House File 210 - Introduced HOUSE FILE 210 BY GUSTOFF (COMPANION TO SF 54 BY ROWLEY) A BILL FOR An Act regulating litigation financing contracts, and including 1 effective date and applicability provisions. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2128YH (2) 91 cm/jh
H.F. 210 Section 1. NEW SECTION . 537C.1 Title. 1 This chapter shall be known as the Litigation Financing 2 Transparency and Consumer Protection Act . 3 Sec. 2. NEW SECTION . 537C.2 Definitions. 4 As used in this chapter, unless otherwise required by the 5 context: 6 1. Consumer means any individual who resides, is present, 7 or is domiciled in this state or who is or may become a 8 plaintiff, claimant, or complainant in a civil action or an 9 administrative proceeding or in pursuit of any claim or cause 10 of action in this state. 11 2. Entity means any domestic or foreign corporation, 12 partnership, limited partnership, limited liability company, 13 trust, fund, plan, or any other business, enterprise, 14 association, or organization of any kind or nature. 15 3. Legal representative means any attorney, group 16 of attorneys, or law firm duly licensed and authorized to 17 practice law and to represent a consumer in a civil action, 18 administrative proceeding, or claim to recover damages in this 19 state. 20 4. Litigation financer means any person or group of 21 persons engaged in, formed, created, or established for the 22 purpose of engaging in the business of litigation financing or 23 any other business or economic activity in which a person or 24 group of persons receive consideration of any kind in exchange 25 for providing litigation financing. 26 5. Litigation financing means the financing, funding, 27 advancing, or loaning of money to pay fees, costs, expenses, or 28 any other sums arising from or in any manner related to a civil 29 action, administrative proceeding, claim, or cause of action, 30 if the financing, funding, advancing, or loaning of money is 31 provided by any person other than a person who is any of the 32 following: 33 a. A party to the civil action, administrative proceeding, 34 claim, or cause of action. 35 -1- LSB 2128YH (2) 91 cm/jh 1/ 14
H.F. 210 b. A legal representative engaged, directly or indirectly 1 through another legal representative, to represent a party in 2 a civil action, administrative proceeding, claim, or cause of 3 action. 4 c. An entity or insurer with a preexisting contractual 5 obligation to indemnify or defend a party in a civil action, 6 administrative proceeding, claim, or cause of action. 7 6. a. Litigation financing contract means a written 8 contract in which a person agrees to provide litigation 9 financing to any person in conjunction with a civil action or 10 an administrative proceeding or in pursuit of any claim or 11 cause of action in consideration for any of the following: 12 (1) The payment of interest, fees, or other consideration to 13 the person providing the litigation financing. 14 (2) Granting or assigning to the person providing the 15 litigation financing a right to receive payment from the 16 value of any proceeds or other consideration realized from 17 any judgment, award, settlement, verdict, or other form of 18 monetary relief any consumer, legal representative, or other 19 person may receive or recover in relation to the civil action, 20 administrative proceeding, claim, or cause of action. 21 b. Litigation financing contract does not include any 22 agreement, contract, or engagement of a legal representative 23 to render legal services to a consumer on a contingency fee 24 basis, including the advancement of legal costs by the legal 25 representative, in which the services or costs are provided 26 to or on behalf of a consumer by the legal representative 27 representing the consumer in the civil action, administrative 28 proceeding, claim, or cause of action. 29 7. Person means an individual or an entity. 30 8. Regulated lender means any of the following: 31 a. A bank, building and loan association, savings and loan 32 association, trust company, credit union, credit association, 33 consumer loan licensee, deferred deposit loan licensee, 34 residential mortgage lender licensee, development corporation, 35 -2- LSB 2128YH (2) 91 cm/jh 2/ 14
H.F. 210 bank holding company, or mutual or stock insurance company 1 organized pursuant to state or federal statutory authority and 2 subject to supervision, control, or regulation by any of the 3 following: 4 (1) An agency of the state of Iowa. 5 (2) An agency of the federal government. 6 b. A subsidiary of an entity described in paragraph a . 7 c. An Iowa state agency or a federal agency that is 8 authorized to lend money. 9 d. A corporation or other entity established by congress or 10 the state of Iowa that is owned, in whole or in part, by the 11 United States or the state of Iowa and that is authorized to 12 lend money. 13 Sec. 3. NEW SECTION . 537C.3 Registration. 14 1. A person shall not engage in litigation financing in this 15 state unless the person is registered with the secretary of 16 state as a litigation financer pursuant to this chapter. 17 2. If the person registering as a litigation financer is an 18 entity: 19 a. The entity must be active and in good standing as 20 reflected in the office of the secretary of state. 21 b. The entitys articles of incorporation, charter, articles 22 of organization, certificate of limited partnership, or other 23 organizational or governing document must contain a statement 24 that the entity has the power to engage in the business of 25 litigation financing and is designated as a litigation financer 26 pursuant to this chapter. 27 3. To register as a litigation financer, a person shall file 28 a registration statement with the secretary of state setting 29 forth all of the following information: 30 a. The legal name of the litigation financer. 31 b. The physical street address and mailing address of the 32 litigation financer. 33 c. A telephone number or electronic mail address through 34 which the litigation financer may be contacted. 35 -3- LSB 2128YH (2) 91 cm/jh 3/ 14
H.F. 210 d. The physical street address and mailing address of the 1 licensed financers registered office and the name of the 2 registered agent at the registered office who is authorized to 3 accept service of process on behalf of the licensed financer. 4 e. Any other information the secretary of state considers 5 necessary. 6 4. If the person seeking to register as a litigation 7 financer is an entity, the following information must be set 8 forth in the registration statement with respect to each person 9 that, directly or indirectly, owns, controls, holds with the 10 power to vote, or holds proxies representing five percent or 11 more of the voting securities of the litigation financer: 12 a. The legal name, physical street address, and mailing 13 address of each person. 14 b. If the person is an individual, all of the following: 15 (1) The individuals occupation. 16 (2) Any offices and positions held with the litigation 17 financer during the past five years. 18 (3) Any conviction of a crime other than misdemeanor traffic 19 violations during the past ten years. 20 c. If the person is an entity, all of the following: 21 (1) The nature of the entitys business operations, if 22 any, during the past five years or a description of the 23 business intended to be done by the entity and the entitys 24 subsidiaries, if any. 25 (2) A list of all individuals who are or who have been 26 selected to become directors or officers of the entity and 27 each subsidiary of the entity. The list must include for each 28 individual the information required by paragraph b . 29 5. A litigation financer subject to registration under this 30 chapter shall file an amended registration within thirty days 31 whenever the information contained in the most recently filed 32 registration changes or becomes inaccurate or incomplete in any 33 respect. 34 6. The secretary of state is authorized to prescribe the 35 -4- LSB 2128YH (2) 91 cm/jh 4/ 14
H.F. 210 forms and the filing fees the secretary of state considers 1 necessary for the purposes of this chapter. 2 7. All documents and information filed with the secretary of 3 state pursuant to this section are public records. 4 8. The secretary of states duty to file documents under 5 this section is ministerial. The secretary of states filing 6 or refusing to file a document does not create a presumption 7 of any of the following: 8 a. That the document does or does not conform to the 9 requirements of this chapter. 10 b. That the information contained in the document is correct 11 or incorrect. 12 Sec. 4. NEW SECTION . 537C.4 Litigation financing 13 protections. 14 1. A litigation financer shall not do any of the following: 15 a. Pay or offer commissions, referral fees, rebates, or 16 other forms of consideration to any person in exchange for 17 referring a consumer to a litigation financer. 18 b. Accept any commissions, referral fees, rebates, or other 19 forms of consideration from any person providing any goods or 20 rendering any services to the consumer. 21 c. Charge a rate of interest that exceeds the rate of 22 interest allowed under chapter 535. 23 d. Receive or recover any payment that exceeds twenty-five 24 percent of the amount of any judgment, award, settlement, 25 verdict, or other form of monetary relief obtained in the civil 26 action, administrative proceeding, claim, or cause of action 27 that is the subject of the litigation contract. 28 e. Advertise false or misleading information regarding the 29 litigation financers products or services. 30 f. Refer or require any consumer to hire or engage any 31 person providing any goods or rendering any services to the 32 consumer. 33 g. Fail to promptly deliver a fully completed and signed 34 litigation financing contract to the consumer and the 35 -5- LSB 2128YH (2) 91 cm/jh 5/ 14
H.F. 210 consumers legal representative. 1 h. Attempt to secure a remedy or obtain a waiver of any 2 remedy, including but not limited to compensatory, statutory, 3 or punitive damages, that the consumer may or may not be 4 entitled to pursue or recover otherwise. 5 i. Offer or provide legal advice to the consumer. 6 j. Assign, including securitizing, a litigation financing 7 contract in whole or in part. 8 k. Report a consumer to a credit reporting agency if 9 insufficient funds remain to repay the litigation financer 10 in full from the proceeds received from any judgment, award, 11 settlement, verdict, or other form of monetary relief obtained 12 in the civil action, administrative proceeding, claim, or cause 13 of action that is the subject of the litigation financing 14 contract. 15 l. Demand, request, receive, or exercise any right to 16 influence, affect, or otherwise make any decision in the 17 handling, conduct, administration, litigation, settlement, or 18 resolution of any civil action, administrative proceeding, 19 claim, or cause of action in which the litigation financer has 20 provided litigation financing. All rights remain solely with 21 the consumer and the consumers legal representative. 22 2. A person who provides any goods or renders any services 23 to the consumer shall not have a financial interest in 24 litigation financing and shall not receive any commissions, 25 referral fees, rebates, or other forms of consideration from 26 any litigation financer or the litigation financers employees, 27 owners, or affiliates. 28 Sec. 5. NEW SECTION . 537C.5 Litigation financing contract 29 disclosures. 30 1. The terms and conditions of a litigation financing 31 contract must be set forth in a fully completed written 32 contract with no terms or conditions omitted. The litigation 33 financing contract must contain all terms and conditions at 34 the time it is signed by any party to the litigation financing 35 -6- LSB 2128YH (2) 91 cm/jh 6/ 14
H.F. 210 contract. 1 2. On execution of a litigation financing contract, a 2 litigation financer shall not amend the terms or conditions of 3 the litigation financing contract without full disclosure to 4 and the prior written consent of all parties to the litigation 5 financing contract. 6 3. A litigation financing contract must set forth the name, 7 physical street address, and mailing address of the litigation 8 financer on the first page of the litigation financing 9 contract. 10 4. A litigation financing contract must contain the 11 following disclosures that constitute material terms and 12 conditions of the litigation financing contract and must be 13 typed in at least fourteen point bold font and be placed 14 clearly and conspicuously immediately above the consumers 15 signature line in the litigation financing contract: 16 IMPORTANT DISCLOSURES PLEASE READ CAREFULLY 17 Right to Cancellation: You may cancel this litigation 18 financing contract without penalty or further obligation within 19 five business days from the date you sign this contract or 20 the date you receive financing from the litigation financer, 21 whichever date is later. You may cancel by sending a notice 22 of cancellation to the litigation financer and returning to 23 the litigation financer any funds received from the litigation 24 financer at the litigation financers address set forth on the 25 first page of this contract. 26 The maximum amount the litigation financer may receive or 27 recover from any contingent payment shall not exceed twenty 28 five percent of the amount of any judgment, award, settlement, 29 verdict, or other form of monetary relief obtained in the civil 30 action, administrative proceeding, claim, or cause of action 31 that is the subject of this litigation contract. 32 The litigation financer agrees that it has no right to, 33 and will not demand, request, receive, or exercise any right 34 to, influence, affect, or otherwise make any decision in the 35 -7- LSB 2128YH (2) 91 cm/jh 7/ 14
H.F. 210 handling, conduct, administration, litigation, settlement, or 1 resolution of your civil action, administrative proceeding, 2 claim, or cause of action. All of these rights remain solely 3 with you and your legal representative. 4 If there is no recovery of any money from your civil action, 5 administrative proceeding, claim, or cause of action, or if 6 there is not enough money to satisfy in full the portion 7 assigned to the litigation financer, you will not owe anything 8 in excess of your recovery. 9 You are entitled to a fully completed contract with no terms 10 or conditions omitted prior to signing. Before signing this 11 contract, you should read the contract completely and consult 12 an attorney. 13 5. If the consumer is represented by a legal representative 14 in the civil action, administrative proceeding, claim, or cause 15 of action that is the subject of the litigation financing 16 contract, the legal representative shall acknowledge in 17 the contract that the legal representative and the legal 18 representatives employer and employees have not received or 19 paid a referral fee or any other consideration from or to the 20 litigation financer and have no obligation to do so in the 21 future. 22 6. If the consumers legal representative is a party to a 23 litigation financing contract related to the consumers civil 24 action, administrative proceeding, claim, or cause of action 25 that is the subject of the litigation financing contract, the 26 legal representative shall disclose and deliver the litigation 27 financing contract to the consumer. Following this disclosure 28 and delivery, the consumer shall sign an acknowledgment that 29 the consumer has read and understands the terms and conditions 30 of the litigation financing contract and the consumer must be 31 provided with a copy of the acknowledgment. 32 Sec. 6. NEW SECTION . 537C.6 Disclosure and discovery of 33 litigation financing contracts. 34 1. Except as otherwise stipulated or ordered by the court, a 35 -8- LSB 2128YH (2) 91 cm/jh 8/ 14
H.F. 210 consumer or the consumers legal representative shall, without 1 awaiting a discovery request, disclose and deliver to all of 2 the following persons the litigation financing contract: 3 a. Each party to the civil action, administrative 4 proceeding, claim, or cause of action, or to each partys legal 5 representative. 6 b. The court, agency, or tribunal in which the civil action, 7 administrative proceeding, claim, or cause of action may be 8 pending. 9 c. Any known person, including an insurer, with a 10 preexisting contractual obligation to indemnify or defend a 11 party to the civil action, administrative proceeding, claim, 12 or cause of action. 13 2. The disclosure obligation under subsection 1 exists 14 regardless of whether a civil action or an administrative 15 proceeding has commenced. 16 3. The disclosure obligation under subsection 1 is a 17 continuing obligation, and within thirty days of entering 18 into a litigation financing contract or amending an existing 19 litigation financing contract, the consumer or the consumers 20 legal representative shall disclose and deliver any new or 21 amended litigation financing contracts. 22 4. The existence of the litigation financing contract 23 and all participants or parties to a litigation financing 24 contract are permissible subjects of discovery in any civil 25 action, administrative proceeding, claim, or cause of action 26 to which litigation financing is provided under the litigation 27 financing contract, regardless of whether a civil action or an 28 administrative proceeding has commenced. 29 Sec. 7. NEW SECTION . 537C.7 Exemptions. 30 This chapter does not apply to any of the following: 31 1. A nonprofit organization that provides litigation 32 financing, directly or indirectly, for the benefit of the 33 nonprofit organization or one or more of the nonprofit 34 organizations members without receiving, in consideration for 35 -9- LSB 2128YH (2) 91 cm/jh 9/ 14
H.F. 210 the litigation financing, any of the following: 1 a. The payment of interest, fees, or other consideration. 2 b. Except for in-house counsel of the nonprofit 3 organization, any right to recovery or payment from the amount 4 of any judgment, award, settlement, verdict, or other form of 5 monetary relief obtained in the civil action, administrative 6 proceeding, claim, or cause of action. 7 2. Any litigation financing provided by an entity engaged in 8 commerce or business activity, but only if the entity does not 9 do any of the following: 10 a. Charge or collect any interest, fees, or other 11 consideration. 12 b. Retain or receive any financial interest in the outcome 13 of the civil action, administrative proceeding, claim, or cause 14 of action. 15 c. Receive any right to recovery or payment from the amount 16 of any judgment, award, settlement, verdict, or other form of 17 monetary relief obtained in the civil action, administrative 18 proceeding, claim, or cause of action. 19 3. A regulated lender that does not receive, in 20 consideration for loaning money to any person, a right to 21 receive payment from the value of any proceeds or other 22 consideration realized from any judgment award, settlement, 23 verdict, or other form of monetary relief any person 24 may receive or recover in relation to any civil action, 25 administrative proceeding, claim, or cause of action. 26 Sec. 8. NEW SECTION . 537C.8 Class actions. 27 This chapter shall apply to any civil action filed or 28 certified as a class action in which litigation financing 29 is provided. A litigation financer owes a fiduciary 30 duty to all class members or intended beneficiaries of a 31 certified class and shall act in a manner consistent with the 32 litigation financers fiduciary duty throughout the civil 33 action. In addition to the disclosure requirements, the 34 legal representative of the putative class shall disclose 35 -10- LSB 2128YH (2) 91 cm/jh 10/ 14
H.F. 210 to all parties, putative class members, and the court any 1 legal, financial, or other relationship between the legal 2 representative and the litigation financer. A class member is 3 entitled to receive from the class counsel a true and correct 4 copy of the litigation financing contract on request. 5 Sec. 9. NEW SECTION . 537C.9 Joint and several liability for 6 costs. 7 A litigation financer is jointly and severally liable for 8 any award or order imposing or assessing costs or monetary 9 sanctions against a consumer arising from or relating to any 10 civil action, administrative proceeding, claim, or cause 11 of action for which the litigation financer is providing 12 litigation financing. 13 Sec. 10. NEW SECTION . 537C.10 Regulatory oversight 14 rulemaking. 15 The secretary of state may adopt rules and other policies in 16 overseeing the practice of litigation financing consistent with 17 this chapter. 18 Sec. 11. NEW SECTION . 537C.11 Violation unenforceable 19 contract. 20 1. Any violation of this chapter by the litigation financer 21 renders the litigation financing contract unenforceable by 22 the litigation financer or any successor-in-interest to the 23 litigation financing contract. 24 2. If a litigation financer charges a rate of interest that 25 exceeds the rate of interest allowed under chapter 535, the 26 litigation financer shall be subject to a penalty for usury and 27 an action to recover excessive interest as authorized under 28 chapter 535. 29 Sec. 12. EFFECTIVE DATE. This Act takes effect January 1, 30 2026. 31 Sec. 13. APPLICABILITY. This Act applies to any civil 32 action or administrative proceeding involving a litigation 33 financer pending on or commenced on or after January 1, 2026. 34 EXPLANATION 35 -11- LSB 2128YH (2) 91 cm/jh 11/ 14
H.F. 210 The inclusion of this explanation does not constitute agreement with 1 the explanations substance by the members of the general assembly. 2 This bill creates the litigation financing transparency and 3 consumer protection Act. 4 The bill requires the registration of litigation financers 5 with the secretary of state. The bill provides registration 6 requirements and procedures for the litigation financer. The 7 bill provides that all documents and information filed with the 8 secretary of state pursuant to the registration of the ligation 9 financer are public records. 10 The bill provides limitations on how a litigation financer 11 may conduct business. A litigation financer may not (1) pay or 12 offer any form of consideration to any person in exchange for 13 referring a consumer to a litigation financer, (2) accept any 14 type of consideration from any person providing any goods or 15 rendering any services to the consumer, (3) charge a rate of 16 interest that exceeds the rate of interest allowed under Code 17 chapter 535 (money and interest), (4) receive or recover any 18 payment that exceeds 25 percent of the reward obtained in the 19 action subject to the litigation contract, (5) advertise false 20 or misleading information regarding the litigation financer 21 products or services, (6) refer or require any consumer to 22 hire or engage any person providing any goods or rendering 23 any services to the consumer, (7) fail to promptly deliver 24 a fully completed and signed litigation financing contract 25 to the consumer and the consumers legal representative, (8) 26 attempt to secure a remedy or obtain a waiver of any remedy, 27 including but not limited to compensatory, statutory, or 28 punitive damages, (9) offer or provide legal advice to the 29 consumer, (10) assign a litigation financing contract in whole 30 or in part, (11) report a consumer to a credit reporting 31 agency, or (12) demand, request, receive, or exercise any right 32 to influence, affect, or otherwise make any decision in the 33 handling, conduct, administration, litigation, settlement, or 34 resolution of any civil action, administrative proceeding, 35 -12- LSB 2128YH (2) 91 cm/jh 12/ 14
H.F. 210 claim, or cause of action in which the litigation financer has 1 provided litigation financing. The bill also provides that a 2 person who provides any goods or renders any services to the 3 consumer shall not have a financial interest in litigation 4 financing. 5 The bill provides the terms, conditions, and disclosures 6 required in a litigation financer contract. Upon execution 7 of the contract, the litigation financer may not amend any 8 terms or conditions of the contract without full disclosure and 9 written consent of all parties. 10 The bill provides that a consumer or legal representative 11 of a consumer, unless otherwise stipulated or ordered by the 12 court, shall disclose and deliver the litigation financing 13 contract to each party of the matter, the court, and any known 14 person with a contractual obligation in the matter. 15 The bill provides exemptions to the new Code chapter, 16 including: (1) a nonprofit organization that provides 17 litigation financing for the benefit of the nonprofit 18 organization or one or more of the nonprofit organizations 19 members; (2) an entity engaged in commerce or business 20 activity, but only if the entity does not: charge or collect 21 any interest, fees, or other consideration; retain or receive 22 any financial interest in the outcome of the civil action, 23 administrative proceeding, claim, or cause of action; and 24 receive any right to recovery or payment from the amount of any 25 judgment, award, settlement, verdict, or other form of monetary 26 relief obtained in the matter; or (3) a regulated lender that 27 does not receive a right to receive payment from the value of 28 any proceeds or other consideration realized from any reward 29 received or recovered in relation to the matter. 30 The bill provides that the new Code chapter applies to class 31 actions. 32 The bill provides that a litigation financer is jointly and 33 severally liable for any award or order imposing or assessing 34 costs or monetary sanctions against a consumer arising from 35 -13- LSB 2128YH (2) 91 cm/jh 13/ 14
H.F. 210 or relating to matters for which the litigation financer is 1 providing litigation financing. 2 The bill authorizes the secretary of state to adopt rules or 3 other policies to enforce the new Code chapter. 4 The bill provides that any violation of the new Code chapter 5 by the litigation financer shall render the contract void and 6 may be subject to penalties. 7 The bill takes effect on January 1, 2026, and applies to 8 any civil action or administrative proceeding involving a 9 litigation financer pending on or commenced after January 1, 10 2026. 11 -14- LSB 2128YH (2) 91 cm/jh 14/ 14