, MD 20850
Ph: 240-813-6139
Em: [email protected]

Please see the attached comment letter.

Molly Lang
American Property Casualty Insurance Association
8700 West Bryn Mawr Ave.
Ste. 1200S
Chicago, IL 60631-3514
(847) 553 - 3627
[email protected]

On behalf of a number of our property and casualty insurance industry clients, including Nationwide Insurance, we stand in support of the comments submitted by the U.S. Chamber of Commerce Institute for Legal Reform regarding the Petition to Amend Rule 8, Arizona Rules of Civil Procedure, to add a new subsection (j) that would require certain disclosures when a civil action is subject to a litigation funding agreement. We ask that you take their comments into consideration when adopting the final rule.

Third-party litigation funding (TPLF) has had a significant impact on the insurance industry, leading to higher premiums, reduced coverage availability, and a less predictable and fair system for all parties involved.
TPLF is considered a significant driver of "social inflation," which refers to the rise in insurance claims costs beyond general economic inflation. This trend of rising claim costs can lead to insurance rates increasing faster than the general rate of inflation, making insurance less affordable.

TPLF has also increased the costs of settling claims due to the financial incentives for funders to push for higher payouts, even if it undermines the plaintiff's best interests. Funders' financial incentives can lead to higher settlement demands, making it harder to reach reasonable settlements.
The lack of disclosure and transparency with regards to TPLF can make it difficult for insurance companies to accurately assess and mitigate legal risks and costs. Additionally, TPLF allows for undue influence on litigation decisions and raises concerns about the fairness and integrity of the legal system.

Requiring even moderate disclosure of third-party funding agreements to the court, by all parties involved in the litigation and in class actions, will allow for greater scrutiny of potential influences and potential conflicts of interest.

TPLF reform is a multifaceted issue with various perspectives. However, the common thread is a desire to ensure that the legal system is fair, transparent, and not unduly influenced by financial interests, especially those of outside parties.

Once again, on behalf of a number of Arizona’s property and casualty insurers, we strongly ask that you consider the U.S. Chamber’s proposed TPLF disclosure requirement recommendations when finalizing your proposed amendment to Rule 8, Arizona Rules of Civil Procedure.

If you have any questions or concerns, please do not hesitate to contact us.

Sincerely,

Marcus B. Osborn, Phd
Kutak Rock LLP
Senior Director-Government Affairs
8601 North Scottsdale Road
Suite 300
Scottsdale, Arizona 85253
Office 480-429-4862
[email protected]

Jennifer Kraham, JD
Kutak Rock LLP
Partner
8601 North Scottsdale Road
Suite 300
Scottsdale, Arizona 85253
Office 480-429-4835
[email protected]

Please see the attached comments from the U.S. Chamber of Commerce Institute for Legal Reform regarding the Petition to Amend Rule 8, Rules of Civil Procedure.

Sincerely,
Page C. Faulk
Senior Vice President, Legal Reform Initiatives
U.S. Chamber of Commerce Institute for Legal Reform
1615 H St NW
Washington, DC
20062
[email protected]
202-463-5602

Please see the attached comments from the Arizona Chamber of Commerce and Industry and the Greater Phoenix Chamber with support from business stakeholders regarding the Petition to Amend Rule 8, Rules of Civil Procedure.

Sincerely,
Daniel B. Seiden
President & CEO
Arizona Chamber of Commerce and Industry
on behalf of business community stakeholders
100 N. 7th Avenue, Suite 120
Phoenix, AZ 85007
Phone: 602-248-4430
[email protected]
State Bar ID 026728

The Court should deny adoption of Petition R-25-003.

The federal courts handle hundreds of thousands of mass tort cases and claims on behalf of millions of putative class action members — all without requiring disclosure of third-party funding. Notably, the federal courts have so far declined to amend Federal Rule 7.1 to impose such a disclosure requirement for conflict-of-interest purposes. Arizona has not adopted a counterpart to Federal Rule 7.1 at all.

The pending petition acknowledges “the importance of third-party litigation funding in providing access to justice” and that “existing ethics rules can address most of the issues related to third-party funding” (Petition at 3). Yet it goes on to propose an unwieldy rule that would serve little purpose beyond inhibiting access to justice for ordinary people — individuals who often don’t even know they have legal recourse, let alone the resources or expertise to pursue a recovery.

The petition’s justifications for the proposed rule — which risks numerous unintended consequences — are unconvincing. For example, the Task Force worries that third-party funding “may end up funding a litigant that is adversarial to another client” (Petition at 4). But this concern is already addressed by existing ethics rules, specifically ERs 1.6 through 1.9.

The Task Force also raises concerns that judges or witnesses might have financial ties to funders, threatening impartiality or candor (Petition at 4). If the Court is concerned about such affiliations, it would be more appropriate to adopt a rule akin to the current Federal Rule 7.1, which is designed to identify conflicts arising directly from the parties. The proposed rule, by contrast, focuses on more remote relationships between parties, lawyers, and their business dealings — missing the mark on immediate conflicts.

Finally, the Task Force suggests that competitors might use litigation funding to harass each other. Yet competitors may have valid business or legal reasons to litigate, regardless of funding sources. It is a questionable proposition that courts should intrude into the motives of competitors by mandating disclosure of how they finance their legal disputes.

Most critically, the Task Force — convened specifically to study and advise on Alternative Business Structure (ABS) entities — fails to address ABS entities in the proposed rule, creating unfair and potentially harmful consequences. Some ABS entities are expressly formed to provide resources traditionally unavailable to law firms, including funding, marketing, and technology. If an ABS includes a member with financial resources, does that relationship fall within the scope of the proposed rule? Section 8(j)(2) seems to suggest it does. In such cases, the third-party funding agreement is likely the ABS operating agreement — a document typically containing confidential and proprietary information governing firm operations and member relations. Other firms would not be required to submit their corporate documents for in-camera inspection. Imposing such requirements on ABS firms unnecessarily intrudes into their operations and undermines access to justice — the very justification for permitting ABS entities in the first place.

Whitney Cunningham, Managing Partner
Aspey, Watkins & Diesel, PLLC
123 N. San Francisco St., Suite 300
Flagstaff, AZ 86001
Tel. 928-774-1478
Email: [email protected]

Filed on behalf of:

Hon. Clint Bolick, Justice
Arizona Supreme Court
1501 W. Washington St.
Phoenix, AZ 85007-3327
Phone: (602) 452-3301
[email protected]

Petitioner hereby submits the attached Reply.