Measure would bar funders from receiving a larger share of settlements than plaintiffs
By Kenneth Araullo
A bill filed in the Florida House of Representatives aims to impose restrictions on litigation financing agreements and establish new disclosure requirements.
House Bill 1157 was introduced by Rep. Fabian Basabe (pictured above), a Republican representing District 106.
The legislation follows a previous attempt to regulate third-party litigation financing in the state. A prior bill, H.B. 1179 and S.B. 1276, which contained similar provisions, stalled in the state House during an earlier session.
The proposed legislation would require courts to evaluate whether litigation funding agreements could impair legal counsel’s ability to adequately and fairly represent parties in a lawsuit. It seeks to address potential conflicts of interest that may arise from third-party financing arrangements.
Under the bill, litigation funders would be prohibited from directing or making decisions regarding the conduct of a lawsuit. This includes restrictions on appointing counsel or selecting expert witnesses.
HB 1157 would also cap the financial returns for litigation funders. The bill prevents funders from receiving a larger share of any settlement than what plaintiffs receive and prohibits the payment of commissions or referral fees.
The bill includes specific provisions related to foreign involvement in litigation financing. In cases where funding agreements involve foreign entities, HB 1157 would require disclosure of the agreement’s existence and identification of the foreign person or entity involved.
Florida is not alone in pursuing litigation funding regulations. The Washington Legislature is set to consider House Bill 2255, a measure that would institute registration requirements, disclosure obligations, interest rate caps, and limits on financiers’ influence over legal strategy and settlements.
Like Florida’s HB 1157, the Washington bill would prohibit financiers from paying referral fees to attorneys and require full disclosure of all funding agreements to all parties in a lawsuit.
Litigation funding involves outside investors providing capital to plaintiffs or law firms in exchange for a portion of any settlement or judgment.