A Florida measure is advancing in the state Legislature that would require the disclosure of third-party litigation funding agreements in civil lawsuits, limit what investors could recover through damages awards and boost transparency of foreign financial interests.
House Bill 1179, sponsored by Rep. Tommy Gregory (R-Lakewood Ranch) and Rep. Toby Overdorf (R-Palm City), passed the House Civil Justice Subcommittee last month. The bill has garnered the support of business groups concerned that such financing agreements lead to excessive litigation and inflated damages awards.
State Sen. Jay Collins (R-Tampa) is sponsoring the version of the bill introduced in the upper house.
““Litigation financing fuels unmeritorious lawsuits in the courts; takes control away from the injured party; and ultimately hurts the consumer,” Alix Miller, president and CEO of the Florida Trucking Association, told the Florida Record in an email. “Florida Trucking Association applauds the efforts of Rep. Gregory, Overdorf and Sen. Collins with HB 1179 / SB 1276, which seeks transparency in our courts and prevents foreign powers or nefarious hedge funds from manipulating our justice system.”
The Legislature’s analysis of HB 1179 indicates that third-party financing of civil litigation, including class-action lawsuits and consolidated actions, can raise concerns about the fairness of the legal process if such funding agreements are not transparent to opposing counsel.
“Unlike with a traditional loan, where a lender might look at a consumer’s credit score, income and other indicators of the consumer’s ability to pay, a litigation financier typically weighs the strength of the claim underlying the civil action, considering the likelihood that the party seeking funding will prevail and the potential damages which may be awarded,” the analysis states.
In addition, litigation-financing agreements can be problematic because such financiers could obtain access to proprietary information or information bearing on U.S. national security interests, according to the analysis.
The bill would require the disclosure of foreign financial interests in civil lawsuits, such as the citizenship or country of foreign investors or sovereign wealth funds, under certain situations, the analysis says.
In addition, the bill outlines conduct by litigation financiers that are prohibited.
“Under the bill, all rights to make decisions with respect to the course and settlement or other disposition of the subject civil action remain solely with the parties thereto and their attorneys,” the analysis states.
Under the provisions of the bill, litigation funders would not be able to receive a larger share of the proceeds from a civil case than the proceeds recovered by the plaintiffs once attorney fees and costs are allocated.
Supporters of the legislation have argued that the bill is necessary in order to bar hostile foreign powers, such as China, from gaining access to U.S. businesses’ trade secrets.
“NFIB supports requiring plaintiffs in lawsuits to disclose third-party financing contracts to defendants in lawsuits and supports prohibiting lawsuit lenders from directing cases on behalf of plaintiffs,” the Florida chapter of the National Federation of Independent Business said in a recent press release.
Opponents, however, contend that litigation-funding agreements tend to benefit plaintiffs and that disclosure of their funding agreements would give corporate defendants a greater advantage in defeating such lawsuits.
If passed and signed by Gov. Ron DeSantis, the measure would take effect on July 1.