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68th Legislature 2023 SB 269.1
1 SENATE BILL NO. 269
2 INTRODUCED BY G. HERTZ
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT ESTABLISHING THE LITIGATION FINANCING TRANSPARENCY
5 AND CONSUMER PROTECTION ACT; REQUIRING THE REGISTRATION OF LITIGATION FINANCERS;
6 ENSURING THE PUBLIC TRANSPARENCY OF PERSONS INVOLVED IN LITIGATION FINANCING
7 ACTIVITIES; ESTABLISHING CONSUMER PROTECTIONS AND REGULATING THE PRACTICE OF
8 LITIGATION FINANCING; ESTABLISHING MINIMUM STANDARDS AND DISCLOSURES FOR LITIGATION
9 FINANCING CONTRACTS; REQUIRING THE DISCLOSURE IN A CIVIL ACTION OF ANY LITIGATION
10 FINANCING TRANSACTION AND LITIGATION FINANCING CONTRACT; CREATING CERTAIN
11 EXEMPTIONS; AUTHORIZING THE SECRETARY OF STATE TO ESTABLISH ADMINISTRATIVE RULES;
12 PROVIDING RULEMAKING AUTHORITY; PROVIDING DEFINITIONS; AND PROVIDING AN IMMEDIATE
13 EFFECTIVE DATE AND AN APPLICABILITY DATE.”
14
15 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
16
17 NEW SECTION. Section 1. Short title. [Sections 1 through 11] may be cited as the "Litigation
18 Financing Transparency and Consumer Protection Act".
19
20 NEW SECTION. Section 2. Definitions. For the purposes of [sections 1 through 11], the f ollowing
21 def initions apply:
22 (1) "Consumer" means any individual who resides, is present, or is domiciled in this state or who is
23 or may become a plaintif f , claimant, or complainant in a civil action or an administrative proceeding or in pursuit
24 of any claim or cause of action in this state.
25 (2) "Entity" means any domestic or f oreign corporation, partnership, limited partnership, limited
26 liability company, trust, f und, plan, or any other business, enterprise, association, or organization of any kind or
27 nature.
28 (3) "Legal representative" means any attorney, group of attorneys, or law f irm duly licensed and
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1 authorized to practice law and to represent a consumer in a civil action, administrative proceeding , or claim to
2 recover damages in this state.
3 (4) "Litigation f inancer" means any person or group of persons engaged in, or f ormed, created , or
4 established f or the purpose of engaging in, the business of litigation f inancing or any other business or
5 economic activity in which a person or group of persons receive consideration of any kind in exch ange f or
6 providing litigation f inancing.
7 (5) "Litigation f inancing" means the f inancing, f unding, advancing , or loaning of money to pay f or
8 f ees, costs, expenses, or any other sums arising f rom or in any manner related to a civil action, administrative
9 proceeding, claim, or cause of action, if the f inancing, f unding, advancing, or loaning of money is provided by
10 any person other than a person who is:
11 (a) a party to the civil action, administrative proceeding, claim, or cause of action;
12 (b) a legal representative engaged, directly or indirectly through another legal representative, to
13 represent a party in the civil action, administrative proceeding, claim, or cause of action; or
14 (c) an entity or insurer with a preexisting contractual obligation to indemnif y o r def end a party to
15 the civil action, administrative proceeding, claim, or cause of action.
16 (6) (a) "Litigation f inancing contract" means a written contract in which a person agrees to provide
17 litigation f inancing to any person in conjunction with a civil action or an administrative proceeding or in pursuit of
18 any claim or cause of action in this state in consideration f or:
19 (i) the payment of interest, f ees, or other consideration to the person providing the litigation
20 f inancing; or
21 (ii) granting or assigning to the person providing the litigation f inancing a contingent right to
22 receive payment f rom the value of any proceeds or other c onsideration realized f rom any judgment, award,
23 settlement, verdict, or other f orm of monetary relief any consumer, legal representative, or entity may receive or
24 recover in relation to the civil action, administrative proceeding, claim , or cause of action.
25 (b) The term does not include any agreement, contract, or engagement of a legal representative to
26 render legal services to a consumer on a contingency f ee basis, including the advancement of legal costs by
27 the legal representative, in which the services or costs are provided to or on behalf of a consumer by the legal
28 representative representing the consumer in the civil action, administrative proceeding, claim , or cause of
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68th Legislature 2023 SB 269.1
1 action.
2 (7) "Person" includes an individual and an entity.
3 (8) "Secretary" means the secretary of state provided f or in Title 2, chapter 15, part 4.
4
5 NEW SECTION. Section 3. Registration. (1) A person may not engage in litigation f inancing in this
6 state unless the person is registered with the secretary of state as a litigation f inancer pursuant to [sections 1
7 through 11].
8 (2) If the person registering as a litigation f inancer is an entity:
9 (a) the entity must be active and in good standing as ref lected in the of f ice of the secretary of
10 state; and
11 (b) the entity's articles of incorporation, charter, articles of organization, certif icate of limited
12 partnership, or other organizational or governing document must contain a statement that the entity has the
13 power to engage in the business of litigation f inancing and is designated as a litigation f inancer pursuant to
14 [sections 1 through 11].
15 (3) To register as a litigation f inancer, a person shall f ile a registration statement with the secretary
16 of state setting f orth the f ollowing inf ormation:
17 (a) the legal name of the litigation f inancer;
18 (b) the physical street address and mailing address of the litigation f inancer;
19 (c) a telephone number or e-mail address through which the litigation f inancer may be contacted;
20 (d) the physical street address and mailing address of the licensed f inancer's registered of fice and
21 the name of the registered agent at the registered of fice who is authorized to accept service of process on
22 behalf of the licensed f inancer; and
23 (e) any other inf ormation the secretary of state considers necessary.
24 (4) If the person seeking to register as a litigation f inancer is an entity, the f ollowing inf ormation
25 must be set f orth in the registration statement with respect to each person that, directly or indirectly, owns,
26 controls, holds with the power to vote, or holds proxies representing 5% or more of the voting securities of the
27 litigation f inancer:
28 (a) the legal name, physical street address, and mailing address of each person;
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68th Legislature 2023 SB 269.1
1 (b) if the person is an individual:
2 (i) the individual's occupation;
3 (ii) any of f ices and positions held with the litigation f inancer during the past 5 years; and
4 (iii) any conviction of a crime other than misdemeanor traf f ic violations during the past 10 years;
5 (c) if the person is an entity:
6 (i) the nature of the entity's business operations, if any, during the past 5 years or a description of
7 the business intended to be done by the entity and the entity's subsidiaries, if any; and
8 (ii) a list of all individuals who are or who have been selected to become directors or of f icers of the
9 entity and each subsidiary of the entity. The list must include f or each individual the inf ormation required by
10 subsection (2).
11 (5) A litigation f inancer subject to registration under [sections 1 through 11] shall f ile an amended
12 registration within 30 days whenever the inf ormation contained in the most recently f iled registration changes or
13 becomes inaccurate or incomplete in any respect.
14 (6) The secretary of state is authorized to prescribe the f orms and the f iling f ees the secretary of
15 state considers necessary f or the purposes of registration and f iling any amended registration or annual report
16 pursuant to [sections 1 through 11].
17 (7) All documents and inf ormation f iled with the secretary of state pursuant to this section are
18 public records.
19 (8) The secretary of state's duty to f ile documents under this section is ministerial. The secretary of
20 state's f iling or ref using to f ile a document does not create a presumption that:
21 (a) the document does or does not conf orm to the requirements of this chapter; or
22 (b) the inf ormation contained in the document is correct or incorrect.
23
24 NEW SECTION. Section 4. Litigation financing protections. (1) A litigation f inancer may not:
25 (a) pay or of f er commissions, ref erral f ees, rebates, or other f orms of consideration to any person
26 in exchange f or ref erring a consumer to a litigation f inancer;
27 (b) accept any commissions, ref erral f ees, rebates, or other f orms of consideration f rom any
28 person providing any goods or rendering any services to the consumer;
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1 (c) charge a rate of interest that exceeds that rate of interest allowed under 31-1-107;
2 (d) receive or recover any contingent payment that exceeds 40% of the amount of any judgment,
3 award, settlement, verdict, or other f orm of monetary relief obtained in the civil action, administrative
4 proceeding, claim, or cause of action that is the subject of the litigation contract ;
5 (e) advertise f alse or misleading inf ormation regarding its products or services;
6 (f ) ref er or require any consumer to hire or engage any person providing any goods or rendering
7 any services to the consumer;
8 (g) f ail to promptly deliver a f ully completed and signed litigation f inancing contract to the consumer
9 and the consumer's legal representative;
10 (h) attempt to secure a remedy or obtain a waiver of any remedy, including but not limited to
11 compensatory, statutory, or punitive damages, that the consumer may or may not be entitled to pursue or
12 recover otherwise;
13 (i) of f er or provide legal advice to the consumer;
14 (j) assign, including securitizing, a litigation f inancing contract in whole or in part;
15 (k) report a consumer to a credit reporting agency if insuf f icient f unds remain to repay the litigation
16 f inancer in f ull f rom the proceeds received f rom any judgment, award, settlement, verdict, or other f orm of
17 monetary relief obtained in the civil action, administrative proceeding, claim, or cause of action that is the
18 subject of the litigation f inancing contract; and
19 (l) demand, request, receive, or exercise any right to inf luence, af f ect, or otherwise make any
20 decision in the handling, conduct, administration, litigation, settlement , or resolution of any civil action,
21 administrative proceeding, claim, or cause of action in which the litigation f inancer has provided litigation
22 f inancing. All rights remain solely with the consumer and the consumer's legal representative.
23 (2) A person who provides any goods or renders any services to the consumer may not have a
24 f inancial interest in litigation f inancing and may not receive any commissions, ref erral f ees, rebates, or other
25 f orms of consideration f rom any litigation f inancer or the litigation f inancer's employees, owners, or af f iliates.
26
27 NEW SECTION. Section 5. Litigation financing contract -- disclosures. (1) The terms and
28 conditions of a litigation f inancing contract must be set f orth in a f ully completed written contract with no terms
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1 or conditions omitted. The litigation f inancing contract must contain all terms and conditions at the time it is
2 signed by any party to the litigation f inancing contract.
3 (2) On execution of a litigation f inancing contract, a litigation f inancer may not am end the terms or
4 conditions of the litigation f inancing contract without f ull disclosure to and the prior written consent of all parties
5 to the litigation f inancing contract.
6 (3) A litigation f inancing contract must set f orth the name, physical street address, and mailing
7 address of the litigation f inancer on page 1 of the litigation f inancing contract.
8 (4) A litigation f inancing contract must contain the f ollowing disclosures that constitute material
9 terms and conditions of the litigation f inancing contrac t and must be typed in at least 14-point bold f ont and be
10 placed clearly and conspicuously immediately above the consumer's signature line in the litigation f inancing
11 contract:
12 "IMPORTANT DISCLOSURES -- PLEASE READ CAREFULLY
13 1. Right to Cancellation: You may cancel this litigation f inancing contract without penalty or f urther
14 obligation within f ive (5) business days f rom the date you sign this contract or the date you receive f inancing
15 f rom the litigation f inancer, whichever date is later. You may cancel by sending a notice of cancellation to the
16 litigation f inancer and returning to the litigation f inancer any f unds received f rom the litigation f inancer at the
17 litigation f inancer's address set f orth on page 1 of this contract.
18 2. The maximum amount the litigation f inancer may receive or recover f rom any contingent
19 payment may not exceed f orty percent (40%) of the amount of any judgment, award, settlement, verdict, or
20 other f orm of monetary relief obtained in the civil action, administrative proceeding, claim, or cause of action
21 that is the subject of this litigation contract.
22 3. The litigation f inancer agrees that it has no right to , and will not demand, request, receive, or
23 exercise any right to, inf luence, af f ect, or otherwise make any decision in the handling, conduct, administration,
24 litigation, settlement, or resolution of your civil action, administrative proceeding, claim, or cause of action. All of
25 these rights remain solely with you and yo ur legal representative.
26 4. If there is no recovery of any money f rom your civil action, administrative proceeding, claim , or
27 cause of action, or if there is not enough money to satisf y in f ull the portion assigned to the litigation f inancer,
28 you will not owe anything in excess of your recovery.
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1 5. You are entitled to a f ully completed contract with no terms or conditions omitted prior to
2 signing. Bef ore signing this contract, you should read the contract completely and consult an attorney."
3 (5) If the consumer is represented by a legal representative in the civil action, administrative
4 proceeding, claim, or cause of action that is the subject of the litigation f inancing contract, the legal
5 representative shall acknowledge in the contract that the legal representative and the legal representative's
6 employer and employees have not received or paid a ref erral f ee or any other consideration f rom or to the
7 litigation f inancer and have no obligation to do so in the f uture.
8 (6) If the consumer's legal representative is a party to a litigation f inancing contract related to the
9 consumer's civil action, administrative proceeding, claim, or cause of action that is the subject of the litigation
10 f inancing contract, the legal representative shall disclose and deliver the l itigation f inancing contract to the
11 consumer. Following this disclosure and delivery, the consumer shall sign an acknowledgement that the
12 consumer has read and understands the terms and conditions of the litigation f inancing contract and the
13 consumer must be provided with a cop