Bill Summary – FastDemocracy

       Florida Senate - 2023                                    SB 1612
       
       
        
       By Senator Yarborough
       
       
       
       
       
       4-01063B-23                                           20231612__
                      A bill to be entitled                      
       An act relating to litigation financing consumer
       protection; creating part VIII of ch. 501, F.S.,
       entitled “Litigation Financing Consumer Protection
       Act”; creating s. 501.998, F.S.; defining terms;
       creating s. 501.9981, F.S.; requiring litigation
       financiers to register with the Department of State
       before engaging in litigation financing in this state;
       providing registration requirements; requiring
       litigation financiers to file a surety bond meeting
       specified requirements; requiring the department serve
       notice to such financiers and to revoke such
       registrations for certain noncompliance; authorizing
       the department to adopt rules; creating s. 501.9982,
       F.S.; providing requirements for litigation financing
       contracts; creating s. 501.9983, F.S.; prohibiting
       litigation financiers from engaging in specified
       conduct; creating s. 501.9984, F.S.; providing
       disclosure requirements for litigation financing
       contracts; creating s. 501.9985, F.S.; providing
       requirements for litigation financiers to assess
       specified interest, fees, and charges; creating s.
       501.9986, F.S.; providing that specified
       communications between attorneys and litigation
       financiers do not affect statutory or common-law
       privilege; creating s. 501.9987, F.S.; providing that
       violations of the act are deceptive and unfair trade
       practices; providing construction; providing an
       effective date.
        
Be It Enacted by the Legislature of the State of Florida:

       Section 1. Part VIII of chapter 501, Florida Statutes,
consisting of ss. 501.998, 501.9981, 501.9982, 501.9983,
501.9984, 501.9985, 501.9986, and 501.9987, is created and
entitled “Litigation Financing Consumer Protection Act.”
       Section 2. Section 501.998, Florida Statutes, is created to
read:
       501.998 Definitions.—As used in this part, the term:
       (1) “Consumer” means any individual.
       (2) “Department” means the Department of State.
       (3) “Funded amount” means the funds actually received and
retained by a consumer under a litigation financing contract.
       (4) “Health care practitioner” has the same meaning as in
s. 456.001.
       (5) “Interest” means the cost of obtaining litigation
financing and includes any profit or advantage of any kind that
a litigation financier may charge, contract for, collect,
receive, or in any way obtain as a condition for a litigation
financing contract. The term does not include charges and fees
specifically authorized by this part.
       (6) “Litigation financier” means a person engaged in the
business of litigation financing.
       (7) “Litigation financing” means a nonrecourse transaction
in which a litigation financier provides funds to a consumer in
exchange for an assignment of the consumer’s contingent right to
receive an amount of the potential net proceeds of the
consumer’s civil action or claim. The term does not include any
of the following:
       (a) Legal services provided to a consumer on a contingency
fee basis, or advanced legal costs, where such services or costs
are provided by an attorney representing the consumer in
accordance with rules regulating The Florida Bar for
professional conduct.
       (b) A commercial tort claim as defined in s.
679.1021(1)(m).
       (c) A worker’s compensation claim under chapter 440.
       (d) Lending or financing arrangements between an attorney
or law firm and a lending institution to fund litigation costs
in the ordinary course of business.
       (e) A consumer finance loan as defined in s. 516.01(2).
       (8) “Net proceeds” means the portion of the proceeds of a
civil action or claim remaining after satisfaction of all liens
with a higher priority than that of the litigation financier as
specified in s. 501.1006(2).
       Section 3. Section 501.9981, Florida Statutes, is created
to read:
       501.9981 Litigation financier registration; registration
revocation.—
       (1) A litigation financier may not engage in litigation
financing in this state before registering as a litigation
financier under this section.
       (a) A litigation financier that is a corporation, limited
liability company, or partnership is registered under this
section if it has:
       1. Met the bond requirements of subsection (2);
       2. A status of active and in good standing as reflected in
department records; and
       3. Filed articles of organization or incorporation, a
certificate of limited partnership, or another organizational
document, or, if a foreign entity, an application for a
certificate of authority with the department stating therein
that it is a litigation financier.
       (b) A litigation financier who is not a corporation,
limited liability company, or partnership is registered under
this section if he or she has:
       1. Met the bond requirements of subsection (2); and
       2. Filed a litigation financier registration application
with the department on a form prescribed by the department
containing, at a minimum:
       a. The applicant’s full legal name and fictitious name, if
any;
       b. The applicant’s physical address, mailing address, and
telephone number;
       c. A statement that the applicant is a litigation
financier; and
       d. Any other information the department deems necessary.
       (2) A litigation financier must file with the department a
$250,000 surety bond, which bond must be:
       (a) Issued by a surety company authorized to do business in
this state.
       (b) Payable to the department for the payment of damages
awarded to a consumer under part II of this chapter.
       (c) Effective so long as the department’s records designate
the litigation financier as such or a litigation financing
contract with the litigation financier is effective.
       (3) A litigation financier must amend its registration
within 30 days after the date the information contained therein
changes or becomes inaccurate in any respect. A litigation
financier who is not a corporation, limited liability company,
or partnership may amend his or her registration by filing with
the department an amendment on a form prescribed by the
department.
       (4) If the department determines that a litigation
financier has not complied with the requirements of this
section, the department must serve the litigation financier
notice in a record of its intent to revoke the registration of
the litigation financier. Such notice:
       (a) Must specifically state all grounds for revocation; and
       (b) May be sent by e-mail to a litigation financier that
provided the department with an e-mail address.
       (5) A litigation financier has 60 days after the date the
department sends the notice under subsection (4) to correct the
grounds for revocation or demonstrate to the reasonable
satisfaction of the department that each ground determined by
the department does not exist. The department shall revoke the
registration of any litigation financier that fails to comply
with the requirements of this section.
       (6) The department has the authority reasonably necessary
to enable it to administer this section efficiently, to perform
duties imposed upon it, and to adopt rules to implement this
section.
       Section 4. Section 501.9982, Florida Statutes, is created
to read:
       501.9982 Litigation financing contracts; terms.—The
litigation financing terms must be set forth in a written
contract containing all of the following information:
       (1) A right of rescission allowing the consumer to cancel
the contract without penalty, interest, fees, charges, or
further obligation if, within 5 business days after execution of
a contract or receipt of funds by the consumer, whichever is
later, the consumer provides written rescission notice and
returns any funds already provided under the contract to the
litigation financier.
       (2) The consumer’s written acknowledgement of whether an
attorney represents him or her in the civil action or claim that
is the subject of the contract.
       (3) A statement indicating that, in the event the proceeds
of the subject civil action or claim are paid into a settlement
fund or trust, the litigation financier must notify the fund or
trust administrator of any outstanding financial obligations
arising from the contract.
       Section 5. Section 501.9983, Florida Statutes, is created
to read:
       501.9983 Prohibited conduct.—A litigation financier may not
do any of the following:
       (1) Pay or offer to pay a commission, referral fee, or
other consideration to any person, including an attorney, law
firm, or health care practitioner, for referring a consumer to a
litigation financier.
       (2) Accept a commission, referral fee, rebate, or other
consideration from any person, including an attorney, law firm,
or health care practitioner.
       (3) Advertise false or misleading information about its
products or services.
       (4) Refer a consumer to a specific attorney, law firm, or
health care practitioner, except that, if a consumer lacks legal
representation, the litigation financier may refer the consumer
to an attorney referral service operated by a county or state
bar association.
       (5) Fail to promptly supply a copy of any complete
litigation financing contract to the consumer.
       (6) Attempt to obtain a waiver of any remedy, including,
but not limited to, compensatory, statutory, or punitive
damages, that the consumer might otherwise have in the subject
civil action or claim.
       (7) Attempt to affect arbitration or waiver of a consumer’s
right to a jury trial in the subject civil action or claim.
       (8) Offer or provide legal advice to the consumer regarding
the litigation financing contract or the subject civil action or
claim.
       (9) Assign a litigation financing contract in whole or in
part.
       (10) Direct, or make any decisions with respect to, the
course of the subject civil action or claim or any settlement
thereof.
       Section 6. Section 501.9984, Florida Statutes, is created
to read:
       501.9984 Required disclosures.—
       (1) A litigation financing contract must contain all of the
following disclosures on the front page of the contract in at
least 12-point boldfaced type:
       (a) Notice of the consumer’s right to a completely filled
in contract.
       (b) A statement that the litigation financier does not have
the right to, and may not make any decisions or attempt to,
influence the consumer or his or her attorney about the conduct
of the civil action or claim that is the subject of the contract
and that the right to make such decisions remains solely with
the consumer.
       (c) The total funded amount provided to the consumer.
       (d) An itemized list of all fees and charges payable by the
consumer.
       (e) The interest rate.
       (f) The total amount due from the consumer in 6-month
intervals for 3 years, including all interest, fees, and
charges.
       (g) A statement that the consumer will not owe any fees or
charges other than those described in the disclosures.
       (h) The cumulative amount due from the consumer for all
litigation financing contracts if the consumer seeks multiple
contracts and makes repayment any time after contract execution.
       (2) A litigation financing contract must also contain the
following disclosure on the front page of the contract in at
least 18-point uppercase and boldfaced type:

       CONSUMER’S RIGHT TO CANCELLATION: YOU MAY CANCEL THIS
       CONTRACT WITHOUT PENALTY, INTEREST, FEES, CHARGES, OR
       FURTHER OBLIGATION WITHIN 5 BUSINESS DAYS FROM THE
       DATE OF CONTRACT EXECUTION OR RECEIPT OF FUNDS FROM
       [INSERT NAME OF THE LITIGATION FINANCIER], WHICHEVER
       IS LATER, BY GIVING WRITTEN NOTICE OF THE CANCELLATION
       AND BY RETURNING THE FUNDS TO [INSERT NAME OF THE
       LITIGATION FINANCIER]. FOR PURPOSES OF THE DEADLINE,
       THE POSTMARK DATE ON FUNDS RETURNED BY REGULAR U.S.
       MAIL, OR THE DATE OF THE RETURN RECEIPT REQUESTED IF
       MAILED BY CERTIFIED MAIL, WILL BE CONSIDERED THE DATE
       OF RETURN OF THE FUNDS.

       (3) A litigation financing contract must contain the
following disclosure immediately above the consumer’s signature
line in 18-point uppercase and boldfaced type:

       DO NOT SIGN THIS CONTRACT BEFORE READING IT COMPLETELY
       OR IF THE CONTRACT CONTAINS ANY INCOMPLETE OR BLANK
       SECTIONS. BEFORE YOU SIGN THIS CONTRACT, YOU SHOULD
       CONSULT AN ATTORNEY. YOU MAY ALSO WANT TO CONSULT A
       TAX ADVISOR, A FINANCIAL PROFESSIONAL, OR AN
       ACCOUNTANT.
       Section 7. Section 501.9985, Florida Statutes, is created
to read:
       501.9985 Interest, fees, charges, and penalties.—
       (1) A litigation financier may not directly or indirectly
charge, contract for, or receive an interest rate of greater
than 35 percent of the funded amount per annum. In determining
compliance with the statutory maximum interest rate, the
computations used must be simple interest and not add-on
interest or any other computation.
       (2) The maximum interest rate that may be contracted for
and received by a litigation financier is 12 times the maximum
monthly rate, and the maximum monthly rate must be computed on
the basis of one-twelfth of the annual rate for each full month.
The maximum daily rate must be computed on the basis of the
maximum monthly rate divided by the number of days in the month.
       (3) Interest may accrue only until a court enters a final
order or a settlement agreement is executed in the civil action
or claim that is the subject of the litigation financing
contract, whichever is earlier, but interest may not accrue for
a period exceeding 3 years after the date the consumer receives
the funds from the litigation financier. The total interest
assessed must be calculated based on the actual number of days
for which interest accrued.
       Section 8. Section 501.9986, Florida Statutes, is created
to read:
       501.9986 Effect of communication on privilege.
Communication between a consumer’s attorney and a litigation
financier regarding a litigation financing contract does not
limit, waive, or abrogate the scope or nature of any statutory
or common-law privilege, including the work-product doctrine and
attorney-client privilege.
       Section 9. Section 501.9987, Florida Statutes, is created
to read:
       501.9987 Violation; enforcement.—
       (1) A violation of this part is an unfair and deceptive
trade practice actionable under part II of this chapter.
       (2) This section does not limit the:
       (a) Enforcing authority’s exercise of powers or performance
of duties that the enforcing authority is otherwise legally
authorized or required to exercise or perform; or
       (b) Rights and remedies available to the state or a person
under any other law.
       Section 10. This act shall take effect July 1, 2023.