In a decision handed down today, New York’s First Department, Appellate Division found that the lower court providently exercised its discretion in allowing defendants to seek materials related to the funding of plaintiffs’ litigation. In the decision, Lituma v Liberty Coca-Cola (available here), the defendants to an automobile lawsuit had asserted an affirmative defense and counterclaims predicated upon potential fraud.
In this short, but important decision, the First Department found that the defendants established that litigation funding documents were material and necessary to their defense of the case by explaining that they could reveal a financial motive for fabricating the accident. In support, an affidavit from the defendants’ insurance agent was submitted that provided a chronology of the events and detailed the links among plaintiffs, medical providers, and other individuals involved in other suspicious accidents.
While it was argued that the defendants may not seek discovery based on their affirmative defense and counterclaim premised on fraud, because those claims do not lie in a personal injury action, the First Department noted the plaintiffs failed to appeal an order allowing defendants to include a fraud affirmative defense and counterclaim in their amended answer, and failed to raise the argument in opposition to this motion. Still, had the First Department considered the issue, defendants appear to have argued that they plead fraud with particularity, such that the claim could withstand a motion to dismiss and discovery would be permitted anyway.
Hurwitz Fine will continue to keep you updated on the latest regarding staged accident litigation and discovery of litigation funding materials.
