Read the full stored bill text
Senate
File
2419
-
Introduced
SENATE
FILE
2419
BY
COMMITTEE
ON
JUDICIARY
(SUCCESSOR
TO
SF
586)
(SUCCESSOR
TO
SF
54)
A
BILL
FOR
An
Act
relating
to
third-party
litigation
funding
and
including
1
applicability
provisions.
2
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
3
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Section
1.
PURPOSE.
In
an
effort
to
promote
consumer
1
protections
related
to
consumer
litigation
funding
2
transactions,
this
Act
establishes
that
such
transactions
must
3
be
subject
to
state
regulation
and
sets
forth
requirements
4
regarding
disclosure,
registration,
funding
company
and
5
attorney
responsibilities
and
limitations,
violations,
6
and
other
items.
This
Act
also
requires
the
disclosure
of
7
commercial
litigation
financing
agreements
and
sets
forth
8
certain
prohibitions
regarding
commercial
litigation
financing
9
agreements.
10
Sec.
2.
NEW
SECTION
.
537C.1
Title.
11
This
chapter
shall
be
known
and
may
be
cited
as
the
12
“Third-Party
Litigation
Funding
Transparency
Act”
.
13
Sec.
3.
NEW
SECTION
.
537C.2
Definitions.
14
As
used
in
this
chapter,
the
following
terms
shall
have
the
15
following
meanings:
16
1.
“Advertise”
means
publishing
or
disseminating
any
17
written,
oral,
electronic,
or
printed
communication
or
any
18
communication
by
means
of
recorded
telephone
messages
or
19
transmitted
or
broadcast
on
radio,
television,
the
internet
or
20
similar
communications,
media,
including
audio
recordings,
film
21
strips,
motion
pictures
and
videos,
published,
disseminated,
22
circulated
or
placed
before
the
public,
directly
or
indirectly,
23
for
the
purpose
of
inducing
a
consumer
to
enter
into
a
consumer
24
litigation
funding.
25
2.
“Charges”
means
the
amount
of
money
to
be
paid
to
the
26
consumer
litigation
funding
company
by
or
on
behalf
of
the
27
consumer,
above
the
funded
amount
provided
by
or
on
behalf
of
28
the
consumer
litigation
funding
company
to
a
consumer.
Charges
29
include
all
administrative,
origination,
underwriting,
or
other
30
fees,
including
interest,
no
matter
how
denominated.
31
3.
“Commercial
litigation
financier”
means
a
person
in
the
32
business
of
entering
into
commercial
litigation
financing
33
agreements
with
claimants
or
with
lawyers
or
law
firms
34
asserting
legal
claims
on
behalf
of
claimants.
“Commercial
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litigation
financier”
does
not
include
a
nonprofit
organization
1
exempt
from
federal
income
tax
under
section
501(c)(3)
of
2
the
Internal
Revenue
Code
or
its
funders
if
the
nonprofit
3
organization
represents
the
claimant
on
a
pro
bono
basis,
which
4
may
include
an
award
of
costs
or
attorney
fees
to
the
nonprofit
5
organization
or
a
related
attorney.
6
4.
a.
“Commercial
litigation
financing
agreement”
means
7
with
respect
to
any
civil
action
or
group
of
civil
actions,
8
a
written
agreement
or
any
contract
that
does
all
of
the
9
following:
10
(1)
A
third
party
agrees
to
provide
funds
to
one
of
the
11
named
parties
or
any
law
firm
affiliated
with
the
action
or
12
group
of
civil
actions.
13
(2)
Creates
a
direct
or
collateralized
interest
in
the
14
proceeds
of
a
civil
action
or
group
of
civil
actions,
whether
15
by
settlement,
verdict,
judgment,
or
otherwise,
and
whose
16
interest
is
based
in
whole
or
in
part
on
a
funding-based
17
obligation
to
the
action
or
group
of
actions
or
the
appearing
18
counsel
or
any
contractual
co-counsel
or
the
law
firms
of
the
19
counsel
or
co-counsel
executed
with
any
of
the
following:
20
(a)
Any
attorney
representing
a
party.
21
(b)
Any
co-counsel
in
the
litigation
with
a
contingent
fee
22
interest
in
the
representation
of
that
party.
23
(c)
Any
third
party
who
has
a
collateral-based
interest
in
24
the
contingency
fees
of
the
counsel
or
co-counsel
firm
related
25
in
whole
or
in
part
to
the
fees
derived
from
representing
that
26
party.
27
b.
“Commercial
litigation
financing
agreement”
does
not
28
include
any
of
the
following:
29
(1)
A
consumer
litigation
funding
agreement.
30
(2)
An
agreement
by
an
attorney
or
law
firm
to
provide
31
legal
services
on
a
contingency
fee
basis
to
the
claimant
or
to
32
advance
the
claimant’s
legal
costs
in
accordance
with
the
Iowa
33
rules
of
professional
conduct.
34
(3)
A
health
insurer,
medical
provider,
or
assignee
that
has
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paid,
is
obligated
to
pay,
or
is
owed
any
sums
for
a
person’s
1
health
care
under
the
terms
of
a
health
insurance
plan
or
2
agreement.
3
(4)
A
financial
institution
providing
loans
to
the
claimant
4
or
the
claimant’s
attorney
or
law
firm
when
repayment
is
not
5
contingent
upon
the
outcome
of
the
legal
claim
or
on
the
6
outcome
of
any
matter
within
a
portfolio
that
includes
the
7
legal
claim
and
involves
the
same
attorney
or
law
firm
or
8
affiliated
attorney
or
law
firm.
9
(5)
A
person
with
a
preexisting
contractual
obligation
to
10
indemnify
or
defend
a
party
to
a
legal
claim.
11
5.
“Consumer”
means
a
natural
person
or
estate
for
a
12
decedent
with
a
legal
claim.
13
6.
“Consumer
litigation
funding”
means
a
nonrecourse
14
transaction
in
which
a
consumer
litigation
funding
company
15
purchases
and
a
consumer
assigns
to
the
company
a
contingent
16
right
to
receive
an
amount
of
the
potential
proceeds
of
17
a
settlement,
judgment,
award,
or
verdict
obtained
in
the
18
consumer’s
legal
claim.
19
7.
“Consumer
litigation
funding
company”
means
a
person
or
20
entity
that
enters
into
a
consumer
litigation
funding
contract
21
with
a
consumer.
“Consumer
litigation
funding
company”
does
not
22
include
any
of
the
following:
23
a.
An
immediate
family
member
of
the
consumer.
24
b.
A
bank,
lender,
financing
entity,
or
other
special
25
purpose
entity
that
provides
financing
to
a
consumer
litigation
26
funding
company
or
to
which
a
consumer
litigation
funding
27
company
grants
a
security
interest
or
transfers
any
rights
or
28
interest
in
a
consumer
litigation
funding.
29
c.
An
attorney
or
accountant
who
provides
services
to
a
30
consumer.
31
8.
“Foreign
country
or
person
of
concern”
means
a
foreign
32
government
or
person
listed
in
15
C.F.R.
§791.4
or
a
country
33
designated
as
a
threat
to
critical
infrastructure
by
the
34
governor.
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9.
“Foreign
entity
of
concern”
means
an
entity
that
is
any
1
of
the
following:
2
a.
Organized
or
incorporated
in
a
foreign
country
of
3
concern.
4
b.
Owned
or
controlled
by
the
government,
a
political
5
subdivision,
or
a
political
party
of
a
foreign
country
of
6
concern.
7
c.
Has
a
principal
place
of
business
in
a
foreign
country
8
of
concern.
9
d.
Owned,
organized,
or
controlled
by,
affiliated
with,
or
10
acting
on
behalf
of
an
individual
or
entity
that
is
or
has
been
11
any
of
the
following:
12
(1)
On
a
sanctions
list
maintained
by
the
federal
office
of
13
foreign
assets
control,
including
any
of
the
following:
14
(a)
Specially
designated
nationals
and
blocked
persons
15
list.
16
(b)
Foreign
sanctions
evaders
list.
17
(c)
Non-SDN
Iran
sanctions
act
list.
18
(d)
Sectoral
sanctions
identifications
list.
19
(e)
List
of
foreign
financial
institutions
subject
to
20
correspondent
account
and
payable-through
account
sanctions.
21
(2)
Designated
by
the
United
States
secretary
of
state
as
a
22
foreign
terrorist
organization.
23
10.
“Funded
amount”
means
the
amount
of
moneys
provided
to,
24
or
on
behalf
of,
the
consumer
in
a
consumer
litigation
funding
25
contract.
“Funded
amount”
excludes
charges.
26
11.
“Funding
date”
means
the
date
on
which
the
funded
amount
27
is
transferred
to
the
consumer
by
the
consumer
litigation
28
funding
company
either
by
personal
delivery
or
through
a
wire
29
transfer
network,
automated
clearing
house,
or
other
electronic
30
means
or
mailed
by
insured,
certified,
or
registered
United
31
States
mail.
32
12.
“Immediate
family
member”
means
a
parent;
sibling;
33
child
by
blood,
adoption,
or
marriage;
spouse;
grandparent;
or
34
grandchild.
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13.
“Legal
claim”
means
a
civil
claim
or
cause
of
action.
1
14.
“Resolution
date”
means
the
date
the
funded
amount,
2
plus
the
agreed-upon
charges,
are
delivered
to
the
consumer
3
litigation
funding
company
by
the
consumer,
the
consumer’s
4
attorney,
or
otherwise.
5
Sec.
4.
NEW
SECTION
.
537C.3
Consumer
litigation
funding
6
contract
requirements
——
right
of
rescission
——
disclosures
to
7
consumers.
8
1.
All
consumer
litigation
funding
contracts
must
meet
all
9
of
the
following
requirements:
10
a.
The
contract
shall
be
written
in
a
clear
and
coherent
11
manner
using
words
with
common,
everyday
meanings
to
enable
the
12
average
consumer
who
makes
a
reasonable
effort
under
ordinary
13
circumstances
to
read
and
understand
the
terms
of
the
contract
14
without
having
to
obtain
the
assistance
of
a
professional.
15
b.
The
contract
shall
be
completely
filled
in
when
presented
16
to
the
consumer
for
signature.
17
c.
The
contract
shall
contain
the
initials
of
the
consumer
18
on
each
page.
19
d.
The
contract
shall
contain
a
statement
that
there
are
no
20
fees
or
charges
to
be
paid
by
the
consumer
other
than
what
is
21
disclosed
on
the
disclosure
form.
22
e.
In
the
event
the
consumer
seeks
more
than
one
litigation
23
funding
contract
from
the
same
company,
the
contract
shall
24
contain
a
statement
providing
the
cumulative
amount
due
from
25
the
consumer
for
all
transactions,
including
charges
under
all
26
contracts,
if
repayment
is
made
any
time
after
the
contracts
27
are
executed.
28
f.
The
contract
shall
contain
a
statement
of
the
maximum
29
amount
the
consumer
may
be
obligated
to
pay
under
the
30
contract
other
than
in
a
case
of
material
breach,
fraud,
or
31
misrepresentation
by
or
on
behalf
of
the
consumer.
32
g.
The
contract
shall
clearly
and
conspicuously
detail
33
how
charges,
including
any
applicable
fees,
are
incurred
or
34
accrued.
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2.
All
consumer
litigation
funding
contracts
must
contain
1
the
disclosures
specified
in
this
section,
which
shall
2
constitute
material
terms
of
the
contract.
Unless
otherwise
3
specified,
such
disclosures
shall
be
typed
in
at
least
twelve
4
point
bold
type
font
and
be
placed
clearly
and
conspicuously
5
within
the
contract,
as
follows:
6
a.
On
the
front
page
under
appropriate
headings,
language
7
specifying
all
of
the
following:
8
(1)
The
funded
amount
to
be
paid
to
the
consumer
by
the
9
consumer
litigation
funding
company.
10
(2)
An
itemization
of
one-time
charges.
11
(3)
The
maximum
total
amount
to
be
assigned
by
the
consumer
12
to
the
company,
including
the
funded
amount
and
all
charges.
13
(4)
A
payment
schedule
to
include
the
funded
amount
and
14
charges,
listing
all
dates
and
the
amount
due
at
the
end
of
15
each
one-hundred-eighty-day
period
from
the
funding
date,
until
16
the
date
the
maximum
amount
due
to
the
company
pursuant
to
the
17
contract
is
paid.
18
b.
Within
the
body
of
the
consumer
litigation
funding
19
contract,
language
stating
all
of
the
following:
20
Consumer’s
right
to
cancellation:
you
may
cancel
this
21
contract
without
penalty
or
further
obligation
within
ten
22
business
days
after
the
funding
date
if
you
return
to
the
23
consumer
litigation
funding
company
the
full
amount
of
the
24
disbursed
funds.
25
The
consumer
litigation
funding
company
shall
have
no
role
26
in
deciding
whether,
when,
and
how
much
the
legal
claim
is
27
settled
for;
however,
the
consumer
and
consumer’s
attorney
must
28
notify
the
consumer
litigation
funding
company
of
the
outcome
29
of
the
legal
claim
by
settlement
or
adjudication
prior
to
or
on
30
the
resolution
date.
The
company
may
seek
updated
information
31
about
the
status
of
the
legal
claim
but
in
no
event
shall
32
the
company
attempt
to
interfere
with,
control,
or
influence
33
the
independent
professional
judgment
of
the
attorney
in
the
34
handling
of
the
legal
claim
or
any
settlement
thereof.
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THE
FUNDED
AMOUNT
AND
AGREED-UPON
CHARGES
SHALL
BE
PAID
1
ONLY
FROM
THE
PROCEEDS
OF
YOUR
LEGAL
CLAIM,
AND
SHALL
BE
PAID
2
ONLY
TO
THE
EXTENT
THAT
THERE
ARE
AVAILABLE
PROCEEDS
FROM
YOUR
3
LEGAL
CLAIM.
YOU
WILL
NOT
OWE
(INSERT
NAME
OF
THE
CONSUMER
4
LITIGATION
FUNDING
COMPANY)
ANYTHING
IF
THERE
ARE
NO
PROCEEDS
5
FROM
YOUR
LEGAL
CLAIM,
UNLESS
YOU
HAVE
VIOLATED
ANY
MATERIAL
6
TERM
OF
THIS
CONTRACT
OR
YOU
HAVE
COMMITTED
FRAUD
AGAINST
7
(INSERT
NAME
OF
CONSUMER
LITIGATION
FUNDING
COMPANY).
8
c.
Located
immediately
above
the
place
on
the
contract
9
where
the
consumer’s
signature
is
required,
in
twelve
point
10
bold
type
font:
Do
not
sign
this
contract
before
you
read
it
11
completely.
Do
not
sign
this
contract
if
it
contains
any
blank
12
spaces.
You
are
entitled
to
a
completely
filled-in
copy
of
the
13
contract
before
you
sign
this
contract.
You
should
obtain
the
14
advice
of
an
attorney
before
signing
this
contract.
Depending
15
on
the
circumstances,
you
may
want
to
consult
a
tax,
public
16
or
private
benefits
planning,
or
financial
professional.
You
17
acknowledge
that
your
attorney
in
the
legal
claim
has
provided
18
no
tax,
public
or
private
benefit
planning,
or
financial
advice
19
regarding
this
transaction.
You
further
acknowledge
that
your
20
attorney
has
explained
the
terms
and
conditions
of
the
consumer
21
litigation
funding
contract.
22
3.
All
consumer
litigation
funding
contracts
must
contain
a
23
written
acknowledgment
by
the
attorney
retained
by
the
consumer
24
in
the
legal
claim
that
attests
to
all
of
the
following:
25
a.
The
attorney
has
reviewed
the
disclosures
in
subsections
26
1
and
2
with
the
consumer.
27
b.
The
attorney
is
being
paid
on
a
contingency
basis
28
pursuant
to
a
written
fee
agreement.
29
c.
All
proceeds
of
the
legal
claim
will
be
disbursed
via
30
either
the
trust
account
of
the
attorney
or
a
settlement
fund
31
established
to
receive
the
proceeds
of
the
legal
claim
on
32
behalf
of
the
consumer.
33
d.
The
attorney
is
obligated
to
disburse
funds
from
the
34
legal
claim
and
take
any
other
steps
to
ensure
that
the
terms
35
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of
the
litigation
funding
contract
are
fulfilled.
1
e.
The
attorney
has
not
received
a
referral
fee
or
other
2
consideration
from
the
consumer
litigation
funding
company
in
3
connection
with
the
consumer
litigation
funding,
nor
will
the
4
attorney
receive
such
fee
or
other
consideration
in
the
future.
5
f.
The
attorney
in
the
legal
claim
has
provided
no
tax,
6
public,
or
private
benefit
planning,
or
financial
advice
7
regarding
this
transaction.
8
4.
In
the
event
that
the
acknowledgement
required
pursuant
9
to
subsection
3
is
not
provided
by
the
attorney
or
firm
10
retained
by
the
consumer
in
the
legal
claim,
the
consumer
11
litigation
funding
contract
shall
be
null
and
void.
The
12
consumer
litigation
funding
contract
shall
remain
valid
and
13
enforceable
in
the
event
the
consumer
terminates
the
initial
14
attorney
or
retains
a
new
attorney
with
respect
to
the
legal
15
claim.
16
5.
A
copy
of
the
executed
contract
shall
promptly
be
17
delivered
to
the
attorney
for
the
consumer.
18
Sec.
5.
NEW
SECTION
.
537C.4
Consumer
litigation
funding
19
prohibitions
and
charge
limitations.
20
1.
Consumer
litigation
funding
companies
shall
not
do
any
21
of
the
following:
22
a.
Pay
or
offer
to
pay
commissions,
referral
fees,
or
other
23
forms
of
consideration
to
any
attorney,
law
firm,
health
care
24
provider,
chiropractor,
physical
therapist,
or
any
of
such
25
person’s
employees
for
referring
a
consumer
to
the
consumer
26
litigation
funding
company.
27
b.
Accept
commissions,
referral
fees,
rebates,
or
other
28
forms
of
consideration
from
an
attorney,
law
firm,
health
care
29
provider,
chiropractor,
physical
therapist,
or
any
of
such
30
person’s
employees.
31
c.
Intentionally
advertise
false
or
misleading
information
32
regarding
the
consumer
litigation
funding
company’s
products
33
or
services.
34
d.
Refer,
in
furtherance
of
an
initial
legal
funding,
a
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customer
or
potential
customer
to
a
specific
attorney,
law
1
firm,
health
care
provider,
chiropractor,
physical
therapist,
2
or
any
of
such
person’s
employees;
provided,
however,
if
a
3
customer
needs
legal
representation,
the
consumer
litigation
4
funding
company
may
refer
the
customer
to
a
local
or
state
bar
5
association
referral
service.
6
e.
Knowingly
provide
funding
to
a
consumer
who
has
7
previously
assigned
or
sold
a
portion
of
the
consumer’s
right
8
to
proceeds
from
a
legal
claim
without
first
making
payment
to
9
or
purchasing
a
prior
unsatisfied
consumer
litigation
funding
10
company’s
entire
funded
amount
and
contracted
charges,
unless
a
11
lesser
amount
is
otherwise
agreed
to
in
writing
by
the
consumer
12
litigation
funding
company,
except
that
multiple
companies
may
13
agree
to
contemporaneously
provide
consumer
litigation
funding
14
to
a
consumer
provided
that
the
consumer
and
the
consumer’s
15
attorney
consent
to
the
arrangement
in
writing.
16
f.
Make
any
decision,
have
any
influence,
or
direct
17
any
decisions
with
respect
to
the
course
of
a
legal
claim,
18
including
decisions
in
appointing
or
changing
counsel,
choice
19
or
use
of
expert
witnesses,
litigation
strategy,
and
settlement
20
or
other
resolution.
The
right
to
make
all
decisions
regarding
21
a
legal
claim
remains
solely
with
the
claimant
and
the
22
claimant’s
attorney
or
law
firm.
23
g.
Attempt
to
obtain
a
waiver
of
any
remedy
or
right
by
the
24
consumer,
including
but
not
limited
to
the
right
to
trial
by
25
jury.
26
h.
Knowingly
pay
or
offer
to
pay
for
court
costs,
filing
27
fees,
or
attorney
fees
either
during
or
after
the
resolution
28
of
the
legal
claim,
using
funds
from
the
consumer
litigation
29
funding
transaction.
30
2.
Notwithstanding
any
other
provision
of
law,
prepayment
31
penalties
or
fees
shall
not
be
charged
or
collected
in
32
connection
with
a
consumer
litigation
funding
transaction.
A
33
prepayment
penalty
in
a
consumer
litigation
funding
transaction
34
is
unenforceable.
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3.
An
attorney
or
law
firm
retained
by
the
consumer
in
a
1
legal
claim
shall
not
have
a
financial
interest
in
the
consumer
2
litigation
funding
company
offering
consumer
litigation
funding
3
to
that
consumer.
4
4.
An
attorney
who
has
referred
the
consumer
to
a
retained
5
attorney
shall
not
have
a
financial
interest
in
the
consumer
6
litigation
funding
company
offering
consumer
litigation
funding
7
to
that
consumer.
8
5.
An
attorney
shall
not
disclose
confidential
or
9
privileged
information
to
a
consumer
litigation
funding
company
10
without
the
written
consent
of
the
consumer
and
in
accord
with
11
any
order
of
the
court
in
the
litigation.
12
6.
A
consumer
litigation
funding
company
shall
not
enter
13
into
a
consumer
litigation
financing
contract
directly
or
14
indirectly
with
a
foreign
entity
of
concern
or
a
foreign
15
country
or
person
of
concern.
16
Sec.
6.
NEW
SECTION
.
537C.5
Contracted
amounts
for
consumer
17
litigation
funding.
18
The
contracted
amount
to
be
paid
to
the
consumer
litigation
19
funding
company
shall
be
a
predetermined
amount
based
upon
20
intervals
of
time
from
the
funding
date
through
the
resolution
21
date,
and
shall
not
be
determined
as
a
percentage
of
the
22
recovery
from
the
legal
claim.
23
Sec.
7.
NEW
SECTION
.
537C.6
Disclosures.
24
1.
Within
thirty
days
of
a
written
request,
a
consumer
shall
25
disclose
to
any
party
to
a
legal
claim
and
each
insurer
that
26
has
a
duty
to
defend
whether
the
consumer
has
entered
into
a
27
consumer
litigation
funding
contract.
28
2.
If
a
consumer
enters
into
a
consumer
litigation
funding
29
contract
after
responding
to
a
request
pursuant
to
subsection
30
1,
the
consumer
has
a
continuing
obligation
to
disclose
and
31
shall
disclose
this
fact
to
the
requesting
person
within
thirty
32
days
after
the
consumer
enters
into
the
contract.
33
3.
Consumer
litigation
funding
contracts,
and
all
34
participants
or
parties
to
the
consumer
litigation
contract,
35
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are
presumed
to
be
discoverable
in
a
civil
proceeding,
1
notwithstanding
any
agreement
or
provision
with
respect
2
to
confidentiality.
A
consumer
may
seek
to
rebut
this
3
presumption.
4
4.
Consumer
litigation
funding
transactions
disclosed
5
under
subsections
1
and
2
and
consumer
litigation
funding
6
contracts
discovered
pursuant
to
subsection
3
are
presumed
to
7
be
inadmissible
as
evidence.
A
party
may
seek
to
rebut
this
8
presumption.
9
Sec.
8.
NEW
SECTION
.
537C.7
Violations
of
consumer
10
litigation
funding
requirements.
11
1.
If
a
consumer
litigation
funding
company
that
willfully
12
violates
any
provision
of
this
chapter
in
a
specific
funding
13
case,
all
of
the
following
apply:
14
a.
Shall
waive
the
consumer
litigation
funding
company’s
15
right
to
recover
both
the
funded
amount
and
any
and
all
16
charges,
as
defined
in
section
537C.2,
in
that
particular
case.
17
b.
Shall
be
liable
for
a
civil
penalty
of
not
more
than
one
18
hundred
thousand
dollars
for
each
violation,
which
shall
accrue
19
to
the
state
of
Iowa
and
may
be
recovered
in
a
legal
claim
20
brought
by
the
attorney
general.
21
2.
This
chapter
shall
not
restrict
the
power
of
the
attorney
22
general.
23
Sec.
9.
NEW
SECTION
.
537C.8
Assignability
——
liens
24
regarding
consumer
litigation
funding.
25
1.
The
contingent
right
to
receive
an
amount
of
the
26
potential
proceeds
of
a
legal
claim
is
assignable
by
a
consumer
27
to
a
consumer
litigation
funding
company.
28
2.
Only
attorney’s
liens
related
to
the
legal
claim
which
29
is
the
subject
of
the
consumer
litigation
funding,
Medicare,
30
or
other
statutory
liens
related
to
the
legal
claim
shall
take
31
priority
over
any
lien
of
the
consumer
litigation
funding
32
company.
33
Sec.
10.
NEW
SECTION
.
537C.9
Consumer
litigation
funding
34
privileged
communications.
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Communications
between
a
consumer’s
attorney
and
a
consumer
1
legal
funding
company
to
allow
the
consumer
legal
funding
2
company
to
ascertain
the
status
of
a
legal
claim
or
a
legal
3
claim’s
expected
value
shall
not
be
discoverable
by
a
person
4
against
whom
the
legal
claim
is
asserted
or
filed.
5
Sec.
11.
NEW
SECTION
.
537C.10
Consumer
litigation
funding
6
and
commercial
litigation
financing
registration.
7
1.
Unless
a
consumer
litigation
funding
company
or
8
commercial
litigation
financier
has
first
registered
with
the
9
state
pursuant
to
this
chapter,
the
company
shall
not
engage
in
10
consumer
litigation
funding
or
commercial
litigation
financing
11
agreements
in
this
state.
12
2.
An
applicant’s
registration
must
be
filed
in
the
manner
13
prescribed
by
the
secretary
of
state
and
must
contain
all
14
the
information
required
by
the
secretary
of
state
to
make
15
an
evaluation
of
the
character
and
fitness
of
the
applicant
16
company
or
financier,
including
but
not
limited
to
any
17
beneficial
ownership
exceeding
twenty
percent.
The
initial
18
application
must
be
accompanied
by
a
fee
determined
by
the
19
secretary
of
state.
A
renewal
registration
must
include
a
fee
20
determined
by
the
secretary
of
state.
A
registration
must
be
21
renewed
every
two
years
and
expires
on
December
31.
22
3.
A
certificate
of
registration
shall
not
be
issued
unless
23
the
secretary
of
state,
upon
investigation,
finds
that
the
24
character
and
fitness
of
the
applicant
company
or
financier,
25
and
of
the
officers
and
directors
thereof,
are
such
as
to
26
warrant
belief
that
the
business
will
be
operated
honestly
and
27
fairly
within
the
purposes
of
this
chapter.
28
4.
Every
registrant
shall,
at
the
time
of
filing
such
29
application,
file
with
the
secretary
of
state,
if
the
secretary
30
of
state
so
requires,
a
bond
satisfactory
to
the
secretary
31
of
state
in
an
amount
not
to
exceed
one
hundred
thousand
32
dollars.
In
lieu
of
the
bond
at
the
option
of
the
registrant,
33
the
registrant
may
post
an
irrevocable
letter
of
credit.
The
34
terms
of
the
bond
must
run
concurrent
with
the
period
of
time
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during
which
the
registration
will
be
in
effect.
The
bond
1
must
provide
that
the
registrant
will
faithfully
conform
to
2
and
abide
by
the
provisions
of
this
chapter
and
to
all
rules
3
lawfully
made
by
the
administrator
under
this
chapter
and
to
4
any
such
person
or
persons
any
and
all
amounts
of
money
that
5
may
become
due
or
owing
to
the
state
or
to
such
person
or
6
persons
from
the
registrant
under
and
by
virtue
of
this
chapter
7
during
the
period
for
which
the
bond
is
given.
8
5.
Upon
written
request,
the
applicant
shall
be
entitled
to
9
a
hearing
on
the
question
of
the
applicant’s
qualifications
for
10
registration
if
any
of
the
following
are
true:
11
a.
The
secretary
of
state
has
notified
the
applicant
in
12
writing
that
the
application
has
been
denied.
13
b.
The
secretary
of
state
has
not
issued
a
registration
14
within
sixty
days
after
the
application
for
the
registration
15
was
filed.
16
6.
A
request
for
a
hearing
shall
not
be
made
more
than
17
fifteen
days
after
the
secretary
of
state
has
mailed
a
written
18
notice
to
the
applicant
that
the
application
has
been
denied
19
and
stating
in
substance
the
secretary
of
state’s
findings
20
supporting
denial
of
the
application.
21
7.
Notwithstanding
the
prior
approval
requirement
of
22
subsection
1,
a
consumer
litigation
funding
company
or
23
commercial
litigation
financier
that
registered
with
the
24
secretary
of
state
between
the
effective
date
of
this
Act
or
25
when
the
secretary
of
state
has
made
applications
available
26
to
the
public,
whichever
is
later,
and
one
hundred
eighty
27
days
thereafter
may
engage
in
consumer
commercial
litigation
28
funding
or
commercial
litigation
financing
agreements
while
the
29
company’s
registration
is
pending
approval
with
the
secretary
30
of
state.
All
consumer
litigation
funding
or
commercial
31
litigation
financing
agreements
entered
into
prior
to
the
32
effective
date
of
this
Act
are
not
subject
to
the
terms
of
this
33
chapter.
34
8.
A
person
or
entity
shall
not
use
any
form
of
consumer
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litigation
funding
contract
or
commercial
litigation
financing
1
agreement
in
this
state
unless
it
has
been
filed
with
the
2
secretary
of
state
in
accordance
with
the
filing
procedures
3
set
forth
by
the
secretary
of
state.
Such
procedures
shall
4
designate
a
reasonable
time
frame
for
the
state
to
raise
5
objections
to
any
filed
form.
6
Sec.
12.
NEW
SECTION
.
537C.11
Commercial
litigation
7
financing
reporting.
8
1.
Each
commercial
litigation
financier
that
engages
9
in
business
in
the
state
shall
annually
submit
a
report
to
10
the
secretary
of
state
by
December
31
specifying
all
of
the
11
following:
12
a.
The
number
of
litigation
fundings
by
the
company
or
13
financier
that
year.
14
b.
A
summation
of
funded
amounts
in
dollars
that
year.
15
c.
The
annual
percentage
charged
to
each
consumer
or
16
commercial
litigation
funding
recipient
where
repayment
was
17
made
that
year.
18
2.
The
secretary
of
state
shall
make
such
information
19
available
to
the
public,
in
a
manner
which
maintains
the
20
confidentiality
of
the
name
of
each
company
and
consumer,
no
21
later
than
thirty
days
after
the
reports
are
submitted.
22
Sec.
13.
NEW
SECTION
.
537C.12
Prohibitions
related
to
23
commercial
litigation
funding.
24
1.
A
commercial
litigation
financier
shall
not
enter
25
into
a
commercial
litigation
financing
agreement
directly
or
26
indirectly
with
a
foreign
entity
of
concern,
a
foreign
country,
27
or
person
of
concern.
28
2.
A
claimant,
attorney,
or
law
firm
representing
a
29
claimant,
affiliated
attorney,
or
law
firm
shall
not
disclose
30
or
share
any
documents
or
information
with
a
commercial
31
litigation
financier
where
such
information
is
subject
to
a
32
protective
or
sealing
order
from
a
court.
33
3.
A
commercial
litigation
financier
shall
not
make
any
34
decision,
have
any
influence,
or
direct
any
decisions
with
35
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respect
to
the
course
of
a
legal
claim,
including
decisions
1
in
appointing
or
changing
counsel,
choice
or
use
of
expert
2
witnesses,
litigation
strategy,
and
settlement
or
other
3
resolution.
The
right
to
make
all
decisions
regarding
a
legal
4
claim
remains
solely
with
the
claimant
and
the
claimant’s
5
attorney
or
law
firm.
6
Sec.
14.
NEW
SECTION
.
537C.13
Commercial
litigation
7
financing
agreement
disclosure
and
discovery.
8
1.
Except
as
otherwise
stipulated
or
ordered
by
the
court,
9
a
claimant
or
the
claimant’s
attorney
shall,
without
awaiting
10
a
discovery
request,
provide
to
all
parties
any
commercial
11
litigation
financing
agreement
at
the
time
a
legal
claim
is
12
asserted
or
commenced
and
any
time
thereafter
that
a
commercial
13
litigation
financing
agreement
is
executed
or
amended.
An
14
insurer
that
has
or
may
have
a
duty
to
defend
or
indemnify
a
15
party
to
a
legal
claim
shall
be
provided
with
the
commercial
16
litigation
financing
agreement
or
any
modifications
or
17
amendments
to
the
agreement.
18
2.
Commercial
litigation
financing
agreements
and
all
19
participants
or
parties
to
such
agreements
are
permissible
20
subjects
of
discovery
in
a
legal
claim.
21
Sec.
15.
NEW
SECTION
.
537C.14
Authority
of
secretary
of
22
state
to
promulgate
certain
rules.
23
The
secretary
of
state
is
authorized
to
adopt
rules
24
necessary
to
effectuate
the
purposes
of
this
chapter.
25
Sec.
16.
APPLICABILITY.
This
Act
applies
to
any
consumer
26
litigation
funding,
contract,
or
commercial
litigation
27
financing
agreement
that
is
effectuated
on
or
after
July
1,
28
2026.
29
EXPLANATION
30
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
31
the
explanation’s
substance
by
the
members
of
the
general
assembly.
32
This
bill
creates
the
third-party
litigation
funding
33
transparency
Act,
which
provides
the
terms,
conditions,
34
and
disclosures
related
to
consumer
litigation
funding
35
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transactions.
1
The
bill
defines
“consumer
litigation
funding”
to
mean
a
2
nonrecourse
transaction
in
which
a
consumer
litigation
funding
3
company
purchases,
and
a
consumer
assigns
to
the
company,
a
4
contingent
right
to
receive
an
amount
of
the
potential
proceeds
5
of
settlement,
judgment,
award,
or
verdict
obtained
in
the
6
consumer’s
legal
claim.
7
The
bill
requires
all
consumer
litigation
funding
contracts
8
to
do
the
following:
(1)
be
written
in
a
clear
and
coherent
9
manner,
(2)
be
completely
finished
when
presented
to
the
10
consumer
for
a
signature,
(3)
contain
the
initial
of
the
11
consumer
on
each
page
of
the
contract,
(4)
have
a
statement
12
providing
there
are
no
fees
or
charges
other
than
the
ones
13
listed
in
the
contract,
(5)
if
a
consumer
has
more
than
one
14
consumer
litigation
funding
contract
with
the
same
company,
15
each
contract
must
provide
the
cumulative
amount
due
from
the
16
consumer
for
all
transactions,
(6)
contain
a
statement
of
the
17
maximum
amount
the
consumer
may
be
obligated
to
pay,
and
(7)
18
detail
how
charges
or
fees
are
incurred
or
accrued.
A
consumer
19
litigation
funding
contract
must
include
disclosures
required
20
by
the
bill
and
the
manner
in
which
disclosures
are
typed.
The
21
bill
requires
a
consumer
litigation
funding
contract
to
have
a
22
written
acknowledgment
by
the
attorney
retained
by
the
consumer
23
in
the
legal
claim.
If
such
required
attorney
acknowledgment
24
is
not
provided,
the
consumer
litigation
funding
contract
25
is
null
and
void.
If
the
consumer
retains
a
new
attorney
26
or
terminates
the
initial
attorney,
the
consumer
litigation
27
funding
contract
is
considered
enforceable.
The
bill
requires
28
a
copy
of
the
executed
contract
to
be
promptly
delivered
to
the
29
consumer’s
attorney.
30
The
bill
prohibits
consumer
litigation
funding
companies
31
from
doing
any
of
the
following:
(1)
paying
or
offering
to
pay
32
commissions,
referral
fees,
or
other
forms
of
consideration
33
to
any
person
for
referring
a
consumer
to
the
consumer
34
litigation
funding
company,
(2)
accepting
commissions,
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referral
fees,
rebates,
or
other
forms
of
consideration
from
1
an
attorney,
law
firm,
health
care
provider,
chiropractor,
2
physical
therapist,
or
any
of
such
person’s
employees,
(3)
3
intentionally
advertising
false
or
misleading
information
4
regarding
the
consumer
litigation
funding
company’s
products
5
or
services,
(4)
referring,
in
furtherance
of
an
initial
6
legal
funding,
a
customer
or
potential
customer
to
a
specific
7
person,
(5)
knowingly
providing
funding
to
a
consumer
who
has
8
previously
assigned
or
sold
a
portion
of
the
consumer’s
right
9
to
proceeds
from
a
legal
claim
without
first
making
payment
to
10
or
purchasing
a
prior
unsatisfied
consumer
litigation
funding
11
company’s
entire
funded
amount
and
contracted
charges,
(6)
12
making
any
decision,
having
any
influence,
or
directing
any
13
decisions
with
respect
to
the
course
of
a
legal
claim,
(7)
14
attempting
to
obtain
a
waiver
of
any
remedy
or
right
by
the
15
consumer,
and
(8)
knowingly
paying
or
offering
to
pay
for
court
16
costs,
filing
fees,
or
attorney
fees
using
funds
from
the
17
consumer
litigation
funding
transaction.
The
bill
provides
18
that
a
consumer
litigation
funding
company
shall
not
enter
into
19
a
consumer
litigation
financing
contract
directly
or
indirectly
20
with
a
foreign
entity
of
concern
or
a
foreign
country
or
person
21
of
concern,
as
those
terms
are
defined
in
the
bill.
22
The
bill
requires
that
the
contracted
amount
to
be
paid
to
23
the
consumer
litigation
funding
company
to
be
a
predetermined
24
amount
and
shall
not
be
determined
as
a
percentage
of
the
25
recovery
from
the
legal
claim.
26
The
bill
requires
that
within
30
days
of
a
written
request,
27
a
consumer
shall
disclose
to
any
party
to
a
legal
claim
and
28
each
insurer
that
has
a
duty
to
defend
whether
the
consumer
29
has
entered
into
a
consumer
litigation
funding
contract.
The
30
consumer
has
an
ongoing
obligation
to
disclose
a
consumer
31
litigation
funding
contract
to
such
parties
if
entered
32
into
after
the
initial
request.
The
bill
provides
that
33
consumer
litigation
funding
contracts,
and
all
participants
34
or
parties
to
the
consumer
litigation
contract,
are
presumed
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to
be
discoverable
in
a
civil
proceeding.
However,
consumer
1
litigation
funding
transactions
disclosed
under
the
bill
and
2
consumer
litigation
funding
contracts
discovered
pursuant
to
3
the
bill
are
presumed
to
be
inadmissible
as
evidence.
4
The
bill
provides
damages
and
penalties
for
a
violation
of
a
5
consumer
litigation
funding
requirement.
6
The
bill
allows
the
contingent
right
to
receive
an
amount
of
7
the
potential
proceeds
of
a
legal
claim
to
be
assignable
by
a
8
consumer
to
a
consumer
litigation
funding
company.
The
bill
9
also
provides
which
liens
shall
take
priority.
10
The
bill
provides
for
privileged
communications
between
11
a
consumer’s
attorney
and
a
consumer
legal
funding
company
12
to
allow
the
consumer
legal
funding
company
to
ascertain
the
13
status
of
a
legal
claim.
14
The
bill
requires
the
registration
of
consumer
litigation
15
funding
companies
and
commercial
litigation
financers
with
16
the
secretary
of
state.
The
bill
provides
registration
17
requirements
and
procedures
for
a
consumer
litigation
funding
18
company
or
commercial
litigation
financer.
The
bill
requires
a
19
commercial
litigation
financier
or
consumer
litigation
funding
20
company
to
submit
annual
reports
to
the
secretary
of
state.
21
The
bill
provides
that
all
documents
and
information
filed
with
22
the
secretary
of
state
pursuant
to
the
registration
are
public
23
records.
24
The
bill
prohibits
a
commercial
litigation
financier
from
25
entering
into
a
commercial
litigation
financing
agreement
26
directly
or
indirectly
with
a
foreign
entity
of
concern,
a
27
foreign
country,
or
person
of
concern.
The
bill
prohibits
28
a
claimant,
attorney,
or
law
firm
representing
a
claimant,
29
affiliated
attorney,
or
law
firm
from
disclosing
or
sharing
any
30
documents
or
information
with
a
commercial
litigation
financier
31
where
such
information
is
subject
to
a
protective
or
sealing
32
order
from
a
court.
The
bill
further
prohibits
a
commercial
33
litigation
financier
from
making
any
decision,
having
any
34
influence,
or
directing
any
decisions
with
respect
to
the
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course
of
a
legal
claim.
1
The
bill
authorizes
the
secretary
of
state
to
adopt
rules
2
necessary
to
effectuate
the
purposes
of
the
bill.
3
The
bill
applies
to
any
consumer
litigation
funding,
4
contract,
or
commercial
litigation
financing
agreement
that
is
5
effectuated
on
or
after
July
1,
2026.
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