Florida Senate - 2023                                    SB 1612
       
       
        
       By Senator Yarborough
       
       
       
       
       
       4-01063B-23                                           20231612__
    1                        A bill to be entitled                      
    2         An act relating to litigation financing consumer
    3         protection; creating part VIII of ch. 501, F.S.,
    4         entitled “Litigation Financing Consumer Protection
    5         Act”; creating s. 501.998, F.S.; defining terms;
    6         creating s. 501.9981, F.S.; requiring litigation
    7         financiers to register with the Department of State
    8         before engaging in litigation financing in this state;
    9         providing registration requirements; requiring
   10         litigation financiers to file a surety bond meeting
   11         specified requirements; requiring the department serve
   12         notice to such financiers and to revoke such
   13         registrations for certain noncompliance; authorizing
   14         the department to adopt rules; creating s. 501.9982,
   15         F.S.; providing requirements for litigation financing
   16         contracts; creating s. 501.9983, F.S.; prohibiting
   17         litigation financiers from engaging in specified
   18         conduct; creating s. 501.9984, F.S.; providing
   19         disclosure requirements for litigation financing
   20         contracts; creating s. 501.9985, F.S.; providing
   21         requirements for litigation financiers to assess
   22         specified interest, fees, and charges; creating s.
   23         501.9986, F.S.; providing that specified
   24         communications between attorneys and litigation
   25         financiers do not affect statutory or common-law
   26         privilege; creating s. 501.9987, F.S.; providing that
   27         violations of the act are deceptive and unfair trade
   28         practices; providing construction; providing an
   29         effective date.
   30          
   31  Be It Enacted by the Legislature of the State of Florida:
   32  
   33         Section 1. Part VIII of chapter 501, Florida Statutes,
   34  consisting of ss. 501.998, 501.9981, 501.9982, 501.9983,
   35  501.9984, 501.9985, 501.9986, and 501.9987, is created and
   36  entitled “Litigation Financing Consumer Protection Act.”
   37         Section 2. Section 501.998, Florida Statutes, is created to
   38  read:
   39         501.998Definitions.—As used in this part, the term:
   40         (1)“Consumer” means any individual.
   41         (2)“Department” means the Department of State.
   42         (3)“Funded amount” means the funds actually received and
   43  retained by a consumer under a litigation financing contract.
   44         (4)“Health care practitioner” has the same meaning as in
   45  s. 456.001.
   46         (5)“Interest” means the cost of obtaining litigation
   47  financing and includes any profit or advantage of any kind that
   48  a litigation financier may charge, contract for, collect,
   49  receive, or in any way obtain as a condition for a litigation
   50  financing contract. The term does not include charges and fees
   51  specifically authorized by this part.
   52         (6)“Litigation financier” means a person engaged in the
   53  business of litigation financing.
   54         (7)“Litigation financing” means a nonrecourse transaction
   55  in which a litigation financier provides funds to a consumer in
   56  exchange for an assignment of the consumer’s contingent right to
   57  receive an amount of the potential net proceeds of the
   58  consumer’s civil action or claim. The term does not include any
   59  of the following:
   60         (a)Legal services provided to a consumer on a contingency
   61  fee basis, or advanced legal costs, where such services or costs
   62  are provided by an attorney representing the consumer in
   63  accordance with rules regulating The Florida Bar for
   64  professional conduct.
   65         (b)A commercial tort claim as defined in s.
   66  679.1021(1)(m).
   67         (c)A worker’s compensation claim under chapter 440.
   68         (d)Lending or financing arrangements between an attorney
   69  or law firm and a lending institution to fund litigation costs
   70  in the ordinary course of business.
   71         (e)A consumer finance loan as defined in s. 516.01(2).
   72         (8)“Net proceeds” means the portion of the proceeds of a
   73  civil action or claim remaining after satisfaction of all liens
   74  with a higher priority than that of the litigation financier as
   75  specified in s. 501.1006(2).
   76         Section 3. Section 501.9981, Florida Statutes, is created
   77  to read:
   78         501.9981Litigation financier registration; registration
   79  revocation.—
   80         (1)A litigation financier may not engage in litigation
   81  financing in this state before registering as a litigation
   82  financier under this section.
   83         (a)A litigation financier that is a corporation, limited
   84  liability company, or partnership is registered under this
   85  section if it has:
   86         1.Met the bond requirements of subsection (2);
   87         2.A status of active and in good standing as reflected in
   88  department records; and
   89         3.Filed articles of organization or incorporation, a
   90  certificate of limited partnership, or another organizational
   91  document, or, if a foreign entity, an application for a
   92  certificate of authority with the department stating therein
   93  that it is a litigation financier.
   94         (b)A litigation financier who is not a corporation,
   95  limited liability company, or partnership is registered under
   96  this section if he or she has:
   97         1.Met the bond requirements of subsection (2); and
   98         2.Filed a litigation financier registration application
   99  with the department on a form prescribed by the department
  100  containing, at a minimum:
  101         a.The applicant’s full legal name and fictitious name, if
  102  any;
  103         b.The applicant’s physical address, mailing address, and
  104  telephone number;
  105         c.A statement that the applicant is a litigation
  106  financier; and
  107         d.Any other information the department deems necessary.
  108         (2)A litigation financier must file with the department a
  109  $250,000 surety bond, which bond must be:
  110         (a)Issued by a surety company authorized to do business in
  111  this state.
  112         (b)Payable to the department for the payment of damages
  113  awarded to a consumer under part II of this chapter.
  114         (c)Effective so long as the department’s records designate
  115  the litigation financier as such or a litigation financing
  116  contract with the litigation financier is effective.
  117         (3)A litigation financier must amend its registration
  118  within 30 days after the date the information contained therein
  119  changes or becomes inaccurate in any respect. A litigation
  120  financier who is not a corporation, limited liability company,
  121  or partnership may amend his or her registration by filing with
  122  the department an amendment on a form prescribed by the
  123  department.
  124         (4)If the department determines that a litigation
  125  financier has not complied with the requirements of this
  126  section, the department must serve the litigation financier
  127  notice in a record of its intent to revoke the registration of
  128  the litigation financier. Such notice:
  129         (a)Must specifically state all grounds for revocation; and
  130         (b)May be sent by e-mail to a litigation financier that
  131  provided the department with an e-mail address.
  132         (5)A litigation financier has 60 days after the date the
  133  department sends the notice under subsection (4) to correct the
  134  grounds for revocation or demonstrate to the reasonable
  135  satisfaction of the department that each ground determined by
  136  the department does not exist. The department shall revoke the
  137  registration of any litigation financier that fails to comply
  138  with the requirements of this section.
  139         (6)The department has the authority reasonably necessary
  140  to enable it to administer this section efficiently, to perform
  141  duties imposed upon it, and to adopt rules to implement this
  142  section.
  143         Section 4. Section 501.9982, Florida Statutes, is created
  144  to read:
  145         501.9982Litigation financing contracts; terms.—The
  146  litigation financing terms must be set forth in a written
  147  contract containing all of the following information:
  148         (1)A right of rescission allowing the consumer to cancel
  149  the contract without penalty, interest, fees, charges, or
  150  further obligation if, within 5 business days after execution of
  151  a contract or receipt of funds by the consumer, whichever is
  152  later, the consumer provides written rescission notice and
  153  returns any funds already provided under the contract to the
  154  litigation financier.
  155         (2)The consumer’s written acknowledgement of whether an
  156  attorney represents him or her in the civil action or claim that
  157  is the subject of the contract.
  158         (3)A statement indicating that, in the event the proceeds
  159  of the subject civil action or claim are paid into a settlement
  160  fund or trust, the litigation financier must notify the fund or
  161  trust administrator of any outstanding financial obligations
  162  arising from the contract.
  163         Section 5. Section 501.9983, Florida Statutes, is created
  164  to read:
  165         501.9983Prohibited conduct.—A litigation financier may not
  166  do any of the following:
  167         (1)Pay or offer to pay a commission, referral fee, or
  168  other consideration to any person, including an attorney, law
  169  firm, or health care practitioner, for referring a consumer to a
  170  litigation financier.
  171         (2)Accept a commission, referral fee, rebate, or other
  172  consideration from any person, including an attorney, law firm,
  173  or health care practitioner.
  174         (3)Advertise false or misleading information about its
  175  products or services.
  176         (4)Refer a consumer to a specific attorney, law firm, or
  177  health care practitioner, except that, if a consumer lacks legal
  178  representation, the litigation financier may refer the consumer
  179  to an attorney referral service operated by a county or state
  180  bar association.
  181         (5)Fail to promptly supply a copy of any complete
  182  litigation financing contract to the consumer.
  183         (6)Attempt to obtain a waiver of any remedy, including,
  184  but not limited to, compensatory, statutory, or punitive
  185  damages, that the consumer might otherwise have in the subject
  186  civil action or claim.
  187         (7)Attempt to affect arbitration or waiver of a consumer’s
  188  right to a jury trial in the subject civil action or claim.
  189         (8)Offer or provide legal advice to the consumer regarding
  190  the litigation financing contract or the subject civil action or
  191  claim.
  192         (9)Assign a litigation financing contract in whole or in
  193  part.
  194         (10)Direct, or make any decisions with respect to, the
  195  course of the subject civil action or claim or any settlement
  196  thereof.
  197         Section 6. Section 501.9984, Florida Statutes, is created
  198  to read:
  199         501.9984Required disclosures.—
  200         (1)A litigation financing contract must contain all of the
  201  following disclosures on the front page of the contract in at
  202  least 12-point boldfaced type:
  203         (a)Notice of the consumer’s right to a completely filled
  204  in contract.
  205         (b)A statement that the litigation financier does not have
  206  the right to, and may not make any decisions or attempt to,
  207  influence the consumer or his or her attorney about the conduct
  208  of the civil action or claim that is the subject of the contract
  209  and that the right to make such decisions remains solely with
  210  the consumer.
  211         (c)The total funded amount provided to the consumer.
  212         (d)An itemized list of all fees and charges payable by the
  213  consumer.
  214         (e)The interest rate.
  215         (f)The total amount due from the consumer in 6-month
  216  intervals for 3 years, including all interest, fees, and
  217  charges.
  218         (g)A statement that the consumer will not owe any fees or
  219  charges other than those described in the disclosures.
  220         (h)The cumulative amount due from the consumer for all
  221  litigation financing contracts if the consumer seeks multiple
  222  contracts and makes repayment any time after contract execution.
  223         (2)A litigation financing contract must also contain the
  224  following disclosure on the front page of the contract in at
  225  least 18-point uppercase and boldfaced type:
  226  
  227         CONSUMER’S RIGHT TO CANCELLATION: YOU MAY CANCEL THIS
  228         CONTRACT WITHOUT PENALTY, INTEREST, FEES, CHARGES, OR
  229         FURTHER OBLIGATION WITHIN 5 BUSINESS DAYS FROM THE
  230         DATE OF CONTRACT EXECUTION OR RECEIPT OF FUNDS FROM
  231         [INSERT NAME OF THE LITIGATION FINANCIER], WHICHEVER
  232         IS LATER, BY GIVING WRITTEN NOTICE OF THE CANCELLATION
  233         AND BY RETURNING THE FUNDS TO [INSERT NAME OF THE
  234         LITIGATION FINANCIER]. FOR PURPOSES OF THE DEADLINE,
  235         THE POSTMARK DATE ON FUNDS RETURNED BY REGULAR U.S.
  236         MAIL, OR THE DATE OF THE RETURN RECEIPT REQUESTED IF
  237         MAILED BY CERTIFIED MAIL, WILL BE CONSIDERED THE DATE
  238         OF RETURN OF THE FUNDS.
  239  
  240         (3)A litigation financing contract must contain the
  241  following disclosure immediately above the consumer’s signature
  242  line in 18-point uppercase and boldfaced type:
  243  
  244         DO NOT SIGN THIS CONTRACT BEFORE READING IT COMPLETELY
  245         OR IF THE CONTRACT CONTAINS ANY INCOMPLETE OR BLANK
  246         SECTIONS. BEFORE YOU SIGN THIS CONTRACT, YOU SHOULD
  247         CONSULT AN ATTORNEY. YOU MAY ALSO WANT TO CONSULT A
  248         TAX ADVISOR, A FINANCIAL PROFESSIONAL, OR AN
  249         ACCOUNTANT.
  250         Section 7. Section 501.9985, Florida Statutes, is created
  251  to read:
  252         501.9985Interest, fees, charges, and penalties.—
  253         (1)A litigation financier may not directly or indirectly
  254  charge, contract for, or receive an interest rate of greater
  255  than 35 percent of the funded amount per annum. In determining
  256  compliance with the statutory maximum interest rate, the
  257  computations used must be simple interest and not add-on
  258  interest or any other computation.
  259         (2)The maximum interest rate that may be contracted for
  260  and received by a litigation financier is 12 times the maximum
  261  monthly rate, and the maximum monthly rate must be computed on
  262  the basis of one-twelfth of the annual rate for each full month.
  263  The maximum daily rate must be computed on the basis of the
  264  maximum monthly rate divided by the number of days in the month.
  265         (3)Interest may accrue only until a court enters a final
  266  order or a settlement agreement is executed in the civil action
  267  or claim that is the subject of the litigation financing
  268  contract, whichever is earlier, but interest may not accrue for
  269  a period exceeding 3 years after the date the consumer receives
  270  the funds from the litigation financier. The total interest
  271  assessed must be calculated based on the actual number of days
  272  for which interest accrued.
  273         Section 8. Section 501.9986, Florida Statutes, is created
  274  to read:
  275         501.9986Effect of communication on privilege.
  276  Communication between a consumer’s attorney and a litigation
  277  financier regarding a litigation financing contract does not
  278  limit, waive, or abrogate the scope or nature of any statutory
  279  or common-law privilege, including the work-product doctrine and
  280  attorney-client privilege.
  281         Section 9. Section 501.9987, Florida Statutes, is created
  282  to read:
  283         501.9987Violation; enforcement.—
  284         (1)A violation of this part is an unfair and deceptive
  285  trade practice actionable under part II of this chapter.
  286         (2)This section does not limit the:
  287         (a)Enforcing authority’s exercise of powers or performance
  288  of duties that the enforcing authority is otherwise legally
  289  authorized or required to exercise or perform; or
  290         (b)Rights and remedies available to the state or a person
  291  under any other law.
  292         Section 10. This act shall take effect July 1, 2023.