LITIGATION FINANCING TRANSPARENCY ACT

HB0223

HOUSE BILL 223

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Marian Matthews

AN ACT

RELATING TO LITIGATION; ENACTING THE LITIGATION FINANCING
TRANSPARENCY ACT; REQUIRING DISCLOSURES; PROVIDING ENFORCEMENT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
[
NEW MATERIAL
] SHORT TITLE.--This act may be
cited as the "Litigation Financing Transparency Act".

SECTION 2.
[
NEW MATERIAL
] DEFINITIONS.--As used in the
Litigation Financing Transparency Act:

A. "action" means a civil action, an administrative
proceeding, a claim or other cause of action;

B. "financial institution" means a bank, a trust
company, a savings and loan association, a credit union, a
consumer lender, an international banking facility or a
financial holding company under the jurisdiction of the state
or federal government;

C. "foreign person" means a person that is not:

(1) a citizen of the United States;

(2) an alien lawfully admitted for permanent
residence in the United States;

(3) an unincorporated association with a
majority number of members of which are citizens of the United
States or aliens lawfully admitted for permanent residence in
the United States; or

(4) a corporation, limited liability company,
partnership, society or other business entity that was formed
or incorporated in the United States;

D. "foreign principal" means:

(1) the government or a government official of
a country other than the United States;

(2) a political subdivision or political party
of a country other than the United States; or

(3) a partnership, an association, a
corporation, an organization or other combination of persons
organized pursuant to the laws of or having its principal place
of business in a country other than the United States whose
shares or other ownership interest is owned by the government
or a government official of a country other than the United
States or owned by a political subdivision or political party
of a country other than the United States;

E. "funded consumer" means a person who has entered
into a litigation financing agreement or whose recovery or
outcome in an action is affected by or subject to a litigation
financing agreement;

F. "health care provider" means:

(1) a person licensed by the state to provide
health care, medical services, nursing services or other
health-related services and includes officers, employees and
agents of the person; or

(2) a federally licensed, regulated or
registered blood bank, blood center or plasma center that
collects, processes or distributes whole human blood, blood
components, plasma, blood fractions or blood derivatives and
includes the officers, employees and agents of the blood bank,
blood center or plasma center;

G. "leadership position" means a lead counsel, a
co-lead counsel, a common benefit counsel, a steering committee
member, an executive committee member or similar positions or
roles;

H. "litigation financier" means a person that has
entered into a litigation financing agreement with a funded
consumer or with the counsel of record for a party to an
action;

I. "litigation financing agreement" means an
agreement for which a person agrees to provide financing,
funding, advancing or loaning of money to pay for fees, costs,
expenses or other sums arising from or in a manner related to
an action in exchange for the right to receive repayment,
interest, fees or other consideration that cumulatively exceeds
the amount of money given by the person and that is contingent
on the outcome of an action or on the outcome of a matter
within a portfolio that includes the action and involves the
same counsel or affiliated counsel;

J. "proprietary information" means information that
is developed, created or discovered by a person or that became
known by or was conveyed to the person that has commercial
value in the person's actual or anticipated business, research
or development or that is received in confidence by or for the
person from any source; and

K. "sovereign wealth fund" means an investment fund
that is owned or controlled by a foreign principal or an agent
of a foreign principal.

SECTION 3.
[
NEW MATERIAL
] LITIGATION FINANCING
AGREEMENTS--EXCLUSIONS.--Excluded from the provisions of this
section are agreements, contracts or arrangements entered into
with or by:

A. a named party to the action if payments made to
the named party are provided exclusively for personal and
family use and are provided on the condition that they are not
to be used for legal filings, legal document preparation and
drafting, appeals, creation of a litigation strategy, drafting
testimony or other expenses directly related to litigation;

B. a counsel of record for legal services provided
on a contingency fee basis or advanced legal costs provided by
a counsel of record;

C. a person with a preexisting contractual
obligation to indemnify or defend a party to the action or a
health insurer that has paid or is obligated to pay sums for
health care services rendered to an injured person pursuant to
the terms of a health insurance policy, plan or agreement;

D. a financial institution for repayment of loans
made directly to a party or a party's counsel when repayment of
the loan is not contingent on the outcome of an action by
settlement, judgment or otherwise or on the outcome of a matter
within a portfolio that includes the action and involves the
same counsel or affiliated counsel;

E. an organization that is exempt from taxation
pursuant to Section 501(c)(3) of the United States Internal
Revenue Code of 1986 if the funding provided to the
organization is used to seek relief other than compensatory
damages in excess of one hundred thousand dollars ($100,000) or
punitive damages, whether as a party or on behalf of a client
or member of the organization and regardless of whether the
organization seeks an award of costs or attorney fees in
providing pro bono representation;

F. an organization that is exempt from taxation
pursuant to Section 501(c)(3) of the United States Internal
Revenue Code of 1986 that provides funding by grant or
otherwise to support the pursuit of litigation that does not
seek compensatory damages in excess of one hundred thousand
dollars ($100,000) or punitive damages; or

G. a person that provides funding to a medical
practice or facility solely for its receivables.

SECTION 4.
[
NEW MATERIAL
] PROHIBITED CONDUCT.--A
litigation financier shall not:

A. direct or make decisions with respect to the
course of an action that is subject to a litigation financing
agreement, including decisions concerning appointing or
changing counsel representing the funded consumer, choice of or
use of expert witnesses and litigation strategy. The funded
consumer and counsel of record shall retain all rights to
decision making and control with regard to the action;

B. pay or offer to pay a commission, a referral fee
or other consideration to a person, including legal counsel, a
law firm or a health care provider, for referring a person to
the litigation financier;

C. assign, including securitizing, a litigation
financing agreement in whole or in part; or

D. be assigned rights to an action that is subject
to a litigation financing agreement to which that litigation
financier is a party.

SECTION 5.
[
NEW MATERIAL
] MANDATORY DISCLOSURES.--

A. Legal counsel that enters into a litigation
financing agreement must deliver a copy of the litigation
financing agreement to all persons the legal counsel is
representing in the subject action within thirty days after the
earlier of being retained as legal counsel or entering into the
litigation financing agreement.

B. Except as otherwise stipulated or ordered by a
court of competent jurisdiction, a party to an action or the
party's legal counsel of record, without awaiting a discovery
request and within thirty days after commencement of the
action, shall:

(1) deliver a copy of the litigation financing
agreement to:

(a) all parties to the action or to the
parties' legal counsels of record;

(b) the court, agency or tribunal in
which the action is pending;

(c) a known person with a preexisting
contractual obligation to indemnify or defend a party to the
action, including an insurer providing indemnification or
paying a party's defense costs;

(d) for a class action, a member of the
class on request; and

(e) for multidistrict litigation
consolidated in this state, all legal counsel approved or
appointed to a leadership position;

(2) disclose in writing to the persons listed
in Paragraph (1) of this subsection the existence and nature of
a legal, financial or other relationship between legal counsel
for the party to the action that is subject to a litigation
financing agreement and the litigation financier; and

(3) disclose in writing to the persons listed
in Paragraph (1) of this subsection, the United States
department of state and the United States department of justice
the name, address and citizenship or country of incorporation
or registration of a foreign person, foreign principal or
sovereign wealth fund, other than named parties or legal
counsel of record:

(a) that has a right to receive a
payment that is contingent on the outcome of the action by
settlement, judgment or otherwise, or on the outcome of a
matter within a portfolio that includes the action and involves
the same or affiliated legal counsel;

(b) from which money that is used to
satisfy a term of the litigation financing agreement has been
or will be directly or indirectly sourced, in whole or in part;
or

(c) that has received or is entitled to
receive proprietary information or information that encompasses
national defense, foreign intelligence and counterintelligence,
international and internal security and foreign relations of
the United States.

C. The disclosure obligations required by this
section are continuing obligations and are triggered on a named
party or the named party's legal counsel of record entering
into a new litigation financing agreement or amending an
existing litigation financing agreement.

D. Prior to production of a litigation financing
agreement in response to a discovery request, a named party may
request and a court must conduct an in-camera review of the
agreement to determine whether it meets the requirements for a
litigation financing agreement. A party may redact information
that may identify the litigation financier before submitting
the agreement for in-camera review. If the court concludes
that the agreement is a litigation financing agreement, a named
party may obtain discovery of the litigation financing
agreement and all parties to the litigation financing
agreement.

E. The court shall determine sanctions for a party
that fails to make the disclosures required by the Litigation
Financing Transparency Act. An evasive or incomplete
disclosure shall be treated as a failure to make the required
disclosure.

F. The disclosure obligations prescribed by this
section apply to class actions and multidistrict litigation.

SECTION 6.
[
NEW MATERIAL
] PROTECTION FROM ADVERSE
DETERMINATIONS.--

A. In a litigation financing agreement, a
litigation financier shall indemnify the funded consumers
against adverse costs, attorney fees, damages or sanctions that
may be ordered or awarded in an action for which a litigation
financier is providing financing for the litigation.

B. Notwithstanding Subsection A of this section,
indemnification is not required for adverse costs, attorney
fees, damages or sanctions that result from the consumer's
intentionally wrongful conduct.

SECTION 7.
[
NEW MATERIAL
] VIOLATION OF ACT.--

A. A litigation financing agreement that is entered
into in violation of the Litigation Financing Transparency Act
is void.

B. A litigation financier that violates a section
of the Litigation Financing Transparency Act commits an
unlawful act pursuant to the Unfair Practices Act.

SECTION 8.
APPLICABILITY.--The Litigation Financing
Transparency Act applies to a civil action, an administrative
proceeding, a claim or a cause of action that is pending or
commenced on or after the effective date of that act.

SECTION 9.
EFFECTIVE DATE.--The effective date of the
provisions of this act is December 31, 2026.