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Third Party Funders - What are your thoughts?

AAA Commercial Rule R-25 says, in part, that "Any person having a direct interest in the arbitration is entitled to attend hearings." Does a third party funder have a "direct" interest? Should parties disclose third party funders?

Please provide your thoughts/comments below.

Comments (5)

Micalyn S. Harris:

"A direct interest" feels like a party, including a corporate representative and for derivative actions, top officers and directors. An insurance company or other third party funder feels like an indirect party.

I use the word "feels" advisedly. It seems to me that as an arbitrator, I should not care if a party is insured or funded by a third party. If that's the case, no reason for parties to disclose how the litigation is funded.

I'm interested in how others feel and think about this issue.

Barry Evenchick:

Generally a third-party funder has no direct interest and should not be disclosed or permitted to attend the arbitration. If a party feels otherwise a motion should be filed, and the arbitrator can decide.

Barry Evenchick

There are many different funding arrangements. Some are more direct than others. Most funders would not seek to attend the hearings but if a request is made, the tribunal would exercise its discretion in making its decision. Generally, the fact of funding and the identity of the funder should be disclosed, but not the terms of the funding.

Paul Peter Nicolai:

I do not believe they have a direct interest. They are, in fact, not a party to the litigation. I believe disclosure of third-party funding should happen in order to prevent questions of arbitrator partiality or conflict of interest.

scott link:

If the funder is an insurance company, I think it is a good practice to have the person with the ultimate authority to attend the hearing. Observing the witnesses and the evidence as it is presented is certainly more informative then receiving nightly updates from trial counsel.

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