Florida Senate - 2020                                    SB 1828
       
       
        
       By Senator Broxson
       
       
       
       
       
       1-01010C-20                                           20201828__
    1                        A bill to be entitled                      
    2         An act relating to litigation financing consumer
    3         protection; creating the Litigation Financing Consumer
    4         Protection Act; creating s. 559.952, F.S.; defining
    5         terms; creating s. 559.953, F.S.; requiring litigation
    6         financiers to register with the Office of Financial
    7         Regulation; providing registration requirements;
    8         creating s. 559.954, F.S.; providing mandatory
    9         litigation financing contract terms; creating s.
   10         559.955, F.S.; prohibiting litigation financiers from
   11         engaging in specified conduct; creating s. 559.956,
   12         F.S.; providing for mandatory litigation financing
   13         contract disclosures; creating s. 559.957, F.S.;
   14         providing for a contingent right to civil action
   15         proceeds assignability; establishing the priority of
   16         liens against or rights to civil action or claim
   17         proceeds; creating s. 559.958, F.S.; authorizing
   18         litigation financiers to charge interest up to a
   19         specified amount annually; providing for simple
   20         compounding; providing for a maximum annual, monthly,
   21         and daily percentage rate; providing a maximum
   22         interest accrual period; providing that total interest
   23         must be calculated based on the actual number of days
   24         for which interest accrued; capping the fees and
   25         charges that litigation financiers may assess;
   26         prohibiting a litigation financier from assessing
   27         specified fees or charges; creating s. 559.959, F.S.;
   28         requiring litigation financing contract disclosure
   29         under specified circumstances; creating s. 559.961,
   30         F.S.; providing that specified communications between
   31         attorneys and litigation financiers do not limit or
   32         waive statutory or common-law privilege; creating s.
   33         559.962, F.S.; providing that a violation of this part
   34         is a violation of the Florida Deceptive and Unfair
   35         Trade Practices Act; providing that this act does not
   36         limit the powers, duties, and rights of specified
   37         persons created under other law; providing an
   38         effective date.
   39          
   40  Be It Enacted by the Legislature of the State of Florida:
   41  
   42         Section 1. Part XIII of chapter 559, Florida Statutes,
   43  consisting of sections 559.952, 559.953, 559.954, 559.955,
   44  559.956, 559.957, 559.958, 559.959, 559.961, and 559.962, is
   45  created and may be cited as the “Litigation Financing Consumer
   46  Protection Act.”
   47         Section 2. Section 559.952, Florida Statutes, is created to
   48  read:
   49         559.952Definitions.—As used in this part, the term:
   50         (1)“Consumer” means any natural person residing,
   51  physically present, or domiciled in this state.
   52         (2)“Enforcing authority” has the same meaning as in s.
   53  501.203.
   54         (3)“Funded amount” means the funds actually received and
   55  retained by a consumer under a litigation financing contract.
   56         (4)“Health care practitioner” has the same meaning as in
   57  s. 456.001.
   58         (5)“Interest” means the cost of obtaining litigation
   59  financing and includes any profit or advantage of any kind
   60  whatsoever that a litigation financier may charge, contract for,
   61  collect, receive, or in any way obtain as a condition of a
   62  litigation financing contract. Charges and fees specifically
   63  authorized by this part may not be deemed interest.
   64         (6)“Litigation financier” means a person, an entity, or a
   65  partnership engaged in the business of litigation financing.
   66         (7)“Litigation financing” means a nonrecourse transaction
   67  in which a litigation financier provides funds to a consumer in
   68  exchange for an assignment of the consumer’s contingent right to
   69  receive an amount of the potential proceeds of his or her civil
   70  action or claim. The term does not include any of the following:
   71         (a)Legal services provided to a consumer on a contingency
   72  fee basis or advanced legal costs, when such services or costs
   73  are provided by an attorney representing the consumer in
   74  accordance with the Florida Rules of Professional Conduct.
   75         (b)A commercial tort claim as defined in s.
   76  679.1021(1)(m).
   77         (c)A claim under the Workers’ Compensation Law.
   78         (d)Normal business lending or financing arrangements
   79  between an attorney or a law firm and a lending institution to
   80  fund litigation costs.
   81         (e)A consumer finance loan, as defined in s. 516.01.
   82         (8)“Net proceeds” means the portion of the proceeds of a
   83  civil action or claim remaining after satisfaction of all liens
   84  with a higher priority than that of the litigation financier as
   85  specified in s. 559.956(2).
   86         (9)“Office” means the Office of Financial Regulation.
   87         Section 3. Section 559.953, Florida Statutes, is created to
   88  read:
   89         559.953Litigation financier registration; registration
   90  revocation.—
   91         (1)A litigation financier may not engage in litigation
   92  financing in this state before registering as a litigation
   93  financier under this section.
   94         (a)A litigation financier that is a corporation, limited
   95  liability company, or partnership is registered under this
   96  section if it has:
   97         1.Met the bond requirements of subsection (2);
   98         2.A status of active and in good standing as reflected in
   99  the office’s records; and
  100         3.Filed articles of organization or incorporation, a
  101  certificate of limited partnership, or another organizational
  102  document, or, if a foreign entity, an application for a
  103  certificate of authority with the office stating therein that it
  104  is a litigation financier.
  105         (b)A litigation financier that is not a corporation,
  106  limited liability company, or partnership is registered under
  107  this section if it has:
  108         1. Met the bond requirements of subsection (2); and
  109         2. Filed a litigation financier registration application
  110  with the office on a form prescribed by the office which
  111  contains, at a minimum:
  112         a. The applicant’s full legal name and any fictitious name
  113  used by the applicant;
  114         b. The applicant’s physical address, mailing address, and
  115  telephone number;
  116         c. A statement that the applicant is a litigation
  117  financier; and
  118         d. Any other information the office deems necessary.
  119         (2) Each litigation financier must file with the office a
  120  $250,000 surety bond, which must meet all of the following
  121  requirements:
  122         (a) Be issued by a surety company authorized to do business
  123  in this state.
  124         (b) Be payable to the office for the payment of damages
  125  awarded to a consumer under part II of this chapter.
  126         (c) Be effective so long as the office’s records designate
  127  a litigation financier as such or a litigation financing
  128  contract with the litigation financier is effective.
  129         (3) A litigation financier must amend its registration
  130  within 30 days after the information contained therein changes
  131  or becomes inaccurate in any respect. A litigation financier
  132  that is not a corporation, limited liability company, or
  133  partnership may amend its registration by filing with the office
  134  an amendment on a form prescribed by the commission.
  135         (4) If the office determines that a litigation financier
  136  has not complied with the requirements of this section, the
  137  office must serve the litigation financier notice in a record of
  138  its intent to revoke the litigation financier’s registration.
  139  Such notice:
  140         (a) Must specifically state all grounds for revocation.
  141         (b) May be sent by electronic mail to a litigation
  142  financier that provided the office with an electronic mail
  143  address.
  144         (5) A litigation financier has 60 days from the date the
  145  office sends the notice required by subsection (4) to correct
  146  each ground for revocation or demonstrate to the reasonable
  147  satisfaction of the office that each ground determined by the
  148  office does not exist. The office must revoke the litigation
  149  financier registration of any litigation financier who fails to
  150  comply with the requirements of this subsection.
  151         (6) The office has the authority reasonably necessary to
  152  enable it to administer this section efficiently, to perform
  153  duties imposed upon it, and to adopt rules to implement this
  154  section.
  155         Section 4. Section 559.954, Florida Statutes, is created to
  156  read:
  157         559.954 Litigation financing contracts; terms.—The
  158  litigation financing terms must be set forth in a written
  159  contract containing all of the following:
  160         (1) A right of rescission allowing the consumer to cancel
  161  the contract without penalty, interest, charges, fees, or
  162  further obligation if, within 5 business days after contract
  163  execution or funds receipt by the consumer, whichever is later,
  164  the consumer provides written rescission notice and returns any
  165  funds already provided under the contract to the litigation
  166  financier.
  167         (2) The consumer’s written acknowledgement of whether an
  168  attorney represents him or her in the civil action or claim that
  169  is the subject of the contract.
  170         (3) A statement indicating that, in the event the proceeds
  171  of the subject civil action or claim are paid into a settlement
  172  fund or trust, the litigation financier must notify the fund or
  173  trust administrator of any outstanding financial obligations
  174  arising from the contract.
  175         Section 5. Section 559.955, Florida Statutes, is created to
  176  read:
  177         559.955 Prohibited conduct.—A litigation financier may not
  178  do any of the following:
  179         (1) Pay or offer to pay a commission, a referral fee, or
  180  other consideration to any person or entity, including an
  181  attorney, a law firm, or a health care practitioner, for
  182  referring a consumer to a litigation financier.
  183         (2) Accept a commission, a referral fee, a rebate, or other
  184  consideration from any person or entity, including an attorney,
  185  a law firm, or a health care practitioner.
  186         (3) Advertise false or misleading information about its
  187  products or services.
  188         (4) Refer a consumer to a specific attorney, law firm, or
  189  health care practitioner, except that, if a consumer lacks legal
  190  representation, the litigation financier may refer the consumer
  191  to an attorney referral service operated by a county or state
  192  bar association.
  193         (5) Fail to promptly supply a copy of all complete
  194  litigation financing contracts to the consumer.
  195         (6) Attempt to obtain a waiver of any remedy, including,
  196  but not limited to, compensatory, statutory, or punitive
  197  damages, which the consumer might otherwise have in the subject
  198  civil action or claim.
  199         (7) Attempt to effect arbitration or waiver of a consumer’s
  200  right to a jury trial in the subject civil action or claim.
  201         (8) Offer or provide legal advice to the consumer regarding
  202  the litigation financing contract or the subject civil action or
  203  claim.
  204         (9) Assign a litigation financing contract in whole or in
  205  part.
  206         (10) Report to a consumer credit reporting agency if
  207  insufficient funds remain from the net proceeds of the subject
  208  civil action or claim to repay the litigation financier.
  209         (11) Direct, or make any decisions with respect to, the
  210  conduct of the subject civil action or claim or any settlement
  211  thereof.
  212         (12) Enter into a litigation financing contract with a
  213  consumer incorporating the consumer’s obligations to the
  214  litigation financier under an existing litigation financing
  215  contract.
  216         (13) Knowingly enter into a litigation financing contract
  217  with a consumer already under a litigation financing contract
  218  with another litigation financier without first paying the
  219  entire funded amount and all charges owed under the existing
  220  contract, unless the consumer consents to a contemporaneous
  221  financing arrangement in writing.
  222         Section 6. Section 559.956, Florida Statutes, is created to
  223  read:
  224         559.956 Required disclosures.—
  225         (1) A litigation financing contract must contain all of the
  226  following disclosures on the front page of the contract in at
  227  least 12-point boldfaced type:
  228         (a) Notice of the consumer’s right to a completely filled
  229  in contract.
  230         (b) A statement that the litigation financier has no right
  231  to and will not make any decisions or attempt to influence the
  232  consumer or his or her attorney about the conduct of the civil
  233  action or claim subject to the contract and that the right to
  234  make such decisions remains solely with the consumer.
  235         (c) The total funded amount provided to the consumer.
  236         (d) An itemized list of all fees and charges payable by the
  237  consumer.
  238         (e) The annual percentage rate of return.
  239         (f) The total amount due from the consumer in 6-month
  240  intervals for 3 years, including all charges and fees.
  241         (g) A statement that the consumer will owe no charges or
  242  fees other than those described in the disclosures.
  243         (h) The cumulative amount due from the consumer for all
  244  litigation financing contracts if the consumer seeks multiple
  245  contracts and makes repayment any time after contract execution.
  246         (i) Notice that if the consumer recovers nothing from the
  247  subject civil action or claim, he or she will owe the litigation
  248  financier nothing.
  249         (j) Notice that if the net proceeds of the subject civil
  250  action or claim are insufficient to fully repay the litigation
  251  financier, the litigation financier will accept a reduced sum as
  252  full payment of the funded amount and all fees and charges owed,
  253  which sum may not exceed the net proceeds less proceeds
  254  specifically awarded for future medical expenses.
  255         (2) A litigation financing contract must also contain the
  256  following disclosure on the front page of the contract in at
  257  least 18-point uppercase and boldfaced type:
  258  
  259         CONSUMER’S RIGHT TO CANCELLATION: YOU MAY CANCEL THIS
  260  CONTRACT WITHOUT PENALTY, INTEREST, CHARGES, FEES, OR FURTHER
  261  OBLIGATION WITHIN 5 BUSINESS DAYS FROM THE DATE OF CONTRACT
  262  EXECUTION OR RECEIVING FUNDS FROM [INSERT NAME OF THE LITIGATION
  263  FINANCIER], WHICHEVER IS LATER, BY GIVING WRITTEN NOTICE OF THE
  264  CANCELLATION AND BY RETURNING THE FUNDS TO [INSERT NAME OF THE
  265  LITIGATION FINANCIER]. FOR PURPOSES OF THE DEADLINE, THE
  266  POSTMARK DATE ON FUNDS RETURNED BY REGULAR U.S. MAIL, OR THE
  267  DATE OF THE RETURN RECEIPT REQUESTED IF MAILED BY CERTIFIED
  268  MAIL, WILL BE CONSIDERED THE DATE OF RETURN OF THE FUNDS.
  269  
  270         (3) A litigation financing contract must contain the
  271  following disclosure immediately above the consumer’s signature
  272  line in 18-point uppercase and boldfaced type:
  273  
  274         DO NOT SIGN THIS CONTRACT BEFORE READING IT COMPLETELY OR
  275  IF THE CONTRACT CONTAINS ANY INCOMPLETE OR BLANK SECTIONS.
  276  BEFORE YOU SIGN THIS CONTRACT, YOU SHOULD CONSULT AN ATTORNEY.
  277  YOU MAY ALSO WANT TO CONSULT A TAX ADVISOR, A FINANCIAL
  278  PROFESSIONAL, OR AN ACCOUNTANT.
  279  
  280         Section 7. Section 559.957, Florida Statutes, is created to
  281  read:
  282         559.957 Contingent right to proceeds assignable; priority
  283  of lien or right to proceeds.—
  284         (1) A consumer may assign his or her contingent right to
  285  receive an amount of the potential proceeds of a civil action or
  286  claim.
  287         (2) A litigation financier’s lien on the potential proceeds
  288  of a civil action or claim has priority over liens that attach
  289  to such proceeds subsequent to the attachment of the litigation
  290  financier’s lien, except for any of the following:
  291         (a) Attorney, insurance carrier, or health care
  292  practitioner liens or liens based upon subrogation interests or
  293  reimbursement rights related to the subject civil action or
  294  claim.
  295         (b) Child support, Medicare, tax, or any other statutory or
  296  governmental lien.
  297         Section 8. Section 559.958, Florida Statutes, is created to
  298  read:
  299         559.958 Interest, fees, charges, and penalties.—
  300         (1) A litigation financier may not directly or indirectly
  301  charge, contract for, or receive an interest rate of greater
  302  than 30 percent of the funded amount per annum. In determining
  303  compliance with the statutory maximum interest rate, the
  304  computations used must be simple interest and not add-on
  305  interest or any other computation.
  306         (2) The maximum annual percentage rate of finance charge
  307  which may be contracted for and received by a litigation
  308  financier is 12 times the maximum monthly rate, and the maximum
  309  monthly rate must be computed on the basis of one-twelfth of the
  310  annual rate for each full month. The maximum daily rate must be
  311  computed on the basis of the maximum monthly rate divided by the
  312  number of days in the month.
  313         (3) Interest may only accrue until a court enters a final
  314  order or a settlement agreement is executed in the civil action
  315  or claim subject to the litigation financing contract, whichever
  316  is earlier, but in no case may interest accrue for a period
  317  exceeding 3 years from the date the consumer receives the funds
  318  from the litigation financier. The total interest amount
  319  assessed must be calculated based on the actual number of days
  320  for which interest accrued.
  321         (4) A litigation financier may not directly or indirectly
  322  charge, contract for, or receive any charges or fees 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  financing contracts the consumer enters into with the litigation
  326  financier respecting the civil action or claim.
  327         (5) A litigation financier may not directly or indirectly
  328  charge, contract for, or receive any interest, charges, or fees
  329  for rescission or cancellation of a litigation financing
  330  contract under s. 559.954(1).
  331         Section 9. Section 559.959, Florida Statutes, is created to
  332  read:
  333         559.959 Litigation financing contracts; discovery.—Except
  334  as otherwise ordered by the court, a party to any civil action
  335  or claim, without awaiting a discovery request, shall 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 559.961, Florida Statutes, is created
  340  to read:
  341         559.961 Effect of communication on privilege.
  342  Communications between a consumer’s attorney and a litigation
  343  financier as it pertains to a litigation financing contract do
  344  not limit, waive, or abrogate the scope or nature of any
  345  statutory or common-law privilege, including the work-product
  346  doctrine and the attorney-client privilege.
  347         Section 11. Section 559.962, Florida Statutes, is created
  348  to read:
  349         559.962 Violation; enforcement.—
  350         (1) A violation of this part is an unfair or deceptive
  351  trade act or practice under part II of chapter 501.
  352         (2) This section may not be construed to limit:
  353         (a) The enforcing authority’s exercise of powers or
  354  performance of duties that the enforcing authority is otherwise
  355  legally authorized or required to exercise or perform.
  356         (b) The rights and remedies available to the state or a
  357  person under any other law.
  358         Section 12. This act shall take effect July 1, 2020.