Litigation funding agreements and communications are infamously intransparent and typically not included in legal disclosures. A New York ruling has set a new precedent in the case Lituma v. Liberty Coca-Cola Beverages, an injury claim centered on a motor vehicle accident. The defendant argued funding information might evidence financial incentives to fraudulently stage the accident. Image Source: Dreamstime

In the case of Lituma v. Liberty Coca-Cola Beverages, the court affirmed a ruling that allows defendants to seek materials related to the funding of plaintiffs' litigation, setting a critical precedent that could impact how the infamously opaque litigation funding industry is handled moving forward. This ruling not only underscores the growing legal scrutiny of funding arrangements but also highlights the challenges now facing TPLF like Therium and the Sulu legal team, who are dealing with a counteraction from Malaysia in both New York and Jersey, Channel Islands.

“In the case of Lituma v. Liberty Coca-Cola Beverages, the court affirmed a ruling that allows defendants to seek materials related to the funding of plaintiffs' litigation.”

Previously, many assumed that funding arrangements were off-limits for discovery, viewed as irrelevant to the substantive issues in dispute. However, the appeals court’s ruling in Lituma makes clear that any information deemed “material and necessary” to the opposing party’s position must be disclosed, which can include documents related to the financial backing of a plaintiff’s case. The court’s broad interpretation of this requirement underscores that even seemingly peripheral details about how a case is funded may be discoverable if they illuminate the motivations or incentives driving the litigation.

In Lituma, the defendants alleged that the plaintiffs’ accident claim was fraudulent and possibly staged, arguing that funding arrangements could reveal a financial motive to fabricate the claim. For litigation funders and counsel, the ruling sharpens the practical reality that sensitive funding information may no longer be insulated from scrutiny. If similar arguments arise in the Sulu arbitration, both funding agreements and related communications could face disclosure demands.

The implications extend to Therium and the Sulu legal team. Since 2024, Malaysia has sought subpoenas in federal court in New York directed at Therium, requesting production of funding agreements and related communications connected to the Sulu claim and its aggressive transnational enforcement campaign. Should New York courts apply reasoning similar to Lituma, the result could be a new level of transparency in litigation finance—potentially compelling disclosure of information that affects the strategic posture of the case.

“Malaysia has sought subpoenas in federal court in New York directed at Therium, requesting production of funding agreements and related communications connected to the Sulu claim.”

For attorneys, the decision adds concrete procedural risk to the use of third-party litigation funding. The court’s reasoning underscores that funding arrangements cannot operate as a shield for questionable conduct, nor as a mechanism to obscure motive, influence, or impropriety.

Indeed, in the aftermath of the Sulu arbitration, disclosure of the financial backing behind the Sulu heirs’ claims has become a focal point as Malaysia argues that funding arrangements bear on motive, credibility, and alleged misconduct—not least the alleged funding of private intelligence consultancies by Therium to perpetuate the dispute. By sharpening scrutiny around privilege, confidentiality, and funder involvement, the New York ruling makes clear that litigation finance is subject to the same transparency expectations that govern the underlying dispute.

“Malaysia argues that funding arrangements bear on motive, credibility, and alleged misconduct—not least the alleged funding of private intelligence consultancies by Therium to perpetuate the dispute.”

More broadly, the decision signals that litigation finance is entering a phase of sustained judicial oversight. Funders that once operated largely behind the scenes may increasingly face discovery demands, and counsel must structure funding relationships with the expectation that key terms and communications could be examined in court.

That trajectory strengthens the case for other jurisdictions to adopt comparable standards. Litigation funding operates across borders, and inconsistent disclosure regimes risk distorting incentives and undermining fairness. A coherent approach—grounded in transparency and the material-and-necessary standard—would promote predictability and reinforce confidence in the integrity of cross-border disputes.

As proceedings continue in New York and Jersey, disclosure questions are likely to remain central. What is clear is that litigation funding can no longer assume insulation from discovery, and courts are prepared to treat it as part of the substantive landscape of modern litigation.

REFERENCES

Feinberg, M. (2025, December 2). NY appellate court holds litigation funding is discoverable: A look at what this ruling may mean for lawyers using litigation funding. Goldberg Segalla. https://www.jdsupra.com

KnowSulu. (2025, November 10). Legal Counteroffensive Builds against Sulu Claimants, Lawyers, and Funder. https://knowsulu.ph

U.S. Chamber of Commerce Institute for Legal Reform. (n.d.). Lifting the shadows: Restating the case for reforming third-party litigation funding (TPLF). https://instituteforlegalreform.com