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Florida Justice Reform Institute

Christine Jordan Sexton - January 25, 2024

Litigation financing was left out of last year's omnibus tort bill, and in previous years the bills have died in committee.

The Republican-controlled Legislature is moving a proposal that would crack down on outside parties who help bankroll lawsuits by requiring attorneys who contract with them to disclose that information to the court as well as their legal competitor’s defense teams.

Members of the House Civil Justice Subcommittee passed legislation (HB 1179) filed by Reps. Tommy Gregory and Toby Overdorf by a 10-7 vote. The Senate Judiciary Committee voted unanimously to pass identical legislation (SB 1276) last week.

The bills create a new section of law called the Litigation Investment Safeguards and Transparency Act and establishes definitions for, among other things, litigation financing, foreign persons, and foreign principals. It requires lawyers who enter into third-party litigation agreements to disclose that information to their clients as well as the court, opposing counsel, and any known person, such as an insurer, with a pre-existing contractual obligation to indemnify or defend a party to the action. The information would be subject to discovery.

The bills ban litigation financing companies from receiving a larger share of the proceeds than the plaintiffs after the payment of attorney fees and costs. The bill also bans litigation financiers from directing or making any decision concerning legal strategy. If the litigation financing company has international ties, lawyers also must disclose the name, address and citizenship, country of incorporation or registration of any foreign person, foreign principal, or sovereign wealth fund.

House bill sponsor Overdorf told members of the civil justice subcommittee the requirement protects American interests from foreign interests, a point that U.S. Chamber of Commerce lobbyist George Fejoo underscored to committee members.

 “I don’t have the legal clearance, and I don’t think that you guys do as well, that Sen. Scott and Rubio do, or the Department of Justice or the House Select Committee on China. But all of them have expressed comments on this,” he said, adding they were concerned proprietary information could be leaked. “These folks that know what’s going on say it’s a problem and that’s why we are trying to lead here in Florida on this disclosure piece.”

The bill excludes from the definition of third-party litigation financier health insurance companies and “an entity with a pre existing contractual obligation to indemnify or defend a party to a civil action, administrative proceeding, claim, or other legal proceeding.”

According to news reports litigation financing is a $13.5 billion industry.

The proposed changes in the bills have been under consideration in the Legislature before, but they haven’t made it across the finish line. Litigation financing was left out of last year’s omnibus tort bill (HB 837), and in previous years, the bills have died in committee

This year’s legislation is coming forward following a public fight between food giant Sysco and Burford Capital, the largest third-party finance and management firm. It is publicly traded on the New York, and London stock exchanges with offices in New York, London, Chicago, Washington, DC, Singapore, Dubai, Sydney and Hong Kong. Facing price-fixing suits, Sysco initially turned to the financier for assistance. But it ultimately sued Buford Capital accusing the financier of meddling with its legal strategy and blocking a settlement that Burford deemed “too low.”

State Rep. and retired judge, Patt Maney said he had worries that the information third party financiers are required to disclose is discoverable under the bill.he had worries that the information third-party financiers are required to disclose is discoverable under the bill.  “It’s my understanding that the discovery has to be calculated to lead to relevant and admissible information. And I don’t see how this leads to relevant and admissible information in a balanced way. I have a stumbling block on that today,” he said.

Rep. Ashley Gantt, a member of the committee and a lawyer, said the bill “is leaving Floridians who will have a cause of action against the big company at a great disadvantage. And the insurance companies again, will not have a duty to disclose. So we’re telling Goliath he has a slingshot, and he actually has three pebbles, so make sure you dodge those and then you will be good. So we are robbing David of the ability to defend himself in a situation of litigation.”

Committee member Rep. Kimberly Daniels agreed.

“The American in me and the military in me, I’m all for national security. It’s a priority on my list. But I don’t think it’s more important than the issue at hand right now. I don’t believe we need a law degree to come to the conclusion this bill gives insurance companies an advantage over injured parties,” she said.

In addition to being a top priority for the Florida Justice Reform Institute, the bills also are a priority for the American Tort Reform Foundation. A section of the 2023-24 Judicial Hellhole Report the American Tort Reform Foundation publishes was dedicated to third-party litigation agreements.

The proposal’s prognosis for the 2024 Session, supporters say, is good. SB 1276 is slated to be heard by the Senate Fiscal Policy Committee next. It is the second and last stop for the bill before it’s eligible to be heard on the Senate floor. HB 1179 is next slated to be heard by the House Justice Appropriations Subcommittee and the Judiciary Committee, which is chaired by bill co-sponsor Gregory.