Judge Says Devin Nunes' Family Has To Tell The Judge Who Is Funding Their Lawsuit Against Esquire & Ryan Lizza

A big open question regarding Rep. Devin Nunes' never ending series of lawsuits against the media has been who is funding those lawsuits. As a watchdog group highlighted last year, House rules require certain steps be followed if a Member is receiving free legal services, and it did not appear that Nunes had followed those steps, and if Nunes were actually paying for those legal services, House rules required that he not be receiving a discount for them, which the watchdog group noted was worth investigating.

The funding of these lawsuits has now become an issue in a case that... was not directly filed by Rep. Nunes. As you'll recall, Nunes sued reporter Ryan Lizza and Esquire publisher Hearst over an article regarding Nunes' family, and the farm they own in Iowa. A few months after Rep. Nunes' lawsuit, Nunes' family filed a separate lawsuit over the same article, against the same defendants, using the same lawyer as Nunes, Steven Biss.

A year ago, a district court judge dismissed Rep. Nunes' lawsuit, though the appeals court recently revived that lawsuit in a truly bizarre decision. The family's case against Lizza and Hearst was on shaky ground, but was allowed to proceed on a very narrow claim.

Over the last few months we've talked about how the proceedings in that case have gone completely off the rails in ways that I've honestly never seen before in years of following some pretty intense cases.

But one of the issues at play in the case is... who is funding the family's lawsuit. That became an issue, because if Rep. Nunes himself is funding the case and is the real party of interest in the lawsuit, that impacts the standard under which defamation must be shown (notably, whether or not the actual malice standard applies). And, Nunes's family has admitted that it (1) isn't paying, and (2) has little involvement in the lawsuit, despite being the plaintiffs. From some recently unredacted filings:

In addition, Plaintiffs’ apparent lack of investment in prosecuting their own lawsuit was buttressed by their deposition testimony admitting they have not incurred out-of-pocket payments to counsel, with the exception paying $500 to former local counsel Joe Feller, and their document production of financial records indicating the same lack of payments to counsel for costs or fees, save the payment to Feller. Consider further that Plaintiff Anthony Nunes III, testifying as the 30(b)(6) corporate representative of NuStar, answered the question “[W]ho is funding the lawyers for this lawsuit?” with “I have no idea.” NuStar 30(b)(6) Anthony Nunes III Dep. 400:8-10.

And while the judge had initially suggested some level of skepticism regarding the relevance of finding out who was funding the family's legal fees, a new ruling says that Biss and the family need to cough up that info and give it to the judge, who will review it in private (meaning it still may never become public). Judge Mark Roberts notes that Hearst and Lizza make a compelling enough case that this information is relevant to their arguments in the case. First, he notes, this isn't just random speculation and fishing on the part of Hearst/Lizza. There's at least some smoke here.

In the case at bar, I find there is more than speculation or mere theory regarding the relevance of third-party funding. First, Plaintiffs have not denied that the litigation is being funded by others. Second, Plaintiffs have only incurred $500 in charges during this protracted litigation. Third, Anthony Nunes III, an individual Plaintiff and the corporate representative has “no idea” who is paying the lawyers representing Plaintiffs. These circumstances may not ultimately turn out to be “untoward,” but they are certainly unusual. Moreover, these circumstances lift the basis for Defendants’ inquiry above the level of mere speculation and raise legitimate subjects for inquiry not present in a more run-of-the-mill personal injury case or commercial dispute. The instant case is distinguishable from a case like Benitez where the defendant seeking litigation funding information could not point out how it might affect the plaintiff’s credibility or be used for impeachment

And, because the real party of interest matters to the actual malice standard, which could be key to this case, there's a more compelling interest in making sure this information is available:

As Defendants point out, a crucial and often determinative issue in a defamation case is whether a plaintiff needs to prove actual malice. This Court has expressed doubt about the viability of a theory of defense based on the Plaintiffs’ status as involuntary public figures. Nevertheless, the unusual facts presented here make Defendants’ inquiry into litigation funding a legitimate subject for discovery to enable them to make the argument on a full record.

Also, the court is well aware that Nunes has been suing many media organizations, reporters, and critics -- which he does not condemn, but merely notes is relevant to this inquiry.

Similarly, the Plaintiffs’ relationship to Congressman Nunes is an important factor in permitting the discovery. Congressman Nunes has engaged in considerable defamation litigation with the assistance of the same attorney employed by Plaintiffs in the instant action. I offer no criticism of any party’s use of the courts to vigorously protect their interests. Nevertheless, Congressman Nunes is clearly a public figure who would be required to prove actual malice. The requirement of actual malice was adopted by the United States Supreme Court because “[i]t would give public servants an unjustified preference over the public they serve, if critics of official conduct did not have a fair equivalent of the immunity granted to the officials themselves.” New York Times v. Sullivan, 376 U.S. 254, 282-83 (1964.) It may turn out that there has been no coordination between the Congressman and his family, as Plaintiffs assert. However, Defendants inquiry into third-party funding serves the legitimate purpose of determining whether such coordination exists. In light of the important constitutional protections that proof of actual malice provides, it is not a significant imposition to require Plaintiffs to provide discovery that would prove or dispel the notion that a third party is using the instant case to avoid a significant hurdle to a defamation claim. Given the close family relationship, the other defamation litigation Congressman Nunes has pursued in his own name with the help of the same attorney, and the Plaintiffs’ lack of knowledge of who is paying their lawyers, the inquiry is not founded on mere speculation.

The judge also notes that in the financial interest disclosure statement that was required as part of the case, the family said that "there are no associations, firms, partnerships, corporations, and other artificial entities" that "have a direct or indirect pecuniary interest in the Plaintiffs’ outcome in the case" but the fact that family members admit they haven't been paying raises questions about whether or not that statement is accurate.

I will not engage in speculation about what arrangements Plaintiffs may have made to finance their lawsuit, if any. However, Anthony Nunes III professed lack of knowledge about who is paying Plaintiffs’ lawyers at least raises the possibility that an undisclosed entity related to NuStar has a pecuniary interest in the outcome of the case that would be pertinent to the Court’s assessment of conflicts.

There's also the issue of whether or not this is a sort of shell lawsuit, and the family is not "the real party of interest." The judge wants to find out.

I cannot say, based on the record before me, that NuStar is not a real party in interest. However, I also cannot rule out the possibility. Anthony Nunes III’s lack of knowledge about who is paying the attorneys prosecuting this action raises legitimate concern about not only who may be in charge of the lawsuit, but also whether Plaintiffs are the still the real parties in interest. Defendants call the Court’s attention to Conlon v. Rosa, which raised the concern of secret funding by stating, “He who pays the piper may not always call the tune, but he’ll likely have an influence on the playlist.”...

Again, I will refrain from speculating about the terms of any agreement between Plaintiffs and a third-party who may be funding this litigation. Nevertheless, it is more than mere speculation and far from a “fishing expedition” to make inquiries that would determine if Plaintiffs assigned all or some of their interest in their claims. Plaintiffs claim compensatory damages of $20,000,000.... It is not unreasonable to inquire whether Plaintiffs’ arrangement with whomever may be funding the case includes an assignment or an agreement that the funder otherwise stands to benefit from the litigation’s outcome. If Plaintiffs have made such an assignment, they may no longer be the real parties in interest. Defendants have a legitimate interest in ensuring the judgment will have a preclusive effect.

If Rep. Nunes himself is somehow the real party of interest, there's a separate issue in that he is also considered a witness in the case. And that creates some questions that the judge wants answered.

I gather from comments at the hearing that Defendants’ concern is that Congressman Nunes may be a source of, or helped arrange, the funding. While this concern has yet to be proven, the basis for it goes beyond mere conjecture. Congressman Nunes and Mr. Biss have related litigation in this Court arising from the same allegedly defamatory article at issue here. Congressman Nunes alleges significant damages arising from the article, as do Plaintiffs. While these family members may be separately financing their respective suits, it is not merely a fishing expedition to inquire about the Congressman’s involvement in the financing of the instant lawsuit and his stake, if any, in the outcome. It may be that he has no more than a desire for his family to succeed in their lawsuit. However, he is also a witness in this case and Defendants are entitled to inquire about his interests in the lawsuit that may illuminate a possible bias.

The judge also highlights that Hearst believes the funding is important to refute a potential "David v. Goliath" argument made by the Nunes family at trial (arguing that big bad NY media is trying to harm lowly poor Midwest farmers), and notes that's another reason to allow discovery on funding.

All that said... this does not mean that the public is going to learn this information. Instead, the judge is saying that the information must first be presented "in camera" (basically: judge's eye's only). Notably, the judge points out that it was the defendants, Hearst and Lizza, who had raised the idea of in camera review, while the Nunes family just flat out resisted having to hand over the documents "but make no reference to the need for in camera inspection." Still, in an abundance of caution, the judge says that he will review the information in private first, and then if he sees no reason to change his mind, he will order the Nunes family to hand that information over to the defendants:

I conclude it is prudent to review the records prior to requiring production to Defendants. If, after my in camera review, no reason appears to reconsider my decision, I anticipate entering a supplemental order requiring their production to Defendants consistent with the protective order in place.

For what it's worth, that means that even assuming the judge does agree, after reviewing whatever information, that the documents need to be handed over to the defense, that information might still not become public. There is a protective order regarding the content shared in discovery which keeps most of it secret (this is for a good reason), and should this case ever get to trial, then some of it may become public. But... there's a good chance (1) this never goes to trial, and (2) this information does not become public (at least not via this case). Still, it's notable that the judge has agreed the information is relevant and must be revealed to him.