Florida lawmakers moved Wednesday to regulate the litigation finance industry, arguing that investor involvement in lawsuits exposes courts to domestic and foreign manipulation.
A state Senate committee has voted in favor of a bill sponsored by Republican Sen. Jay Collins that would require litigants to disclose when their lawsuits will be financed by investors seeking a financial return if the lawsuit is successful. Obliged.
“It's frightening that they can interfere and influence our court system,” Collins said. The Senate Fiscal Policy Committee approved the bill on a 15-6 vote.
The bill (SB 1276) is one of a series of proposals backed by the U.S. Chamber of Commerce and other groups introduced in states this year aimed at reining in the $13.5 billion litigation finance industry. Kansas, Rhode Island, and Arizona also introduced litigation funding bills in January.
Florida's bill includes more than just disclosure of litigation funding agreements. The bill also takes cues from federal legislation introduced last year by Sens. John Kennedy (R-Louisiana) and Joe Manchin (D-Virginia) that would require disclosure of foreign investments.
Nathan Morris, senior associate director of the chamber's Justice Reform Institute, said, “Floridians are concerned about how outsiders, such as hedge funds and foreign governments, can control lawsuits at any time in exchange for large settlements and damages. “We need to know what they are funding.”
At a hearing Wednesday in Florida, Collins added amendments that would allow for editing of loan amounts and extend protections to nonprofits.
The bill also targets funders by not allowing them to receive more revenue than the plaintiffs receiving funding. There is also a requirement that litigation funders reimburse plaintiffs for adverse costs, attorneys' fees, damages, and sanctions. If these are not included, the litigation funding agreement will be void and unenforceable.
Kansas is the only state to have a bill referred to committee. The industry's trade group, the International Legal Finance Association, is lobbying against the bill in Florida and Kansas, but has no registered lobbyists in Arizona and Rhode Island. Industry groups did not testify at the Florida hearing.
“ILFA has strong relationships with legislators across the country and educates them about the shameful misinformation being spread by the U.S. Chamber of Commerce and the insurance industry,” ILFA said in a statement. “We will continue to fight for greater access to our court system within a balanced regulatory environment that prioritizes the rule of law over special interests.”
Florida's bill is the most advanced of the state's efforts, passing out of committee on Wednesday and receiving early approval in the Senate Judiciary Committee.
A parallel bill in the Florida House of Representatives was voted in favor of the Civil Justice Subcommittee, but was delayed twice for consideration by the House Judiciary Appropriations Subcommittee.
The bill must be approved on the floor of the House and Senate before going to Republican Gov. Ron DeSantis for his signature.
Democratic state Sen. Shevrin Jones suggested during Wednesday's hearing that the bill is unnecessary. “I don't buy into the national security concerns and foreign manipulation that we're talking about,” he said.
