The original instrument and the following digest, which constitutes no part of the
legislative instrument, were prepared by Michelle Ducharme.
DIGEST
Morrish (SB 299)
Proposed law provides for the regulation of civil justice funding companies in this state.
Proposed law defines the following terms as follows:
(1)"Advertise" means publishing or disseminating any written, electronic, or printed
communication or any communication by means of recorded telephone messages or
transmitted on radio, television, the Internet, or similar communications media, including
film strips, motion pictures and videos, published, disseminated, circulated, or placed
before the public, directly or indirectly, for the purpose of inducing a consumer to enter
into a civil justice funding.
(2)"Charges" means the amount of money to be paid to the civil justice funding company by
or on behalf of the consumer, above the amount provided by or on behalf of the company
to a consumer. Charges include all administrative, origination, underwriting, or other
fees no matter how denominated.
(3)"Civil justice funding company" means a person or entity that enters into a civil justice
funding with a consumer. This term shall not include any of the following:
(a)An immediate family member of the consumer.
(b)A bank, lender, financing entity, or other special purpose entity that provides
financing to a civil justice funding company or to which a civil justice funding
company grants a security interest or transfers any rights or interest in a civil
justice funding.
(c)An attorney or accountant who provides services to a consumer.
(4)"Civil justice funding transaction" means a non-recourse transaction in which a civil
justice funding company purchases and a consumer assigns to the company a contingent
right to receive an amount of the potential proceeds of a settlement, judgment, award, or
verdict obtained in the consumer's legal claim.
(5)"Consumer" means a natural person who has a pending legal claim and who either:
(a) Resides or is domiciled in Louisiana.
(b) Has a legal claim in Louisiana. (6)"Funded amount" means the amount of monies provided to, or on behalf of, the consumer
in the civil justice funding, excluding charges.
(7)"Funding date" means the date on which the funded amount is transferred to the consumer
by the civil justice funding company in any of the following manners:
(a)By personal delivery or via wire.
(b)By Automated Clearing House or other electronic means.
(c)By certified or registered mail.
(8)"Immediate family member" means a spouse, child, sibling, parent, grandparent,
grandchild, including stepparent, stepchild, stepsibling, and adoptive relationships.
(9)"Legal claim" means a bona fide civil claim or cause of action.
(10)"Resolution date" means the date the amount funded to the consumer, plus the agreed
upon charges, are delivered to the civil justice funding company.
Proposed law provides for the registration of civil justice funding companies.
Proposed law prohibits a civil justice funding company from engaging in the business of civil
justice funding unless the civil justice funding company is registered in accordance with the
certain provisions of law.
Proposed law provides that a civil justice funding company's application shall be filed on a form
and in the manner prescribed by the secretary of state and shall contain the information the
secretary of state requires to make an evaluation of the character and fitness of the civil justice
funding company that is applying for registration in this state.
Proposed law provides that a certificate of registration shall not be issued unless the secretary of
state, upon investigation, finds that the character and fitness of the civil justice funding company,
and of the officers and directors thereof, are such as to warrant belief that the business will be
operated honestly and fairly in accordance with certain provisions of law.
Proposed law provides that a registration issued by the secretary of state shall be valid for two
years and that 30 days prior to the expiration of the registration, the civil justice funding company
shall submit a renewal application on a form and in a manner prescribed by the secretary of state.
Proposed law provides that at the time of filing an application, the civil justice funding company
shall file with the secretary of state a bond satisfactory to the secretary of state in an amount not
to exceed $50,000. In lieu of the bond, the civil justice funding company may post an
irrevocable letter of credit. Proposed law provides that the terms of the bond shall run concurrently with the period of time
during which the registration is in effect. The bond shall provide the civil justice funding
company shall faithfully conform to certain provisions of law and to all applicable rules and
regulations.
Proposed law allows a civil justice funding company to request, in writing, a hearing if the
secretary of state has notified the civil justice funding company that its application has been
denied or the secretary of state has not issued a registration to the civil justice funding company
within 60 days of filing of the application for registration.
Proposed law provides that a request for a hearing shall not be made more than 15 days after the
secretary of state has mailed a written notice to the civil justice funding company that its
application has been denied. The written notice shall state the secretary of state's findings
supporting denial of the application for registration.
Proposed law allows a civil justice funding company who applies for registration between
August 1, 2014, and December 31, 2014, to engage in civil justice funding while its application
is waiting for approval from the secretary of state.
Proposed law provides that the provisions of proposed law shall not apply to any civil justice
funding contract entered into prior to August 1, 2014.
Proposed law provides that no civil justice funding company shall use any form of civil justice
funding contract in this state unless it has been filed with the secretary of state in accordance with
the filing procedures prescribed by the secretary of state.
Proposed law provides that a civil justice funding shall meet all of the following requirements:
(1)The contract shall be completely filled in when presented to the consumer for signature.
(2)The contract shall contain, in bold print, a right of rescission, allowing the consumer to
cancel the contract without penalty or further obligation if, within five business days after
the funding date, the consumer does either of the following:
(a)Returns to the civil justice funding company the full amount of the disbursed
funds by delivering the civil justice funding company's uncashed check to the civil
justice funding company's office in person.
(b)Mails, by certified or registered mail, to the address specified in the contract, a
notice of cancellation and the full amount of disbursed funds in the form of the
company's uncashed check or a registered or certified check or money order.
(3)The contract shall contain the initials of the consumer on each page of the contract.
Proposed law provides that the contract shall contain a written acknowledgment by the consumer's attorney retained in the legal claim that states all of the following:
(1)To the best of the attorney's knowledge, all the costs and charges relating to the consumer
lawsuit loans have been disclosed to the consumer.
(2)The attorney is being paid on a contingency basis pursuant to a written fee agreement.
(3)All proceeds of the legal claim shall be disbursed via either the trust account of the
attorney or a settlement fund established to receive the proceeds of the legal claim on
behalf of the consumer.
(4)The attorney is following the written instructions of the consumer with regard to the civil
justice funding.
(5) The attorney has not received a referral fee or other consideration from the civil justice
funding company in connection with the civil justice funding, nor will the attorney
receive such fee or other consideration in the future.
Proposed law provides that if the acknowledgment provided proposed law is not completed and
signed by the attorney retained by the consumer in the legal claim, the contract shall be null and
void.
Proposed law provides that the civil justice funding contract and attorney acknowledgment shall
not thereafter be deemed null and void solely because legal representation of the consumer
changes after execution of such contract and acknowledgment.
Proposed law provides that no civil justice funding company shall:
(1)Pay or offer to pay commissions, referral fees, or other forms of consideration to any
attorney, law firm, medical provider, chiropractor, or physical therapist, or any of their
employees for referring a consumer to the civil justice funding company.
(2)Accept any commissions, referral fees, rebates, or other forms of consideration from an
attorney, law firm, medical provider, chiropractor, or physical therapist, or any of their
employees.
(3)Intentionally advertise materially false or misleading information regarding its products
or services.
(4)Refer, in furtherance of an initial legal funding, a consumer or potential consumer to a
specific attorney, law firm, medical provider, chiropractor, or physical therapist, or any of
their employees. However, if a consumer needs legal representation, the company may
refer the consumer to a local or state bar association referral service.
(5)Fail to supply promptly a copy of the executed contract to the consumer's attorney. (6)Knowingly provide funding to a consumer who has previously assigned or sold a portion
of the consumer's rights to proceeds from his legal claim without first making payments
to or purchasing a prior unsatisfied civil justice funding company's entire funded amount
and contracted charges, unless a lesser amount is otherwise agreed to in writing by the
civil justice funding companies, except that multiple civil justice funding companies may
agree to contemporaneously provide funding to a consumer provided that the consumer
and the consumer's attorney consent to the arrangement in writing.
(7)Receive any right to or make any decisions with respect to the conduct of the underlying
legal claim or any settlement or resolution of such legal claim. The right to make such
decisions shall remain solely with the consumer and his attorney in the legal claim.
(8)Knowingly pay or offer to pay for court costs, filing fees, or attorney fees either during or
after the resolution of the legal claim using funds from the consumer lawsuit loan
transaction.
Proposed law prohibits an attorney or law firm retained by a consumer shall have a financial
interest in the civil justice funding company offering a civil justice funding transaction to such
consumer. Additionally, any attorney who has referred the consumer to his retained attorney
shall not have a financial interest in the civil justice funding company offering civil justice
funding to such consumer.
Proposed law provides that the contracted amount to be paid to the civil justice funding company
by the consumer shall be a predetermined amount based upon intervals of time from the funding
date through the resolution date. It shall not be based on a percentage of the recovery from the
legal claim.
Proposed law provides that all civil justice funding company contracts shall contain the
disclosures specified and such disclosures shall constitute material terms of the contract. Unless
otherwise specified, the disclosures shall be in bold typed print of not less than 12-point font and
be placed clearly and conspicuously within the contract, as follows:
(1)On the front page under appropriate headings, language specifying each of the following:
(a)The funded amount to be paid to the consumer by the civil justice funding
company.
(b)An itemization of one-time charges.
(c)The total amount to be assigned by the consumer to the civil justice funding
company, including the funded amount and all charges.
(d)A payment schedule to include the funded amount and charges, listing all dates
and the amount due at the end of each one hundred eighty-day period from the
funding date, until the maximum amount due to the civil justice funding company by the consumer to satisfy the amount due pursuant to the contract.
(2)Within the body of the contract, language specifying the following:
"Consumer's Right to Cancellation
You may cancel this contract without penalty or further obligation within five
business days after the funding date if you either:
(a)Return to the civil justice funding company the full amount of the disbursed funds
by delivering the civil justice funding company's uncashed check to the civil
justice funding company's office in person.
(b)Mail, by certified or registered mail, to the civil justice funding company at the
address specified in the contract, a notice of cancellation and include in such
mailing a return of the full amount of disbursed funds in the form of the civil
justice funding company's uncashed check or a registered or certified check or
money order."
(3)The civil justice funding company shall have no role in deciding whether, when, and how
much the legal claim is settled for; however, the consumer and his attorney shall notify
the civil justice funding company of the outcome of the legal claim prior to the resolution
date. The civil justice funding company may seek updated information about the status of
the legal claim, but in no event shall the company interfere with the independent
professional judgment of the attorney in the handling of the legal claim or any settlement
of the claim.
(4)Within the body of the contract, in all capital letters in bold typed print of not less than
12-point font contained within a box, the following: "THE FUNDED AMOUNT AND
AGREED UPON CHARGES SHALL BE PAI D ONLY FROM THE PROCEEDS OF
YOUR LEGAL CLAIM, AND SHALL BE PAID ONLY TO THE EXTENT THAT
THERE ARE AVAILABLE PROCEEDS FROM YOUR LEGAL CLAIM. YOU WILL
NOT OWE [INSERT NAME OF THE CIVIL JUSTICE FUNDING COMPANY]
ANYTHING IF THERE ARE NO PROCEEDS FROM YOUR LEGAL CLAIM,
UNLESS YOU OR YOUR ATTORNEY HAVE VIOLATED ANY MATERIAL TERM
OF THIS CONTRACT OR YOU HAVE COMMITTED FRAUD AGAINST THE CIVIL
JUSTICE FUNDING COMPANY."
(5)Located immediately above the place on the contract where the consumer's signature is
required, conspicuously displayed and in 12-point font the following: "Do not sign this
contract before you read it completely or if it contains any blank spaces. You are entitled
to a completely filled in copy of the contract. Before you sign this contract, you should
obtain the advice of an attorney. Depending on the circumstances, you may want to
consult a tax professional, public or private benefits planning professional, or financial
professional. You acknowledge that your attorney in the legal claim has provided no tax advice, public or private benefit planning advice, or financial advice regarding this
transaction."
Proposed law provides that the contingent right to receive an amount of the potential proceeds of
a legal claim is assignable by a consumer.
Proposed law shall not be construed to cause any civil justice funding transaction to be deemed a
loan or subject to any of the provisions of the Louisiana Consumer Credit Law.
Proposed law provides that only attorney's liens related to the legal claim or Medicare or other
statutory liens related to the legal claim shall take priority over any lien of the civil justice
funding company. All other liens shall take priority by normal operation of law.
Proposed law shall not be deemed to regulate an attorney client relationship or any other matter
regulated by the Louisiana Supreme Court.
Proposed law shall not be deemed to affect an attorney lien or privilege arising under Louisiana
law.
Proposed law provides that any violation of proposed law shall constitute an unfair or deceptive
act or practice for purposes of the Unfair Trade and Consumer Protection Law.
Proposed law provides that if a court of competent jurisdiction determines that a civil justice
funding company has intentionally violated the provisions of proposed law with regard to a
specific civil justice funding transaction, the civil justice funding company shall only be entitled
to recover the funded amount provided to the consumer in such specific civil justice funding and
shall not be entitled to any additional charges.
Proposed law provides that the remedies and rights provided in proposed law are in addition to
and do not preclude any remedy otherwise available under law to a consumer.
Effective August 1, 2014.
(Adds R.S. 9:3580.1-3580.10)