At a Glance
Summary:
New York litigation funding discovery is available only when the party seeking disclosure demonstrates that the funding documents are material and necessary to a specific claim, defense, or fraud theory.
The Appellate Division, First Department, affirmed the denial of the defendants’ motion to compel production of litigation funding agreements and lien documentation. The Court held that the defendants failed to demonstrate that the funding documents were “material and necessary” to any claim or defense under CPLR § 3101(a).
Court: New York Appellate Division, First Department
Decision Date: February 17, 2026
Case: Perdomo v 361 E. Realty Assoc. LLC, 2026 NY Slip Op 00860, 246 AD3d 541 (1st Dept 2026)
Topic: Litigation Funding Discovery Under CPLR § 3101(a)
The Court’s Position
Litigation funding agreements are not discoverable in New York personal injury actions unless the party seeking disclosure demonstrates that the documents are “material and necessary” to a specific claim or defense under CPLR § 3101(a).
Speculation about potential fraud, improper motive, or settlement influence is insufficient. However, where a defendant pleads fraud and supports the theory with concrete investigative evidence, such as documented staged-accident indicators or coordinated fraud activity, courts may permit litigation funding agreements and reopen discovery even after the filing of a note of issue.
From a Claims Perspective
Funding discovery requires evidence, not suspicion—document the fraud investigation and support the motion with a detailed adjuster affidavit.
In Perdomo, the Appellate Division, First Department, affirmed the denial of the defendants’ motion to compel production of litigation funding agreements and lien documentation. The Court held that the defendants failed to demonstrate that the funding documents were “material and necessary” to any claim or defense under CPLR § 3101(a).
Unlike cases involving fraud or anti-SLAPP counterclaims, there was no evidentiary showing tying the funding to motive, fabrication, or bad faith.
What Happened
The plaintiff alleged personal injuries. The defendants moved to compel disclosure of (1) litigation funding agreements, (2) lien information, (3) related financial documents, arguing that funding might show improper motive or settlement interference.
The motion court denied the application, and the First Department unanimously affirmed. Critically, the defendants offered only speculation about potential fraud and did not connect the funding to any pleaded defense supported by evidence.
The Court’s repeated use of the word “speculative” is the dividing line between Perdomo and Lituma.
The Court’s Decision
The First Department held:
- Litigation funding is not automatically discoverable
- Funding does not qualify as a collateral source under CPLR § 4545
- Absent a demonstrated nexus to a pleaded defense, disclosure is improper
- General suspicion of provider misconduct, fraud, or RICO-related activity is insufficient
- The Court distinguished cases where funding was relevant to:
- Anti-SLAPP motive issues.
- Demonstrated fraud schemes (indirectly referring to Lituma v Liberty Coca-Cola Beverages LLC).
Practical Impact
For claims adjusters and defense counsel:
- You cannot routinely demand litigation funding documents
- Courts require a specific evidentiary showing
- General suspicion about the plaintiff’s doctors or funding companies will not suffice
- Overreaching discovery motions may damage credibility
- Perdomo is a reminder that New York courts still enforce proportionality and relevance in disclosure disputes
What to Know (Perdomo)
- CPLR § 3101(a) requires materiality tied to a specific defense
- Litigation funding does not equal a collateral source
- Fraud allegations must be supported by evidence, not conjecture
- Courts will not permit fishing expeditions into a plaintiff financing
Practice Pointers (Perdomo)
If you intend to seek litigation funding discovery:
- Plead a fraud-based defense or counterclaim
- Develop objective evidence linking funding to fabrication
- Articulate how funding supports a particular defense theory
- Avoid boilerplate arguments about “motive”
Without that foundation, your motion will fail.
At a Glance
Summary: The First Department affirmed vacatur of the note of issue and permitted discovery into litigation funding agreements where the defendants produced substantial evidence suggesting the accident was intentionally staged as part of a broader fraud ring. Lituma v Liberty Coca-Cola Beverages LLC, 2025 NY Slip Op 06389, 234 AD3d 504 (1st Dept 2025) This case represents the other side of the Perdomo coin.
Court: New York Appellate Division, First Department
Decision Date: November 20, 2025
Case: Lituma v Liberty Coca-Cola Beverages LLC, 2025 NY Slip Op 06389, 243 AD3d 504 (1st Dept 2025)
Topic: Litigation Funding Discovery Under CPLR § 3101(a)
What Happened
The underlying accident involved a rear-end collision on the Brooklyn- Queens Expressway between the plaintiffs’ vehicle and a Coca-Cola tractor trailer.
The defendants alleged: (1) the plaintiffs cut in front of the truck and “slammed on the brakes,” (2) the stop was unjustified, (3) the plaintiffs were linked to other suspicious commercial-truck accidents, (4) there were connections to known staged-accident participants, (5) certain medical providers were named in RICO-related actions.
Most importantly, the defendants submitted an affidavit from a complex claims adjuster outlining (1) the chronology of the investigation, (2) social media connections, (3) ISO/NICB history, (4) prior suspicious accidents, (5) links to an alleged “mastermind” organizer, and (6) unusual medical treatment patterns
The investigation surfaced after the note of issue was filed.
This is a powerful endorsement of carrier-driven fraud investigation.
The Court’s Ruling
The First Department affirmed:
- Vacatur of the note of issue
- Further fraud-related discovery
- Discovery into the litigation funding agreement
The distinguishing facts from Perdomo:
- A pleaded fraud counterclaim
- Specific evidentiary support
- Detailed adjuster affidavit
- Documented fraud-ring connections
- Timing showing new information post-note of issue
This was not speculation. It was structured investigative work.
Table:
| Issue | Perdomo | Lituma |
| Fraud theory supported by the evidence? | No meaningful evidentiary showing | Yes—a detailed counterclaim and evidentiary showing |
| Adjuster Affidavit? | No | Yes, extensive chronology |
| Nexus to funding? | Speculative | Tied to motive and scheme |
| Result | Discovery denied | Discovery permitted |
From a Claims Perspective
Lituma validates:
- Early fraud analytics
- ISO and social media investigation
- Coordinated carrier intelligence
- Use of declaratory judgment litigation to uncover patterns
- Strategic post-note-of-issue motions when fraud surfaces
Most importantly, Lituma confirms that a well-supported adjuster affidavit can be outcome-determinative. This is a blueprint for defending staged-accident litigation.
Relevant Legal Points (Lituma)
- 22 NYCRR § 202.21(d) allows post-note discovery upon a showing unusual or unanticipated circumstances
- Fraud counterclaims can justify expanded disclosure
- Litigation funding discovery becomes permissible when tied to a fabrication motive
- Trial courts have broad discretion in supervising fraud-related discovery
Practice Pointers for Risk Avoidance
For insurers and defense counsel:
Before filing a funding discovery motion:
- Build the evidentiary record
- Use ISO/National Insurance Crime Bureau data
- Analyze provider overlap
- Examine prior loss histories
- Develop social media linkage
Then:
- Support your motion with a detailed adjuster affidavit
- Articulate how funding relates to a fabrication motive
Final Thoughts for Claims Professionals
New York courts are not hostile to litigation funding discovery.
They are hostile to speculation.
If you can demonstrate structured fraud indicators—like in Lituma—you may expand discovery and reopen discovery even after a note of issue.
Without objective evidentiary support, Perdomo will likely bar discovery.
For claims departments focused on risk avoidance, fraud detection, and litigation cost control, these two decisions should shape how you:
- Draft counterclaims
- Supervise complex claims
- Structure SIU investigations
- Train adjusters on affidavit drafting
- Decide when to escalate fraud theories
The First Departmnent’s message is clear: Evidence-driven fraud defense will be protected, and fishing expeditions will not.
For deeper appellate-level analysis affecting claims handling and risk transfer, follow New York Civil Law.
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Primary Authority
The governing disclosure rule is CPLR § 3101, which requires “full disclosure of all matter material and necessary in the prosecution or defense of an action.” New York courts interpret this standard broadly, but discovery must still be tied to a specific claim or defense and cannot be based on speculation.
Sources:
- Perdomo v 361 E. Realty Assoc. LLC, 2026 NY Slip 00860, 246 AD3d 541 (1st Dept 2026)
- Lituma v Liberty Coca-Cola Beverages LLC, 2025 NY Slip Op 06389, 243 AD3d 504 (1st Dept 2025)
- CPLR § 3101 (the scope of disclosure)
- 22 NYCRR § 202.21(d) (Post-note of issue discovery for unusual or unanticipated circumstances)
Questions This Post Answers:
- When are litigation funding agreements discoverable in New York?
- Can insurers obtain discovery of litigation funding agreements?
- What evidence is required to obtain litigation funding discovery under CPLR § 3101(a)?
- How does Lituma differ from Perdomo?
- Can fraud allegations justify litigation funding discovery?
Photo Credit: Towfiqu Barbhuiya