HCSHB2771--LITIGATIONFUNDING
SPONSOR: Christofanelli
COMMITTEEACTION:Voted"DoPasswithHCS"bytheSpecial
CommitteeonLitigationReformbyavoteof4to3.
ThefollowingisasummaryoftheHouseCommitteeSubstituteforHB
2771.
Thisbillcreatesthe"ConsumerLegalFundingModelAct"and
containsseveraldefinitionaltermsincluding"Consumerlegal
fundingcontract"inwhichaconsumerlegalfundingcompany
purchasesandaconsumerassignstothecompanyacontingentright
toreceivemoneysfromthesettlement,judgment,awardorverdict
fromaconsumer'slegalclaim.Thebilldetailstherequirements
tobeincludedinthecontract,whichisnotconsideredtobea
loan.Thecompanymustprovidetheconsumer'sattorneywith
writtennoticeofthecontractprovidedtotheconsumerwithin3
businessdaysofthefundingdate.Thecontractisvalidfora
periodof48months.
Thebilldetailsactionsthatcannotbetakenbythecompanysuch
aspayingorofferingtopayoracceptingcommissions,referral
fees,orotherformsofconsiderationfromanattorney,medical
provider,etc.orintentionallyadvertisingfalseormisleading
information;orreceivinganyrighttoormakedecisionsrelating
totheconductoftheunderlyinglegalclaimorresolutionthereof.
Thebillprovidesfordisclosurestobeincludedinthecontract
whichareregardedasmaterialtermsofthecontract. Thebill
specifiesthewrittenlanguagetobecontainedinthebodyofthe
contract. Theconsumerlegalfundingcontractshallbevoidedifa
courtwithjurisdictionfindsthatacompanyintentionallyviolated
theprovisionsofthissectionofthebill.
ThebilldoesnotrestricttheAttorneyGeneral'spowersor
performanceofduties.Thecompanymustberegisteredaccordingto
thestandardsdevelopedbytheDivisionofFinancewithinthe
DepartmentofCommerceandInsuranceandthebilldetails
provisionsrelatingtodenialofapplicationsforregistration
(Sections436.550to436.570,RSMo).
Thisbillrequiresallcivillitigationfundingtomeetcertain
specifiedrequirements. ThisActappliestoanyclassactionsbut
doesnotapplytolitigationfinancingprovidedtocommercial
enterprises. A"litigationfinancingtransaction"isdefinedas
financingprovidedtoaconsumerinreturnfortheconsumer
assigningacontingentrighttoreceivemoneysfromthesettlement, judgment,award,orverdictfromaconsumer'slegalclaim.
AlitigationfinanciermustberegisteredwiththeSecretaryof
State'sOffice(SOS)andmeettherequirementsincludedinthe
bill,includingthepostingofasuretybondofnotlessthan
$50,000. Inaddition,thelitigationfinanciershallfileannual
reportswiththeSOSasstatedinthebill.TheSOSshallrelease
thereportandsummarytothepublicafterredactingpersonally
identifyinginformationofanyconsumer.
Thebilldetailsactionsthatcannotbetakenbythelitigation
financierwhicharesimilartotheactionsthatcannotbetakenby
theconsumerlegalfundingcompany. Thewrittencontractmustbe
completelyfilledin.Thebillprovidesfordisclosurestobe
includedinthecontractwhichareregardedasmaterialtermsof
thecontract. Inaddition,theexistenceoflitigationfinancing
arrangementsaresubjecttodiscoveryinpersonalinjury
litigation.
ThepracticeoflitigationfinancingisregulatedbytheDivision
ofFinanceandanyviolationoftheprovisionsoftheActmakethe
contractunenforceablebythepartiesoranysuccessor-in-interest.
Thisbillalsomakesitunlawfulforanypersonorentityto
operateasaconsumerlegalfundingproviderinthisstateexcept
asauthorizedbytheConsumerLegalFundingModelActonceitis
enacted. However,anycompanythathasalicenseingoodstanding
underthecurrentsystemshallbeentitledtomakeconsumerlegal
fundings,aslongasthatcompanyfilesanapplicationfora
consumerlegalfundinglicense,for60daysoruntiltheDivision
approvesordeniestheapplicationforafundinglicense,whichever
issooner(Sections436.571to436.580).
Thefollowingisasummaryofthepublictestimonyfromthe
committeehearing. Thetestimonywasbasedontheintroduced
versionofthebill.
PROPONENTS: Supporterssaythatthisbillwillprotectconsumers
frombeingtakenadvantageofbythecurrentsystem.Itwillalso
makesuretherightpeopleareheldaccountablewhentheyarebad
actors.Attorneysarenotsupposedtosharefeeswithnon-
attorneysandanon-partyshouldnothaveaninterestinthe
outcomeoflitigation. Thebillputsnecessaryparametersonthe
industry.
TestifyingforthebillwereRepresentative Christofanelli;
MissouriInsuranceCoalition;MissouriChamberofCommerce&
Industry;EricSchuller,AllianceforResponsibleConsumerLegal
Funding;AmericanLegalFinanceAssociation;AmericanProperty CasualtyInsuranceAssociation;MissouriCivilJusticeReform;and
StateFarmInsuranceCompanies.
OPPONENTS: Thosewhoopposethebillsubmittedwrittentestimony.
TestifyingagainstthebillwasArnieDienoff.
Writtentestimonyhasbeensubmittedforthisbill.Thefull
writtentestimonycanbefoundunderTestimonyonthebillpageon
theHousewebsite.