Florida Senate - 2021 SB 1750 By Senator Broxson 1-01544A-21 20211750__ 1 A bill to be entitled 2 An act relating to litigation financing consumer 3 protection; creating part XIII of ch. 559, F.S., 4 entitled “Litigation Financing Consumer Protection 5 Act”; creating s. 559.953, F.S.; defining terms; 6 creating s. 559.954, F.S.; requiring litigation 7 financiers to register with the Department of State 8 before engaging in litigation financing; providing 9 registration requirements; requiring litigation 10 financiers to file a surety bond meeting specified 11 requirements; requiring the department serve notice to 12 such financiers and to revoke such registrations for 13 certain noncompliance; authorizing the department to 14 adopt rules; creating s. 559.955, F.S.; providing 15 requirements for litigation financing contracts; 16 creating s. 559.956, F.S.; prohibiting litigation 17 financiers from engaging in specified conduct; 18 creating s. 559.957, F.S.; providing disclosure 19 requirements for litigation financing contracts; 20 creating s. 559.958, F.S.; providing for the 21 assignment of contingent rights to civil action or 22 claim proceeds; specifying the priority of liens 23 against or rights to civil action or claim proceeds; 24 creating s. 559.959, F.S.; authorizing litigation 25 financiers to assess specified interest, fees, and 26 charges; providing requirements for such interest, 27 fees, and charges; prohibiting a litigation financier 28 from assessing certain fees or charges; creating s. 29 559.961, F.S.; requiring the disclosure of litigation 30 financing contracts under specified circumstances; 31 creating s. 559.962, F.S.; providing that specified 32 communications between attorneys and litigation 33 financiers do not affect statutory or common-law 34 privilege; creating s. 559.963, F.S.; providing that 35 violations of the act constitute deceptive and unfair 36 trade practices; providing construction; 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 559.953, 559.954, 559.955, 559.956, 43 559.957, 559.958, 559.959, 559.961, 559.962, and 559.963, is 44 created and entitled “Litigation Financing Consumer Protection 45 Act.” 46 Section 2. Section 559.953, Florida Statutes, is created to 47 read: 48 559.953 Definitions.—As used in this part, the term: 49 (1) “Consumer” means any individual. 50 (2) “Department” means the Department of State. 51 (3) “Enforcing authority” has the same meaning as in s. 52 501.203(2). 53 (4) “Funded amount” means the funds actually received and 54 retained by a consumer under a litigation financing contract. 55 (5) “Health care practitioner” has the same meaning as in 56 s. 456.001. 57 (6) “Interest” means the cost of obtaining litigation 58 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 for a 61 litigation financing contract. Charges and fees specifically 62 authorized by this part are not interest. 63 (7) “Litigation financier” means a person engaged in the 64 business of litigation financing. 65 (8) “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 the consumer’s 69 civil action or claim. The term does not include: 70 (a) Legal services provided to a consumer on a contingency 71 fee basis or advanced legal costs where 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 worker’s compensation claim under chapter 440; 77 (d) Lending or financing arrangements between an attorney 78 or law firm and a lending institution to fund litigation costs 79 in the ordinary course of business; or 80 (e) A consumer finance loan, as defined in s. 516.01(2). 81 (9) “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. 559.958(2). 85 Section 3. Section 559.954, Florida Statutes, is created to 86 read: 87 559.954 Litigation financier registration; registration 88 revocation.— 89 (1) A litigation financier may not engage in litigation 90 financing in this state before registering as a litigation 91 financier under this section. 92 (a) A litigation financier that is a corporation, limited 93 liability company, or partnership shall be considered registered 94 under this section if it has: 95 1. Met the bond requirements of subsection (2); 96 2. A status of active and in good standing as reflected in 97 department records; and 98 3. Filed articles of organization or incorporation, a 99 certificate of limited partnership, or another organizational 100 document or, if a foreign entity, an application for a 101 certificate of authority with the department stating therein 102 that it is a litigation financier. 103 (b) A litigation financier who is not a corporation, 104 limited liability company, or partnership shall be considered 105 registered under this section if he or she has: 106 1. Met the bond requirements of subsection (2); and 107 2. Filed a litigation financier registration application 108 with the department on a form prescribed by the department 109 containing, at a minimum: 110 a. The applicant’s full legal name and fictitious name, if 111 any; 112 b. The applicant’s physical address, mailing address, and 113 telephone number; 114 c. A statement that the applicant is a litigation 115 financier; and 116 d. Any other information the department deems necessary. 117 (2) Each litigation financier must file with the department 118 a $250,000 surety bond that must be all of the following: 119 (a) Issued by a surety company authorized to do business in 120 this state. 121 (b) Payable to the department for the payment of damages 122 awarded to a consumer under part II of chapter 501. 123 (c) Effective so long as the department’s records designate 124 a litigation financier as such or a litigation financing 125 contract with the litigation financier is effective. 126 (3) A litigation financier must amend its registration 127 within 30 days after the date the information contained therein 128 changes or becomes inaccurate in any respect. A litigation 129 financier who is not a corporation, limited liability company, 130 or partnership may amend his or her registration by filing with 131 the department an amendment on a form prescribed by the 132 department. 133 (4) If the department determines that a litigation 134 financier has not complied with the requirements of this 135 section, the department shall serve the litigation financier 136 notice in a record of its intent to revoke the litigation 137 financier’s registration. Such notice: 138 (a) Must specifically state all grounds for revocation; and 139 (b) May be sent by electronic mail to a litigation 140 financier that provided the department with an electronic mail 141 address. 142 (5) A litigation financier has 60 days from the date the 143 department sends the notice required by subsection (4) to 144 correct the grounds for revocation or demonstrate to the 145 reasonable satisfaction of the department that each ground 146 determined by the department does not exist. The department 147 shall revoke the registration of any litigation financier that 148 fails to comply with the requirements of this section. 149 (6) The department has the authority reasonably necessary 150 to enable it to administer this section efficiently, to perform 151 duties imposed upon it, and to adopt rules to implement this 152 section. 153 Section 4. Section 559.955, Florida Statutes, is created to 154 read: 155 559.955 Litigation financing contracts; terms.—The 156 litigation financing terms must be set forth in a written 157 contract containing: 158 (1) A right of rescission allowing the consumer to cancel 159 the contract without penalty, interest, fees, charges, or 160 further obligation if, within 5 business days after execution of 161 a contract or receipt of funds by the consumer, whichever is 162 later, the consumer provides written rescission notice and 163 returns any funds already provided under the contract to the 164 litigation financier; 165 (2) The consumer’s written acknowledgement of whether an 166 attorney represents him or her in the civil action or claim that 167 is the subject of the contract; and 168 (3) A statement indicating that, in the event the proceeds 169 of the subject civil action or claim are paid into a settlement 170 fund or trust, the litigation financier must notify the fund or 171 trust administrator of any outstanding financial obligations 172 arising from the contract. 173 Section 5. Section 559.956, Florida Statutes, is created to 174 read: 175 559.956 Prohibited conduct.—A litigation financier may not: 176 (1) Pay or offer to pay a commission, referral fee, or 177 other consideration to any person, including an attorney, law 178 firm, or health care practitioner, for referring a consumer to a 179 litigation financier; 180 (2) Accept a commission, referral fee, rebate, or other 181 consideration from any person, including an attorney, law firm, 182 or health care practitioner; 183 (3) Advertise false or misleading information about its 184 products or services; 185 (4) Refer a consumer to a specific attorney, law firm, or 186 health care practitioner, except that, if a consumer lacks legal 187 representation, the litigation financier may refer the consumer 188 to an attorney referral service operated by a county or state 189 bar association; 190 (5) Fail to promptly supply a copy of any complete 191 litigation financing contract to the consumer; 192 (6) Attempt to obtain a waiver of any remedy, including, 193 but not limited to, compensatory, statutory, or punitive damages 194 that the consumer might otherwise have in the subject civil 195 action or claim; 196 (7) Attempt to effect arbitration or waiver of a consumer’s 197 right to a jury trial in the subject civil action or claim; 198 (8) Offer or provide legal advice to the consumer regarding 199 the litigation financing contract or the subject civil action or 200 claim; 201 (9) Assign a litigation financing contract in whole or in 202 part; 203 (10) Report to a consumer credit reporting agency if 204 insufficient funds remain from the net proceeds of the subject 205 civil action or claim to repay the litigation financier; 206 (11) Direct or make any decisions with respect to the 207 course of the subject civil action or claim or any settlement 208 thereof; 209 (12) Enter into a litigation financing contract with a 210 consumer incorporating the consumer’s obligations to the 211 litigation financier under an existing litigation financing 212 contract; or 213 (13) Knowingly enter into a litigation financing contract 214 with a consumer already under a litigation financing contract 215 with another litigation financier without first paying the 216 entire funded amount and all fees and charges owed under the 217 existing contract, unless the consumer consents to a 218 contemporaneous financing arrangement in writing. 219 Section 6. Section 559.957, Florida Statutes, is created to 220 read: 221 559.957 Required disclosures.— 222 (1) A litigation financing contract must contain the 223 following disclosures on the front page of the contract in at 224 least 12-point boldfaced type: 225 (a) Notice of the consumer’s right to a completely filled 226 in contract; 227 (b) A statement that the litigation financier does not have 228 the right to, and may not make any decisions or attempt to, 229 influence the consumer or his or her attorney about the conduct 230 of the civil action or claim that is the subject of the contract 231 and that the right to make such decisions remains solely with 232 the consumer; 233 (c) The total funded amount provided to the consumer; 234 (d) An itemized list of all fees and charges payable by the 235 consumer; 236 (e) The interest rate; 237 (f) The total amount due from the consumer in 6-month 238 intervals for 3 years, including all interest, fees, and 239 charges; 240 (g) A statement that the consumer will owe no fees or 241 charges 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; and 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 CONTRACT 259 WITHOUT PENALTY, INTEREST, FEES, CHARGES, OR FURTHER OBLIGATION 260 WITHIN 5 BUSINESS DAYS FROM THE DATE OF CONTRACT EXECUTION OR 261 RECEIPT OF FUNDS FROM [INSERT NAME OF THE LITIGATION FINANCIER], 262 WHICHEVER IS LATER, BY GIVING WRITTEN NOTICE OF THE CANCELLATION 263 AND BY RETURNING THE FUNDS TO [INSERT NAME OF THE LITIGATION 264 FINANCIER]. FOR PURPOSES OF THE DEADLINE, THE POSTMARK DATE ON 265 FUNDS RETURNED BY REGULAR U.S. MAIL, OR THE DATE OF THE RETURN 266 RECEIPT REQUESTED IF MAILED BY CERTIFIED MAIL, WILL BE 267 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 IF THE 274 CONTRACT CONTAINS ANY INCOMPLETE OR BLANK SECTIONS. BEFORE YOU 275 SIGN THIS CONTRACT, YOU SHOULD CONSULT AN ATTORNEY. YOU MAY ALSO 276 WANT TO CONSULT A TAX ADVISOR, A FINANCIAL PROFESSIONAL, OR AN 277 ACCOUNTANT. 278 Section 7. Section 559.958, Florida Statutes, is created to 279 read: 280 559.958 Contingent right to proceeds assignable; priority 281 of lien or right to proceeds.— 282 (1) A consumer may assign his or her contingent right to 283 receive an amount of the potential proceeds of a civil action or 284 claim. 285 (2) A litigation financier’s lien on the potential proceeds 286 of a civil action or claim has priority over liens that attach 287 to such proceeds subsequent to the attachment of the litigation 288 financier’s lien, except for: 289 (a) Attorney, insurance carrier, or healthcare practitioner 290 liens or liens based upon subrogation interests or reimbursement 291 rights related to the subject civil action or claim; and 292 (b) Child support, Medicare, tax, or any other statutory or 293 governmental lien. 294 Section 8. Section 559.959, Florida Statutes, is created to 295 read: 296 559.959 Interest, fees, charges, and penalties.— 297 (1) A litigation financier may not directly or indirectly 298 charge, contract for, or receive an interest rate of greater 299 than 10 percent of the funded amount per annum. In determining 300 compliance with the statutory maximum interest rate, the 301 computations used must be simple interest and not add-on 302 interest or any other computations. 303 (2) The maximum interest rate that may be contracted for 304 and received by a litigation financier is 12 times the maximum 305 monthly rate, and the maximum monthly rate must be computed on 306 the basis of one-twelfth of the annual rate for each full month. 307 The maximum daily rate must be computed on the basis of the 308 maximum monthly rate divided by the number of days in the month. 309 (3) Interest may only accrue until a court enters a final 310 order or a settlement agreement is executed in the civil action 311 or claim that is the subject of the litigation financing 312 contract, whichever is earlier, but interest may not accrue for 313 a period exceeding 3 years from the date the consumer receives 314 the funds from the litigation financier. The total interest 315 assessed must be calculated based on the actual number of days 316 for which interest accrued. 317 (4) A litigation financier may not directly or indirectly 318 charge, contract for, or receive any fees or charges the 319 combined total of which exceeds $500 with regard to a single 320 civil action or claim, regardless of the number of litigation 321 financing contracts the consumer enters into with the litigation 322 financier with respect to the civil action or claim. 323 (5) A litigation financier may not directly or indirectly 324 charge, contract for, or receive any interest, fees, or charges, 325 for rescission or cancellation of a litigation financing 326 contract under s. 559.955(1). 327 Section 9. Section 559.961, Florida Statutes, is created to 328 read: 329 559.961 Litigation financing contracts; discovery.—Except 330 as otherwise ordered by the court, a party to any civil action 331 or claim must, without awaiting a discovery request, provide to 332 the other parties any contract under which a litigation 333 financier has a contingent right to receive compensation sourced 334 from potential proceeds of the civil action or claim. 335 Section 10. Section 559.962, Florida Statutes, is created 336 to read: 337 559.962 Effect of communication on privilege.—Communication 338 between a consumer’s attorney and a litigation financier 339 regarding a litigation financing contract does not limit, waive, 340 or abrogate the scope or nature of any statutory or common-law 341 privilege, including the work-product doctrine and the attorney 342 client privilege. 343 Section 11. Section 559.963, Florida Statutes, is created 344 to read: 345 559.963 Violation; enforcement.— 346 (1) A violation of this part is considered an unfair and 347 deceptive trade practice actionable under part II of chapter 348 501. 349 (2) This section does not limit: 350 (a) The enforcing authority’s exercise of powers or 351 performance of duties that the enforcing authority is otherwise 352 legally authorized or required to exercise or perform; or 353 (b) The rights and remedies available to the state or a 354 person under any other law. 355 Section 12. This act shall take effect July 1, 2021.