Litigation financing regulation heads to Senate Rules Committee

The latest attempt to regulate litigation financing is on a fast-track in the Florida Senate, with sponsors saying a bill would bring greater transparency and consumer protection.

Opponents continue to push back, arguing that disclosure requirements would put individuals at a bigger disadvantage when challenging corporate and well-heeled defendants.

SB 1396 by Sen. Colleen Burton, R-Lakeland, makes its final committee stop today [Tuesday] in Senate Rules. It cleared its first stop, in the Judiciary Committee, 8-2, on January 27.

Burton, one of the few non-lawyers on the Judiciary Committee, stressed that the “Litigation Investment Safeguards and Transparency Act,” doesn’t ban litigation financing or contingency fee arrangements.

The bill merely protects consumers by barring litigation financers from interfering with the course of the lawsuit or recovering more of the proceeds than the plaintiffs collectively recover, Burton said.

“When a plaintiff enters into a legal proceeding, they anticipate they will receive the benefit if it goes their way,” Burton said.

The bill also protects Florida’s civil justice system from U.S. adversaries by requiring plaintiffs to disclose agreements that involve a “foreign person, foreign principal, or sovereign wealth fund.”

Burton stressed that the bill requires plaintiffs to disclose the existence of litigation financing, not the terms of an agreement.

The bill is supported by insurance companies, Associated Industries of Florida, the Florida Chamber of Commerce, and the Florida Justice Reform Institute, to name a few.

A litigation financing bill by former Sen. Jay Collins, a Tampa Republican who has since been appointed lieutenant governor, died on the Seante calendar in the 2024 session.

In 2023, lawmakers, encouraged by the same groups that support SB 1396, enacted sweeping civil litigation restrictions in the name of “tort reform.”

Litigation financing is not uncommon in the commercial sector, where “sophisticated litigants” use the funds primarily in commercial disputes and class actions, according to a Senate analysis.

In the consumer sector, the analysis notes, litigation financing helps individuals pay rent, utilities, and other living costs while a lawsuit is pending. The analysis cites industry data that show more than half of the consumers earn $50,000 or less, lack a college degree, and less than half are homeowners, “suggesting that lower-income consumers with access to fewer resources are the primary market for litigation funding agreements.”

Caroline Gieser, an Atlanta attorney appearing on behalf of the American Tort Reform Institute, told the Judiciary Committee that SB 1396 is modest compared with recent restrictions Georgia lawmakers enacted. Georgia requires litigation financers to register with the state’s financial regulators, Gieser said. The state also bars foreign adversaries from participating in litigation financing.

Florida has no statute regulating litigation financing, Gieser noted.

“This is a fast-growing, billion-dollar industry,” that has attracted Chinese investors, Gieser said. “Left unchecked and undisclosed, third-party litigation funders may direct the choice of an attorney, litigation decisions, and even whether a case should settle or go to trial.”

Sen. Tina Polsky

Sen. Tina Polsky, D-Boca Raton, and an attorney, pressed Gieser for more details.

“So why would you need to know as a defendant in a personal injury case how the plaintiff is financing it?” she asked, adding that it could encourage defendants to drag out the proceedings until the plaintiff’s money runs out. “What would you do with the information that the plaintiff has a litigation financing agreement?”

“That’s case specific,” Gieser said, adding that the “plaintiff’s lawyer has the ability to seek a protective order on my discovery conduct,” if he or she suspects delaying tactics.

George Feijoo, representing the U.S. Chamber of Commerce’s Institute for Legal Reform, said a study last month by the Perryman Group blames litigation financing for contributing to “nuclear verdicts” that cost U.S. consumers $600 per household and the U.S. and state governments $15 billion in lost tax revenue.

“Tort reform works,” he said. “We shouldn’t fatigue from providing more affordability for Floridians, more transparency.”

William Cotterall, a Tallahassee lawyer representing the Florida Justice Association, a staunch opponent, warned that disclosure of litigation financing agreements will harm, not help consumers.

“When litigation financing is disclosed, even if the terms of the contract are not disclosed, that provides an incentive to drag out discovery, because they know the clock may be ticking on a financing contract.”

The bill is one-sided, Cotterall argued.

“Not a single thing that they talked about would apply to the defendant,” Cotterall said. “If you want to look at an equal judiciary, they have to be playing on a level playing field.”

SB 1396 is one of 17 bills the Senate Rules Committee will consider when it convenes at 9 a.m. today. It goes next to the Senate floor.

A companion measure, HB 1157 by Rep. Fabián Basabe, R-Miami Beach, has yet to be heard. It faces hearings in the Civil Justice & Claims Subcommittee, Justice Budget Subcommittee, and Judiciary.

Lawmakers are scheduled to adjourn the regular, 60-day session on March 13.