Florida Senate - 2021                                    SB 1750
       
       
        
       By Senator Broxson
       
       
       
       
       
       1-01544A-21                                           20211750__
    1                        A bill to be entitled                      
    2         An act relating to litigation financing consumer
    3         protection; creating part XIII of ch. 559, F.S.,
    4         entitled “Litigation Financing Consumer Protection
    5         Act”; creating s. 559.953, F.S.; defining terms;
    6         creating s. 559.954, F.S.; requiring litigation
    7         financiers to register with the Department of State
    8         before engaging in litigation financing; providing
    9         registration requirements; requiring litigation
   10         financiers to file a surety bond meeting specified
   11         requirements; requiring the department serve notice to
   12         such financiers and to revoke such registrations for
   13         certain noncompliance; authorizing the department to
   14         adopt rules; creating s. 559.955, F.S.; providing
   15         requirements for litigation financing contracts;
   16         creating s. 559.956, F.S.; prohibiting litigation
   17         financiers from engaging in specified conduct;
   18         creating s. 559.957, F.S.; providing disclosure
   19         requirements for litigation financing contracts;
   20         creating s. 559.958, F.S.; providing for the
   21         assignment of contingent rights to civil action or
   22         claim proceeds; specifying the priority of liens
   23         against or rights to civil action or claim proceeds;
   24         creating s. 559.959, F.S.; authorizing litigation
   25         financiers to assess specified interest, fees, and
   26         charges; providing requirements for such interest,
   27         fees, and charges; prohibiting a litigation financier
   28         from assessing certain fees or charges; creating s.
   29         559.961, F.S.; requiring the disclosure of litigation
   30         financing contracts under specified circumstances;
   31         creating s. 559.962, F.S.; providing that specified
   32         communications between attorneys and litigation
   33         financiers do not affect statutory or common-law
   34         privilege; creating s. 559.963, F.S.; providing that
   35         violations of the act constitute deceptive and unfair
   36         trade practices; providing construction; providing an
   37         effective date.
   38          
   39  Be It Enacted by the Legislature of the State of Florida:
   40  
   41         Section 1. Part XIII of chapter 559, Florida Statutes,
   42  consisting of sections 559.953, 559.954, 559.955, 559.956,
   43  559.957, 559.958, 559.959, 559.961, 559.962, and 559.963, is
   44  created and entitled “Litigation Financing Consumer Protection
   45  Act.”
   46         Section 2. Section 559.953, Florida Statutes, is created to
   47  read:
   48         559.953Definitions.—As used in this part, the term:
   49         (1)“Consumer” means any individual.
   50         (2)“Department” means the Department of State.
   51         (3)“Enforcing authority” has the same meaning as in s.
   52  501.203(2).
   53         (4)“Funded amount” means the funds actually received and
   54  retained by a consumer under a litigation financing contract.
   55         (5)“Health care practitioner” has the same meaning as in
   56  s. 456.001.
   57         (6)“Interest” means the cost of obtaining litigation
   58  financing and includes any profit or advantage of any kind
   59  whatsoever that a litigation financier may charge, contract for,
   60  collect, receive, or in any way obtain as a condition for a
   61  litigation financing contract. Charges and fees specifically
   62  authorized by this part are not interest.
   63         (7)“Litigation financier” means a person engaged in the
   64  business of litigation financing.
   65         (8)“Litigation financing” means a nonrecourse transaction
   66  in which a litigation financier provides funds to a consumer in
   67  exchange for an assignment of the consumer’s contingent right to
   68  receive an amount of the potential proceeds of the consumer’s
   69  civil action or claim. The term does not include:
   70         (a)Legal services provided to a consumer on a contingency
   71  fee basis or advanced legal costs where such services or costs
   72  are provided by an attorney representing the consumer in
   73  accordance with the Florida Rules of Professional Conduct;
   74         (b)A commercial tort claim as defined in s.
   75  679.1021(1)(m);
   76         (c)A worker’s compensation claim under chapter 440;
   77         (d)Lending or financing arrangements between an attorney
   78  or law firm and a lending institution to fund litigation costs
   79  in the ordinary course of business; or
   80         (e)A consumer finance loan, as defined in s. 516.01(2).
   81         (9)“Net proceeds” means the portion of the proceeds of a
   82  civil action or claim remaining after satisfaction of all liens
   83  with a higher priority than that of the litigation financier as
   84  specified in s. 559.958(2).
   85         Section 3. Section 559.954, Florida Statutes, is created to
   86  read:
   87         559.954Litigation financier registration; registration
   88  revocation.—
   89         (1)A litigation financier may not engage in litigation
   90  financing in this state before registering as a litigation
   91  financier under this section.
   92         (a)A litigation financier that is a corporation, limited
   93  liability company, or partnership shall be considered registered
   94  under this section if it has:
   95         1.Met the bond requirements of subsection (2);
   96         2.A status of active and in good standing as reflected in
   97  department records; and
   98         3.Filed articles of organization or incorporation, a
   99  certificate of limited partnership, or another organizational
  100  document or, if a foreign entity, an application for a
  101  certificate of authority with the department stating therein
  102  that it is a litigation financier.
  103         (b)A litigation financier who is not a corporation,
  104  limited liability company, or partnership shall be considered
  105  registered under this section if he or she has:
  106         1.Met the bond requirements of subsection (2); and
  107         2.Filed a litigation financier registration application
  108  with the department on a form prescribed by the department
  109  containing, at a minimum:
  110         a.The applicant’s full legal name and fictitious name, if
  111  any;
  112         b.The applicant’s physical address, mailing address, and
  113  telephone number;
  114         c.A statement that the applicant is a litigation
  115  financier; and
  116         d.Any other information the department deems necessary.
  117         (2)Each litigation financier must file with the department
  118  a $250,000 surety bond that must be all of the following:
  119         (a)Issued by a surety company authorized to do business in
  120  this state.
  121         (b)Payable to the department for the payment of damages
  122  awarded to a consumer under part II of chapter 501.
  123         (c)Effective so long as the department’s records designate
  124  a litigation financier as such or a litigation financing
  125  contract with the litigation financier is effective.
  126         (3)A litigation financier must amend its registration
  127  within 30 days after the date the information contained therein
  128  changes or becomes inaccurate in any respect. A litigation
  129  financier who is not a corporation, limited liability company,
  130  or partnership may amend his or her registration by filing with
  131  the department an amendment on a form prescribed by the
  132  department.
  133         (4)If the department determines that a litigation
  134  financier has not complied with the requirements of this
  135  section, the department shall serve the litigation financier
  136  notice in a record of its intent to revoke the litigation
  137  financier’s registration. Such notice:
  138         (a)Must specifically state all grounds for revocation; and
  139         (b)May be sent by electronic mail to a litigation
  140  financier that provided the department with an electronic mail
  141  address.
  142         (5)A litigation financier has 60 days from the date the
  143  department sends the notice required by subsection (4) to
  144  correct the grounds for revocation or demonstrate to the
  145  reasonable satisfaction of the department that each ground
  146  determined by the department does not exist. The department
  147  shall revoke the registration of any litigation financier that
  148  fails to comply with the requirements of this section.
  149         (6)The department has the authority reasonably necessary
  150  to enable it to administer this section efficiently, to perform
  151  duties imposed upon it, and to adopt rules to implement this
  152  section.
  153         Section 4. Section 559.955, Florida Statutes, is created to
  154  read:
  155         559.955Litigation financing contracts; terms.—The
  156  litigation financing terms must be set forth in a written
  157  contract containing:
  158         (1)A right of rescission allowing the consumer to cancel
  159  the contract without penalty, interest, fees, charges, or
  160  further obligation if, within 5 business days after execution of
  161  a contract or receipt of funds by the consumer, whichever is
  162  later, the consumer provides written rescission notice and
  163  returns any funds already provided under the contract to the
  164  litigation financier;
  165         (2)The consumer’s written acknowledgement of whether an
  166  attorney represents him or her in the civil action or claim that
  167  is the subject of the contract; and
  168         (3)A statement indicating that, in the event the proceeds
  169  of the subject civil action or claim are paid into a settlement
  170  fund or trust, the litigation financier must notify the fund or
  171  trust administrator of any outstanding financial obligations
  172  arising from the contract.
  173         Section 5. Section 559.956, Florida Statutes, is created to
  174  read:
  175         559.956Prohibited conduct.—A litigation financier may not:
  176         (1)Pay or offer to pay a commission, referral fee, or
  177  other consideration to any person, including an attorney, law
  178  firm, or health care practitioner, for referring a consumer to a
  179  litigation financier;
  180         (2)Accept a commission, referral fee, rebate, or other
  181  consideration from any person, including an attorney, law firm,
  182  or health care practitioner;
  183         (3)Advertise false or misleading information about its
  184  products or services;
  185         (4)Refer a consumer to a specific attorney, law firm, or
  186  health care practitioner, except that, if a consumer lacks legal
  187  representation, the litigation financier may refer the consumer
  188  to an attorney referral service operated by a county or state
  189  bar association;
  190         (5)Fail to promptly supply a copy of any complete
  191  litigation financing contract to the consumer;
  192         (6)Attempt to obtain a waiver of any remedy, including,
  193  but not limited to, compensatory, statutory, or punitive damages
  194  that the consumer might otherwise have in the subject civil
  195  action or claim;
  196         (7)Attempt to effect arbitration or waiver of a consumer’s
  197  right to a jury trial in the subject civil action or claim;
  198         (8)Offer or provide legal advice to the consumer regarding
  199  the litigation financing contract or the subject civil action or
  200  claim;
  201         (9)Assign a litigation financing contract in whole or in
  202  part;
  203         (10)Report to a consumer credit reporting agency if
  204  insufficient funds remain from the net proceeds of the subject
  205  civil action or claim to repay the litigation financier;
  206         (11)Direct or make any decisions with respect to the
  207  course of the subject civil action or claim or any settlement
  208  thereof;
  209         (12)Enter into a litigation financing contract with a
  210  consumer incorporating the consumer’s obligations to the
  211  litigation financier under an existing litigation financing
  212  contract; or
  213         (13)Knowingly enter into a litigation financing contract
  214  with a consumer already under a litigation financing contract
  215  with another litigation financier without first paying the
  216  entire funded amount and all fees and charges owed under the
  217  existing contract, unless the consumer consents to a
  218  contemporaneous financing arrangement in writing.
  219         Section 6. Section 559.957, Florida Statutes, is created to
  220  read:
  221         559.957Required disclosures.—
  222         (1)A litigation financing contract must contain the
  223  following disclosures on the front page of the contract in at
  224  least 12-point boldfaced type:
  225         (a)Notice of the consumer’s right to a completely filled
  226  in contract;
  227         (b)A statement that the litigation financier does not have
  228  the right to, and may not make any decisions or attempt to,
  229  influence the consumer or his or her attorney about the conduct
  230  of the civil action or claim that is the subject of the contract
  231  and that the right to make such decisions remains solely with
  232  the consumer;
  233         (c)The total funded amount provided to the consumer;
  234         (d)An itemized list of all fees and charges payable by the
  235  consumer;
  236         (e)The interest rate;
  237         (f)The total amount due from the consumer in 6-month
  238  intervals for 3 years, including all interest, fees, and
  239  charges;
  240         (g)A statement that the consumer will owe no fees or
  241  charges other than those described in the disclosures;
  242         (h)The cumulative amount due from the consumer for all
  243  litigation financing contracts if the consumer seeks multiple
  244  contracts and makes repayment any time after contract execution;
  245         (i)Notice that if the consumer recovers nothing from the
  246  subject civil action or claim, he or she will owe the litigation
  247  financier nothing; and
  248         (j)Notice that if the net proceeds of the subject civil
  249  action or claim are insufficient to fully repay the litigation
  250  financier, the litigation financier will accept a reduced sum as
  251  full payment of the funded amount and all fees and charges owed,
  252  which sum may not exceed the net proceeds less proceeds
  253  specifically awarded for future medical expenses.
  254         (2)A litigation financing contract must also contain the
  255  following disclosure on the front page of the contract in at
  256  least 18-point uppercase and boldfaced type:
  257  
  258  CONSUMER’S RIGHT TO CANCELLATION: YOU MAY CANCEL THIS CONTRACT
  259  WITHOUT PENALTY, INTEREST, FEES, CHARGES, OR FURTHER OBLIGATION
  260  WITHIN 5 BUSINESS DAYS FROM THE DATE OF CONTRACT EXECUTION OR
  261  RECEIPT OF FUNDS FROM [INSERT NAME OF THE LITIGATION FINANCIER],
  262  WHICHEVER IS LATER, BY GIVING WRITTEN NOTICE OF THE CANCELLATION
  263  AND BY RETURNING THE FUNDS TO [INSERT NAME OF THE LITIGATION
  264  FINANCIER]. FOR PURPOSES OF THE DEADLINE, THE POSTMARK DATE ON
  265  FUNDS RETURNED BY REGULAR U.S. MAIL, OR THE DATE OF THE RETURN
  266  RECEIPT REQUESTED IF MAILED BY CERTIFIED MAIL, WILL BE
  267  CONSIDERED THE DATE OF RETURN OF THE FUNDS.
  268  
  269         (3)A litigation financing contract must contain the
  270  following disclosure immediately above the consumer’s signature
  271  line in 18-point uppercase and boldfaced type:
  272  
  273  DO NOT SIGN THIS CONTRACT BEFORE READING IT COMPLETELY OR IF THE
  274  CONTRACT CONTAINS ANY INCOMPLETE OR BLANK SECTIONS. BEFORE YOU
  275  SIGN THIS CONTRACT, YOU SHOULD CONSULT AN ATTORNEY. YOU MAY ALSO
  276  WANT TO CONSULT A TAX ADVISOR, A FINANCIAL PROFESSIONAL, OR AN
  277  ACCOUNTANT.
  278         Section 7. Section 559.958, Florida Statutes, is created to
  279  read:
  280         559.958Contingent right to proceeds assignable; priority
  281  of lien or right to proceeds.—
  282         (1)A consumer may assign his or her contingent right to
  283  receive an amount of the potential proceeds of a civil action or
  284  claim.
  285         (2)A litigation financier’s lien on the potential proceeds
  286  of a civil action or claim has priority over liens that attach
  287  to such proceeds subsequent to the attachment of the litigation
  288  financier’s lien, except for:
  289         (a)Attorney, insurance carrier, or healthcare practitioner
  290  liens or liens based upon subrogation interests or reimbursement
  291  rights related to the subject civil action or claim; and
  292         (b)Child support, Medicare, tax, or any other statutory or
  293  governmental lien.
  294         Section 8. Section 559.959, Florida Statutes, is created to
  295  read:
  296         559.959Interest, fees, charges, and penalties.—
  297         (1)A litigation financier may not directly or indirectly
  298  charge, contract for, or receive an interest rate of greater
  299  than 10 percent of the funded amount per annum. In determining
  300  compliance with the statutory maximum interest rate, the
  301  computations used must be simple interest and not add-on
  302  interest or any other computations.
  303         (2)The maximum interest rate that may be contracted for
  304  and received by a litigation financier is 12 times the maximum
  305  monthly rate, and the maximum monthly rate must be computed on
  306  the basis of one-twelfth of the annual rate for each full month.
  307  The maximum daily rate must be computed on the basis of the
  308  maximum monthly rate divided by the number of days in the month.
  309         (3)Interest may only accrue until a court enters a final
  310  order or a settlement agreement is executed in the civil action
  311  or claim that is the subject of the litigation financing
  312  contract, whichever is earlier, but interest may not accrue for
  313  a period exceeding 3 years from the date the consumer receives
  314  the funds from the litigation financier. The total interest
  315  assessed must be calculated based on the actual number of days
  316  for which interest accrued.
  317         (4)A litigation financier may not directly or indirectly
  318  charge, contract for, or receive any fees or charges the
  319  combined total of which exceeds $500 with regard to a single
  320  civil action or claim, regardless of the number of litigation
  321  financing contracts the consumer enters into with the litigation
  322  financier with respect to the civil action or claim.
  323         (5)A litigation financier may not directly or indirectly
  324  charge, contract for, or receive any interest, fees, or charges,
  325  for rescission or cancellation of a litigation financing
  326  contract under s. 559.955(1).
  327         Section 9. Section 559.961, Florida Statutes, is created to
  328  read:
  329         559.961Litigation financing contracts; discovery.—Except
  330  as otherwise ordered by the court, a party to any civil action
  331  or claim must, without awaiting a discovery request, provide to
  332  the other parties any contract under which a litigation
  333  financier has a contingent right to receive compensation sourced
  334  from potential proceeds of the civil action or claim.
  335         Section 10. Section 559.962, Florida Statutes, is created
  336  to read:
  337         559.962Effect of communication on privilege.—Communication
  338  between a consumer’s attorney and a litigation financier
  339  regarding a litigation financing contract does not limit, waive,
  340  or abrogate the scope or nature of any statutory or common-law
  341  privilege, including the work-product doctrine and the attorney
  342  client privilege.
  343         Section 11. Section 559.963, Florida Statutes, is created
  344  to read:
  345         559.963Violation; enforcement.—
  346         (1)A violation of this part is considered an unfair and
  347  deceptive trade practice actionable under part II of chapter
  348  501.
  349         (2)This section does not limit:
  350         (a)The enforcing authority’s exercise of powers or
  351  performance of duties that the enforcing authority is otherwise
  352  legally authorized or required to exercise or perform; or
  353         (b)The rights and remedies available to the state or a
  354  person under any other law.
  355         Section 12. This act shall take effect July 1, 2021.