Senate Bill 1828 (2020) — Litigation financing consumer protection
SB 1828
Florida Bills
Florida Senate - 2020 SB 1828 By Senator Broxson 1-01010C-20 20201828__ Page 1 of 13 CODING: Words stricken are deletions; words underlined are additions. A bill to be entitled 1
An act relating to litigation financing consumer 2 protection; creating the Litigation Financing Consumer 3 Protection Act; creating s. 559.952, F.S.; defining 4 terms; creating s. 559.953, F.S.; requiring litigation 5 financiers to register with the Office of Financial 6 Regulation; providing registration requirements; 7 creating s. 559.954, F.S.; providing mandatory 8 litigation financing contract terms; creating s. 9 559.955, F.S.; prohibiting litigation financiers from 10 engaging in specified conduct; creating s. 559.956, 11 F.S.; providing for mandatory litigation financing 12 contract disclosures; creating s. 559.957, F.S.; 13 providing for a contingent right to civil action 14 proceeds assignability; establishing the priority of 15 liens against or rights to civil action or claim 16 proceeds; creating s. 559.958, F.S.; authorizing 17 litigation financiers to charge interest up to a 18 specified amount annually; providing for simple 19 compounding; providing for a maximum annual, monthly, 20 and daily percentage rate; providing a maximum 21 interest accrual period; providing that total interest 22 must be calculated based on the actual number of days 23 for which interest accrued; capping the fees and 24 charges that litigation financiers may assess; 25 prohibiting a litigation financier from assessing 26 specified fees or charges; creating s. 559.959, F.S.; 27 requiring litigation financing contract disclosure 28 under specified circumstances; creating s. 559.961, 29
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 2 of 13 CODING: Words stricken are deletions; words underlined are additions. F.S.; providing that specified communications between 30 attorneys and litigation financiers do not limit or 31 waive statutory or common-law privilege; creating s. 32 559.962, F.S.; providing that a violation of this
part 33 is a violation of the Florida Deceptive and Unfair 34 Trade Practices Act; providing that this act does not 35 limit the powers, duties, and rights of specified 36 persons created under other law; providing an 37 effective date. 38 39 Be It Enacted by the Legislature of the State of Florida: 40 41
Section 1.
Part XIII of
chapter 559, Florida Statutes, 42 consisting of sections 559.952, 559.953, 559.954, 559.955, 43 559.956, 559.957, 559.958, 559.959, 559.961, and 559.962, is 44 created and may be cited as the “Litigation Financing Consumer 45 Protection Act.” 46
Section
Section 559.952, Florida Statutes, is created to 47 read: 48 559.952
Definitions.—As used in this part, the term: 49 (1) “Consumer” means any natural person residing, 50 physically present, or domiciled in this state. 51 (2) “Enforcing authority” has the same meaning as in s. 52 501.203. 53 (3) “Funded amount” means the funds actually received and 54 retained by a consumer under a litigation financing contract. 55 (4) “Health care practitioner” has the same meaning as in 56 s. 456.001. 57 (5) “Interest” means the cost of obtaining litigation 58
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 3 of 13 CODING: Words stricken are deletions; words underlined are additions. financing and includes any profit or advantage of any kind 59 whatsoever that a litigation financier may charge, contract for, 60 collect, receive, or in any way obtain as a condition of a 61 litigation financing contract.
Charges and fees specifically 62 authorized by this part may not be deemed interest. 63 (6) “Litigation financier” means a person, an entity, or a 64 partnership engaged in the business of litigation financing. 65 (7) “Litigation financing” means a nonrecourse transaction 66 in which a litigation financier provides funds to a consumer in 67 exchange for an assignment of the consumer’s contingent right to 68 receive an amount of the potential proceeds of his or her civil 69 action or claim. The term does not include any of the following: 70 (
a) Legal services provided to a consumer on a contingency 71 fee basis or advanced legal costs, when such services or costs 72 are provided by an attorney representing the consumer in 73 accordance with the Florida Rules of Professional Conduct. 74 (
b) A commercial tort claim as defined in s. 75 679.1021(1)(m). 76 (
c) A claim under the Workers’ Compensation Law. 77 (
d) Normal business lending or financing arrangements 78 between an attorney or a law firm and a lending institution to 79 fund litigation costs. 80 (
e) A consumer finance loan, as defined in s. 516.01. 81 (8) “Net proceeds” means the portion of the proceeds of a 82 civil action or claim remaining after satisfaction of all liens 83 with a higher priority than that of the litigation financier as 84 specified in s. 559.956(2). 85 (9) “Office” means the Office of Financial Regulation. 86
Section
Section 559.953, Florida Statutes, is created to 87
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 4 of 13 CODING: Words stricken are deletions; words underlined are additions. read: 88 559.953 Litigation financier registration; registration 89 revocation.— 90
(1) A litigation financier may not engage in litigation 91 financing in this state before registering as a litigation 92 financier under this section. 93 (
a) A litigation financier that is a corporation, limited 94 liability company, or partnership is registered under this 95
section if it has: 96 1. Met the bond requirements of subsection (2); 97 2. A status of active and in good standing as reflected in 98 the office’s records; and 99 3. Filed articles of organization or incorporation, a 100 certificate of limited partnership, or another organizational 101 document, or, if a foreign entity, an application for a 102 certificate of authority with the office stating therein that it 103 is a litigation financier. 104 (
b) A litigation financier that is not a corporation, 105 limited liability company, or partnership is registered under 106 this
section if it has: 107 1. Met the bond requirements of subsection (2); and 108 2. Filed a litigation financier registration application 109 with the office on a form prescribed by the office which 110 contains, at a minimum: 111 a. The applicant’s full legal name and any fictitious name 112 used by the applicant; 113 b. The applicant’s physical address, mailing address, and 114 telephone number; 115 c. A statement that the applicant is a litigation 116
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 5 of 13 CODING: Words stricken are deletions; words underlined are additions. financier; and 117 d. Any other information the office deems necessary. 118
(2) Each litigation financier must file with the office a 119 $250,000 surety bond, which must meet all of the following 120 requirements: 121 (
a) Be issued by a surety company authorized to do business 122 in this state. 123 (
b) Be payable to the office for the payment of damages 124 awarded to a consumer under
part II of this chapter. 125 (
c) Be effective so long as the office’s records designate 126 a litigation financier as such or a litigation financing 127 contract with the litigation financier is effective. 128
(3) A litigation financier must amend its registration 129 within 30 days after the information contained therein changes 130 or becomes inaccurate in any respect. A litigation financier 131 that is not a corporation, limited liability company, or 132 partnership may amend its registration by filing with the office 133 an amendment on a form prescribed by the commission. 134
(4) If the office determines that a litigation financier 135 has not complied with the requirements of this section, the 136 office must serve the litigation financier notice in a record of 137 its intent to revoke the litigation financier’s registration. 138 Such notice: 139 (
a) Must specifically state all grounds for revocation. 140 (
b) May be sent by electronic mail to a litigation 141 financier that provided the office with an electronic mail 142 address. 143
(5) A litigation financier has 60 days from the date the 144 office sends the notice required by subsection (4) to correct 145
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 6 of 13 CODING: Words stricken are deletions; words underlined are additions. each ground for revocation or demonstrate to the reasonable 146 satisfaction of the office that each ground determined by the 147 office does not exist. The office must revoke the litigation 148 financier registration of any litigation financier who fails to 149 comply with the requirements of this subsection. 150
(6) The office has the authority reasonably necessary to 151 enable it to administer this
section efficiently, to perform 152 duties imposed upon it, and to adopt rules to implement this 153 section. 154
Section
Section 559.954, Florida Statutes, is created to 155 read: 156 559.954 Litigation financing contracts; terms.—The 157 litigation financing terms must be set forth in a written 158 contract containing all of the following: 159
(1) A right of rescission allowing the consumer to cancel 160 the contract without penalty, interest, charges, fees, or 161 further obligation if, within 5 business days after contract 162 execution or funds receipt by the consumer, whichever is later, 163 the consumer provides written rescission notice and returns any 164 funds already provided under the contract to the litigation 165 financier. 166
(2) The consumer’s written acknowledgement of whether an 167 attorney represents him or her in the civil action or claim that 168 is the subject of the contract. 169
(3) A statement indicating that, in the event the proceeds 170 of the subject civil action or claim are paid into a settlement 171 fund or trust, the litigation financier must notify the fund or 172 trust administrator of any outstanding financial obligations 173 arising from the contract. 174
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Section
Section 559.955, Florida Statutes, is created to 175 read: 176 559.955 Prohibited conduct.—A litigation financier may not 177 do any of the following: 178
(1) Pay or offer to pay a commission, a referral fee, or 179 other consideration to any person or entity, including an 180 attorney, a law firm, or a health care practitioner, for 181 referring a consumer to a litigation financier. 182
(2) Accept a commission, a referral fee, a rebate, or other 183 consideration from any person or entity, including an attorney, 184 a law firm, or a health care practitioner. 185
(3) Advertise false or misleading information about its 186 products or services. 187
(4) Refer a consumer to a specific attorney, law firm, or 188 health care practitioner, except that, if a consumer lacks legal 189 representation, the litigation financier may refer the consumer 190 to an attorney referral service operated by a county or state 191 bar association. 192
(5) Fail to promptly supply a copy of all complete 193 litigation financing contracts to the consumer. 194
(6) Attempt to obtain a waiver of any remedy, including, 195 but not limited to, compensatory, statutory, or punitive 196 damages, which the consumer might otherwise have in the subject 197 civil action or claim. 198
(7) Attempt to effect arbitration or waiver of a consumer’s 199 right to a jury trial in the subject civil action or claim. 200
(8) Offer or provide legal advice to the consumer regarding 201 the litigation financing contract or the subject civil action or 202 claim. 203
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(9) Assign a litigation financing contract in whole or in 204 part. 205
(10) Report to a consumer credit reporting agency if 206 insufficient funds remain from the net proceeds of the subject 207 civil action or claim to repay the litigation financier. 208
(11) Direct, or make any decisions with respect to, the 209 conduct of the subject civil action or claim or any settlement 210 thereof. 211
(12) Enter into a litigation financing contract with a 212 consumer incorporating the consumer’s obligations to the 213 litigation financier under an existing litigation financing 214 contract. 215
(13) Knowingly enter into a litigation financing contract 216 with a consumer already under a litigation financing contract 217 with another litigation financier without first paying the 218 entire funded amount and all charges owed under the existing 219 contract, unless the consumer consents to a contemporaneous 220 financing arrangement in writing. 221
Section
Section 559.956, Florida Statutes, is created to 222 read: 223 559.956 Required disclosures.— 224
(1) A litigation financing contract must contain all of the 225 following disclosures on the front page of the contract in at 226 least 12-point boldfaced type: 227 (
a) Notice of the consumer’s right to a completely filled 228 in contract. 229 (
b) A statement that the litigation financier has no right 230 to and will not make any decisions or attempt to influence the 231 consumer or his or her attorney about the conduct of the civil 232
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 9 of 13 CODING: Words stricken are deletions; words underlined are additions. action or claim subject to the contract and that the right to 233 make such decisions remains solely with the consumer. 234 (
c) The total funded amount provided to the consumer. 235 (
d) An itemized list of all fees and charges payable by the 236 consumer. 237 (
e) The annual percentage rate of return. 238 (
f) The total amount due from the consumer in 6-month 239 intervals for 3 years, including all charges and fees. 240 (
g) A statement that the consumer will owe no charges or 241 fees other than those described in the disclosures. 242 (
h) The cumulative amount due from the consumer for all 243 litigation financing contracts if the consumer seeks multiple 244 contracts and makes repayment any time after contract execution. 245 (
i) Notice that if the consumer recovers nothing from the 246 subject civil action or claim, he or she will owe the litigation 247 financier nothing. 248 (
j) Notice that if the net proceeds of the subject civil 249 action or claim are insufficient to fully repay the litigation 250 financier, the litigation financier will accept a reduced sum as 251 full payment of the funded amount and all fees and charges owed, 252 which sum may not exceed the net proceeds less proceeds 253 specifically awarded for future medical expenses. 254
(2) A litigation financing contract must also contain the 255 following disclosure on the front page of the contract in at 256 least 18-point uppercase and boldfaced type: 257 258 CONSUMER’S RIGHT TO CANCELLATION: YOU MAY CANCEL THIS 259 CONTRACT WITHOUT PENALTY, INTEREST, CHARGES, FEES, OR FURTHER 260 OBLIGATION WITHIN 5 BUSINESS DAYS FROM THE DATE OF CONTRACT 261
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 10 of 13 CODING: Words stricken are deletions; words underlined are additions. EXECUTION OR RECEIVING FUNDS FROM [INSERT NAME OF THE LITIGATION 262 FINANCIER], WHICHEVER IS LATER, BY GIVING WRITTEN NOTICE OF THE 263 CANCELLATION AND BY RETURNING THE FUNDS TO [INSERT NAME OF THE 264 LITIGATION FINANCIER]. FOR PURPOSES OF THE DEADLINE, THE 265 POSTMARK DATE ON FUNDS RETURNED BY REGULAR U.S. MAIL, OR THE 266 DATE OF THE RETURN RECEIPT REQUESTED IF MAILED BY CERTIFIED 267 MAIL, WILL BE CONSIDERED THE DATE OF RETURN OF THE FUNDS. 268 269
(3) A litigation financing contract must contain the 270 following disclosure immediately above the consumer’s signature 271 line in 18-point uppercase and boldfaced type: 272 273 DO NOT SIGN THIS CONTRACT BEFORE READING IT COMPLETELY OR 274 IF THE CONTRACT CONTAINS ANY INCOMPLETE OR BLANK SECTIONS. 275 BEFORE YOU SIGN THIS CONTRACT, YOU SHOULD CONSULT AN ATTORNEY. 276 YOU MAY ALSO WANT TO CONSULT A TAX ADVISOR, A FINANCIAL 277 PROFESSIONAL, OR AN ACCOUNTANT. 278 279
Section
Section 559.957, Florida Statutes, is created to 280 read: 281 559.957 Contingent right to proceeds assignable; priority 282 of lien or right to proceeds.— 283
(1) A consumer may assign his or her contingent right to 284 receive an amount of the potential proceeds of a civil action or 285 claim. 286
(2) A litigation financier’s lien on the potential proceeds 287 of a civil action or claim has priority over liens that attach 288 to such proceeds subsequent to the attachment of the litigation 289 financier’s lien, except for any of the following: 290
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a) Attorney, insurance carrier, or health care 291 practitioner liens or liens based upon subrogation interests or 292 reimbursement rights related to the subject civil action or 293 claim. 294 (
b) Child support, Medicare, tax, or any other statutory or 295 governmental lien. 296
Section
Section 559.958, Florida Statutes, is created to 297 read: 298 559.958 Interest, fees, charges, and penalties.— 299
(1) A litigation financier may not directly or indirectly 300 charge, contract for, or receive an interest rate of greater 301 than 30 percent of the funded amount per annum. In determining 302 compliance with the statutory maximum interest rate, the 303 computations used must be simple interest and not add-on 304 interest or any other computation. 305
(2) The maximum annual percentage rate of finance charge 306 which may be contracted for and received by a litigation 307 financier is 12 times the maximum monthly rate, and the maximum 308 monthly rate must be computed on the basis of one-twelfth of the 309 annual rate for each full month. The maximum daily rate must be 310 computed on the basis of the maximum monthly rate divided by the 311 number of days in the month. 312
(3) Interest may only accrue until a court enters a final 313 order or a settlement agreement is executed in the civil action 314 or claim subject to the litigation financing contract, whichever 315 is earlier, but in no case may interest accrue for a period 316 exceeding 3 years from the date the consumer receives the funds 317 from the litigation financier. The total interest amount 318 assessed must be calculated based on the actual number of days 319
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 12 of 13 CODING: Words stricken are deletions; words underlined are additions. for which interest accrued. 320
(4) A litigation financier may not directly or indirectly 321 charge, contract for, or receive any charges or fees the 322 combined total of which exceeds $500 with regard to a single 323 civil action or claim, regardless of the number of litigation 324 financing contracts the consumer enters into with the litigation 325 financier respecting the civil action or claim. 326
(5) A litigation financier may not directly or indirectly 327 charge, contract for, or receive any interest, charges, or fees 328 for rescission or cancellation of a litigation financing 329 contract under s. 559.954(1). 330
Section
Section 559.959, Florida Statutes, is created to 331 read: 332 559.959 Litigation financing contracts; discovery.—Except 333 as otherwise ordered by the court, a party to any civil action 334 or claim, without awaiting a discovery request, shall provide to 335 the other parties any contract under which a litigation 336 financier has a contingent right to receive compensation sourced 337 from potential proceeds of the civil action or claim. 338
Section
Section 559.961, Florida Statutes, is created 339 to read: 340 559.961 Effect of communication on privilege.—341 Communications between a consumer’s attorney and a litigation 342 financier as it pertains to a litigation financing contract do 343 not limit, waive, or abrogate the scope or nature of any 344 statutory or common-law privilege, including the work-product 345 doctrine and the attorney-client privilege. 346
Section
Section 559.962, Florida Statutes, is created 347 to read: 348
Florida Senate - 2020 SB 1828 1-01010C-20 20201828__ Page 13 of 13 CODING: Words stricken are deletions; words underlined are additions. 559.962 Violation; enforcement.— 349
(1) A violation of this
part is an unfair or deceptive 350 trade act or practice under
part II of
chapter 501. 351
(2) This
section may not be construed to limit: 352 (
a) The enforcing authority’s exercise of powers or 353 performance of duties that the enforcing authority is otherwise 354 legally authorized or required to exercise or perform. 355 (
b) The rights and remedies available to the state or a 356 person under any other law. 357