The legislative instrument and the following digest, which constitutes no part of
the legislative instrument, were prepared by Michelle Ducharme.
CONFERENCE COMMI TTEE REPORT DIGEST
Senate Bill No. 299 by Senator Morrish
Keyword and summary of the bill as proposed by the Conference Committee
LOANS. Provides relative to civil justice funding companies. (1/1/15)
Report adopts House amendments to:
1. Make technical changes.
2. Remove provisions that attorney's liens related to a legal claim or Medicare
or other lien take priority over any lien of the civil justice funding company
Digest of the bill as proposed by the Conference Committee
Proposed law provides for the regulation of civil justice funding companies in this state and
defines the following terms:
(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 funded 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, or
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 with the secretary
of state.
Proposed law provides that a civil justice funding company's registration shall be filed on a
form and in the manner prescribed by the secretary of state. Proposed law provides that a registration filed with the secretary of state shall be valid for
two years. Prior to the expiration of the registration, the civil justice funding company shall
submit a registration renewal on a form and in a manner prescribed by the secretary of state.
Proposed law that at the time of filing a registration or registration renewal, the civil justice
funding company shall file with the secretary of state a surety bond issued by a surety
company authorized to do business in La. in the amount of $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 that applies for registration between January 1,
2015, and July 1, 2015, may engage in civil justice funding during this period and shall be
deemed registered.
Proposed law provides that the provisions of proposed law shall not apply to any civil
justice funding contract entered into prior to July 1, 2015.
Proposed law provides that a civil justice funding contract 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 civil
justice funding transactions 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 in the 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 civil justice
funding transaction.
Proposed law prohibits an attorney or law firm retained by a consumer from having 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 AVAI LABLE PROCEEDS FROM YOUR
LEGAL CLAIM. YOU WILL NOT OWE [INSERT NAME OF THE CIVIL
JUSTICE FUNDING COMPANY] ANYTHI NG 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 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 Practices and Consumer
Protection Law.
Proposed law allows the attorney general to seek reasonable costs, expenses, and fees if a
person is found liable in an action brought by the attorney general.
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 January 1, 2015.
(Adds R.S. 9:3580.1-3580.10)