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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
A bill to be entitled 1
An act relating to litigation financing consumer 2
protection; creating part VIII of ch. 501, F.S., 3
entitled "Litigation Financing Consumer Protection 4
Act"; creating s. 501.1001, F.S.; providing 5
definitions; creating s. 501.1002, F.S.; requiring 6
litigation financiers to register with the Department 7
of State before engaging in litigation financing; 8
providing registration requirements; requiring 9
litigation financiers to file a surety bond meeting 10
specified requirements; requiring the department serve 11
notice to such financiers and to revoke such 12
registrations for certain noncompliance; authorizing 13
the department to adopt rules; creating s. 501.1003, 14
F.S.; providing requirements for litigation financing 15
contracts; creating s. 501.1004, F.S.; prohibiting 16
litigation financiers from engaging in specified 17
conduct; creating s. 501.1005, F.S.; providing 18
disclosure requirements for litigation financing 19
contracts; creating s. 501.1006, F.S.; providing for 20
the assignment of contingent rights to civil action or 21
claim proceeds; specifying the priority of liens 22
against or rights to civil action or claim proceeds; 23
creating s. 501.1007, F.S.; authorizing litigation 24
financiers to assess specified interest, fees, and 25
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charges; providing requirements for such interest, 26
fees, and charges; prohibiting a litigation financier 27
from assessing specified fees or charges; creating s. 28
501.1008, F.S.; requiring the disclosure of litigation 29
financing contracts under specified circumstances; 30
creating s. 501.1009, F.S.; providing that specified 31
communications between attorneys and litigation 32
financiers do not effect statutory or common -law 33
privilege; creating s. 501.1011, F.S.; providing that 34
violations of the act are deceptive and unfair trade 35
practices; providing construction; providing an 36
effective date. 37
38
Be It Enacted by the Legislature of the State of Florida: 39
40
Section 1. Part VIII of chapter 501, Florida Statutes, 41
consisting of sections 501.1001, 501.1002, 501.1003, 501.1004, 42
501.1005, 501.1006, 501.1007, 501.1008, 501.1009, and 501.101 1, 43
is created and entitled "Litigation Financing Consumer 44
Protection Act." 45
Section 2. Section 501.1001, Florida Statutes, is created 46
to read: 47
501.1001 Definitions. —As used in this part, the term: 48
(1) "Consumer" means an individual. 49
(2) "Department" means the Department of State. 50
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(3) "Enforcing authority" has the same meaning as in s. 51
501.203. 52
(4) "Funded amount" means the funds actually received and 53
retained by a consumer under a litigation financing contract. 54
(5) "Health care practitioner" has the same meaning as in 55
s. 456.001. 56
(6) "Interest" means the cost of obtaining litigation 57
financing and includes any profit or advantage of any kind 58
whatsoever that a litigation financier may charge, contract for, 59
collect, receive, or in any way obtai n as a condition for a 60
litigation financing contract. Charges and fees specifically 61
authorized by this part are not interest. 62
(7) "Litigation financier" means a person engaged in the 63
business of litigation financing. 64
(8) "Litigation financing" means a nonrecourse transaction 65
in which a litigation financier provides funds to a consumer in 66
exchange for an assignment of the consumer's contingent right to 67
receive an amount of the potential proceeds of the consumer's 68
civil action or claim. The term does not include: 69
(a) Legal services provided to a consumer on a contingency 70
fee basis, or advanced legal costs, where such services or costs 71
are provided by an attorney representing the consumer in 72
accordance with the Florida Rules of Professional Conduct; 73
(b) A commercial tort claim as defined in s. 74
679.1021(1)(m); 75
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(c) A worker's compensation claim under chapter 440; 76
(d) Lending or financing arrangements between an attorney 77
or law firm and a lending institution to fund litigation costs 78
in the ordinary cour se of business; or 79
(e) A consumer finance loan, as defined in s. 516.01(2). 80
(9) "Net proceeds" means the portion of the proceeds of a 81
civil action or claim remaining after satisfaction of all liens 82
with a higher priority than that of the litigation fin ancier as 83
specified in s. 501.1006(2). 84
Section 3. Section 501.1002, Florida Statutes, is created 85
to read: 86
501.1002 Litigation financier registration; registration 87
revocation.— 88
(1) A litigation financier may not engage in litigation 89
financing in this state before registering as a litigation 90
financier under this section. 91
(a) A litigation financier that is a corporation, limited 92
liability company, or partnership is registered under this 93
section if it has: 94
1. Met the bond requirements of subsection (2); 95
2. A status of active and in good standing as reflected in 96
department records; and 97
3. Filed articles of organization or incorporation, a 98
certificate of limited partnership, or another organizational 99
document, or, if a foreign entity, an applicatio n for a 100
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certificate of authority with the department stating that it is 101
a litigation financier. 102
(b) A litigation financier who is not a corporation, 103
limited liability company, or partnership is registered under 104
this section if he or she has: 105
1. Met the bond requirements of subsection (2); and 106
2. Filed a litigation financier registration application 107
with the department on a form prescribed by the department 108
containing, at a minimum: 109
a. The applicant's full legal name and fictitious name, if 110
any; 111
b. The applicant's physical address, mailing address, and 112
telephone number; 113
c. A statement that the applicant is a litigation 114
financier; and 115
d. Any other information the department deems necessary. 116
(2) Each litigation financier must file with the 117
department a $250,000 surety bond: 118
(a) Issued by a surety company authorized to do business 119
in this state. 120
(b) Payable to the department for the payment of damages 121
awarded to a consumer under part II of this chapter. 122
(c) Effective so long as the departme nt's records 123
designate a litigation financier as such or a litigation 124
financing contract with the litigation financier is effective. 125
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(3) A litigation financier must amend its registration 126
within 30 days after the date the information contained changes 127
or becomes inaccurate in any respect. A litigation financier who 128
is not a corporation, limited liability company, or partnership 129
may amend his or her registration by filing with the department 130
an amendment on a form prescribed by the department. 131
(4) If the department determines that a litigation 132
financier has not complied with the requirements of this 133
section, the department shall serve the litigation financier 134
notice of its intent to revoke the litigation financier's 135
registration. The notice: 136
(a) Must specifically state all grounds for revocation; 137
and 138
(b) May be sent by electronic mail to a litigation 139
financier that provided the department with an electronic mail 140
address. 141
(5) A litigation financier has 60 days after the date the 142
department sends the n otice required by subsection (4) to 143
correct the grounds for revocation or demonstrate to the 144
reasonable satisfaction of the department that each ground 145
determined by the department does not exist. The department 146
shall revoke the litigation financier regist ration of a 147
litigation financier who fails to comply with the requirements 148
of this section. 149
(6) The department has the authority reasonably necessary 150
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to enable it to administer this section efficiently, to perform 151
duties imposed upon it, and to adopt rul es to implement this 152
section. 153
Section 4. Section 501.1003, Florida Statutes, is created 154
to read: 155
501.1003 Litigation financing contracts; terms. —The 156
litigation financing terms must be set forth in a written 157
contract containing all of the following: 158
(1) A right of rescission allowing the consumer to cancel 159
the contract without penalty, interest, fees, or 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. 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 outstand ing financial obligations 172
arising from the contract. 173
Section 5. Section 501.1004, Florida Statutes, is created 174
to read: 175
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501.1004 Prohibited conduct. —A litigation financier may 176
not: 177
(1) Pay or offer to pay a commission, referral fee or 178
other consideration to a person, including an attorney, law 179
firm, or health care practitioner, for referring a consumer to a 180
litigation financier; 181
(2) Accept a commission, referral fee, rebate, or other 182
consideration from a person, including an attorney, law firm, or 183
health care practitioner; 184
(3) Advertise false or misleading information about its 185
products or services; 186
(4) Refer a consumer to a specific attorney, law firm, or 187
health care practitioner, except that, if a consumer lacks legal 188
representation, the liti gation financier may refer the consumer 189
to an attorney referral service operated by a county or state 190
bar association; 191
(5) Fail to promptly supply a copy of any complete 192
litigation financing contract to a consumer; 193
(6) Attempt to obtain a waiver of any remedy, including, 194
but not limited to, compensatory, statutory, or punitive 195
damages, that a consumer might otherwise have in the subject 196
civil action or claim; 197
(7) Attempt to effect arbitration or waiver of a 198
consumer's right to a jury trial in the subj ect civil action or 199
claim; 200
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(8) Offer or provide legal advice to a consumer regarding 201
the litigation financing contract or the subject civil action or 202
claim; 203
(9) Assign a litigation financing contract in whole or in 204
part; 205
(10) Report to a consumer cre dit 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
course of the subject civil action or claim or any set tlement 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; or 215
(13) Knowingly enter into a litigation financing c ontract 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 fees and charges owed under the 219
existing contract, unless the consumer consents to a 220
contemporaneous financing arrangement in writing. 221
Section 6. Section 501.1005, Florida Statutes, is created 222
to read: 223
501.1005 Required disclosures. — 224
(1) A litigation financing contract must contain all of 225
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the following disclosures on the front page of the contr act in 226
at 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 does not 230
have the right to, and may not make any decisions or attempt to, 231
influence the consum er or his or her attorney about the conduct 232
of the civil action or claim that is the subject of the contract 233
and that the right to make such decisions remains solely with 234
the consumer. 235
(c) The total funded amount provided to the consumer. 236
(d) An itemized list of all fees and charges payable by 237
the consumer. 238
(e) The interest rate. 239
(f) The total amount due from the consumer in 6 -month 240
intervals for 3 years, including all interest, fees, and 241
charges. 242
(g) A statement that the consumer will owe no fees or 243
charges other than those described in the disclosures. 244
(h) The cumulative amount due from the consumer for all 245
litigation financing contracts if the consumer seeks multiple 246
contracts and makes repayment any time after execution of a 247
contract. 248
(i) Notice that if the consumer recovers nothing from the 249
subject civil action or claim, he or she will owe the litigation 250
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financier nothing. 251
(j) Notice that if the net proceeds of the subject civil 252
action or claim are insufficient to fully repay the litigati on 253
financier, the litigation financier will accept a reduced sum as 254
full payment of the funded amount and all fees and charges owed, 255
which sum may not exceed the net proceeds less proceeds 256
specifically awarded for future medical expenses. 257
(2) A litigation financing contract must also contain the 258
following disclosure on the front page of the contract in at 259
least 18-point uppercase and boldfaced type: 260
261
CONSUMER'S RIGHT TO CANCELLATION: YOU MAY CANCEL THIS CONTRACT 262
WITHOUT PENALTY, INTEREST, FEES, CHARGES, O R FURTHER OBLIGATION 263
WITHIN 5 BUSINESS DAYS AFTER THE DATE OF CONTRACT EXECUTION OR 264
RECEIPT OF FUNDS FROM [INSERT NAME OF THE LITIGATION FINANCIER] , 265
WHICHEVER IS LATER, BY GIVING WRITTEN NOTICE OF THE CANCELLATION 266
AND BY RETURNING THE FUNDS TO [INSERT NAME OF THE LITIGATION 267
FINANCIER]. FOR PURPOSES OF THE DEADLINE, THE POSTMARK DATE ON 268
FUNDS RETURNED BY REGULAR U.S. MAIL, OR THE DATE OF THE RETURN 269
RECEIPT REQUESTED IF MAILED BY CERTIFIED MAIL, WILL BE 270
CONSIDERED THE DATE OF RETURN OF THE FUNDS. 271
272
(3) A litigation financing contract must contain the 273
following disclosure immediately above the consumer's signature 274
line in 18-point uppercase and boldfaced type: 275
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
276
DO NOT SIGN THIS CONTRACT BEFORE READING IT COMPLETELY OR IF THE 277
CONTRACT CONTAINS ANY INCOMPLETE OR BLANK SECTIONS. BEFORE YOU 278
SIGN THIS CONTRACT, YOU SHOULD CONSULT AN ATTORNEY. YOU MAY ALSO 279
WANT TO CONSULT A TAX ADVISOR, A FINANCIAL PROFESSIONAL, OR AN 280
ACCOUNTANT. 281
Section 7. Section 501.1006, Florida Statutes, is created 282
to read: 283
501.1006 Contingent right to proceeds assignable; priority 284
of lien or right to proceeds. — 285
(1) A consumer may assign his or her contingent right to 286
receive an amount of the potential proceeds of a civil action or 287
claim. 288
(2) A litigation financier's lien on the potenti al 289
proceeds of a civil action or claim has priority over liens that 290
attach to such proceeds subsequent to the attachment of the 291
litigation financier's lien, except for: 292
(a) Attorney, insurance carrier, or healthcare 293
practitioner liens or liens based upon subrogation interests or 294
reimbursement rights related to the subject civil action or 295
claim; and 296
(b) Child support, Medicare, tax, or any other statutory 297
or governmental lien. 298
Section 8. Section 501.1007, Florida Statutes, is created 299
to read: 300
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501.1007 Interest, fees, and charges. — 301
(1) A litigation financier may not directly or indirectly 302
charge, contract for, or receive an interest rate of greater 303
than 10 percent of the funded amount per annum. In determining 304
compliance with the statutory maximum interest rate, the 305
computations used must be simple interest and not add -on 306
interest or any other computations. 307
(2) The maximum interest rate that may be contracted for 308
and received by a litigation financier is 12 times the maximum 309
monthly rate, and the maximum monthly rate must be computed on 310
the basis of one-twelfth of the annual rate for each full month. 311
The maximum daily rate must be computed on the basis of the 312
maximum monthly rate divided by the number of days in the month. 313
(3) Interest may only a ccrue until a court enters a final 314
order or a settlement agreement is executed in the civil action 315
or claim that is the subject of the litigation financing 316
contract, whichever is earlier, but interest may not accrue for 317
a period exceeding three years after the date the consumer 318
receives the funds from the litigation financier. The total 319
interest assessed must be calculated based on the actual number 320
of days for which interest accrued. 321
(4) A litigation financier may not directly or indirectly 322
charge, contract for, or receive any fees or charges the 323
combined total of which exceeds $500 with regard to a single 324
civil action or claim, regardless of the number of litigation 325
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financing contracts the consumer enters into with the litigation 326
financier with respect t o the civil action or claim. 327
(5) A litigation financier may not directly or indirectly 328
charge, contract for, or receive any interest, fees, or charges 329
for rescission or cancellation of a litigation financing 330
contract under s. 501.1003(1). 331
Section 9. Section 501.1008, Florida Statutes, is created 332
to read: 333
501.1008 Litigation financing contracts; discovery. —Except 334
as otherwise ordered by the court, a party to any civil action 335
or claim must, without awaiting a discovery request, provide to 336
the other parties any contract under which a litigation 337
financier has a contingent right to receive compensation sourced 338
from potential proceeds of the civil action or claim. 339
Section 10. Section 501.1009, Florida Statutes, is created 340
to read: 341
501.1009 Effect of communication on privilege. —342
Communication between a consumer's attorney and a litigation 343
financier regarding a litigation financing contract does not 344
limit, waive, or abrogate the scope or nature of any statutory 345
or common-law privilege, including the work -product doctrine and 346
the attorney-client privilege. 347
Section 11. Section 501.1011, Florida Statutes, is created 348
to read: 349
501.1011 Violation; enforcement. — 350
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(1) A violation of this part is an unfair and deceptive 351
trade practice actionable under part II of this chapter. 352
(2) This section does not limit the: 353
(a) Enforcing authority's exercise of powers or 354
performance of duties which the enforcing authority is otherwise 355
legally authorized or required to exercise or perform; or 356
(b) Rights and remedie s available to the state or a person 357
under any other law. 358
Section 12. This act shall take effect July 1, 2022. 359