Attorney-client privilege and work product protection are generally waived once protected material is shared with an outside third party, a rule that would seem to put litigation funders, who need detailed information about a case's merits before committing capital, in serious tension with a claimant's confidentiality interests. In practice, a growing body of case law has carved out protection for funder communications, most often under the work product doctrine (since materials shared with a funder are typically prepared because of anticipated litigation, not to waive protection) or the common-interest doctrine (since claimant, counsel, and funder share a genuine common interest in the litigation's outcome).
Courts applying these doctrines have generally required two things: that the funding agreement itself contain an explicit confidentiality provision, and that the parties maintain an actual, reasonable expectation of confidentiality in their communications rather than treating the funder as a casual outside party. Where those conditions are met, courts in multiple jurisdictions, including the reasoning underlying Miller v. Caterpillar, covered elsewhere in this library, have held that sharing diligence materials with a funder under a properly drafted non-disclosure agreement does not waive either protection.
Sophisticated funding agreements now routinely address this directly, and the Federal Rules of Evidence offer an additional layer of protection: under Rule 502, parties can obtain a court order confirming that disclosure to a funder does not constitute a waiver, an order that then binds all parties in any future proceeding. For claimants and counsel evaluating a funder, confirming the funding agreement includes both a confidentiality clause and, where available, a Rule 502 order is now considered standard due diligence, not an optional extra.