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Senate Study Bill 3150 - IntroducedA Bill ForAn Act 1regulating litigation financing contracts, and including
2effective date and applicability provisions.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 537C.1 Title.
2This chapter shall be known as the “Litigation Financing
3Transparency and Consumer Protection Act”.
4 Sec. 2. NEW SECTION. 537C.2 Definitions.
5As used in this chapter, unless otherwise required by the
6context:
71. “Consumer” means any individual who resides, is present,
8or is domiciled in this state or who is or may become a
9plaintiff, claimant, or complainant in a civil action or an
10administrative proceeding or in pursuit of any claim or cause
11of action in this state.
122. “Entity” means any domestic or foreign corporation,
13partnership, limited partnership, limited liability company,
14trust, fund, plan, or any other business, enterprise,
15association, or organization of any kind or nature.
163. “Legal representative” means any attorney, group
17of attorneys, or law firm duly licensed and authorized to
18practice law and to represent a consumer in a civil action,
19administrative proceeding, or claim to recover damages in this
20state.
214. “Litigation financer” means any person or group of
22persons engaged in, formed, created, or established for the
23purpose of engaging in the business of litigation financing or
24any other business or economic activity in which a person or
25group of persons receive consideration of any kind in exchange
26for providing litigation financing.
275. “Litigation financing” means the financing, funding,
28advancing, or loaning of money to pay fees, costs, expenses, or
29any other sums arising from or in any manner related to a civil
30action, administrative proceeding, claim, or cause of action,
31if the financing, funding, advancing, or loaning of money is
32provided by any person other than a person who is any of the
33following:
34a. A party to the civil action, administrative proceeding,
35claim, or cause of action.
-1- 1b. A legal representative engaged, directly or indirectly
2through another legal representative, to represent a party in
3a civil action, administrative proceeding, claim, or cause of
4action.
5c. An entity or insurer with a preexisting contractual
6obligation to indemnify or defend a party in a civil action,
7administrative proceeding, claim, or cause of action.
86. a. “Litigation financing contract” means a written
9contract in which a person agrees to provide litigation
10financing to any person in conjunction with a civil action or
11an administrative proceeding or in pursuit of any claim or
12cause of action in consideration for any of the following:
13(1) The payment of interest, fees, or other consideration to
14the person providing the litigation financing.
15(2) Granting or assigning to the person providing the
16litigation financing a right to receive payment from the
17value of any proceeds or other consideration realized from
18any judgment, award, settlement, verdict, or other form of
19monetary relief any consumer, legal representative, or other
20person may receive or recover in relation to the civil action,
21administrative proceeding, claim, or cause of action.
22b. “Litigation financing contract” does not include any
23agreement, contract, or engagement of a legal representative
24to render legal services to a consumer on a contingency fee
25basis, including the advancement of legal costs by the legal
26representative, in which the services or costs are provided
27to or on behalf of a consumer by the legal representative
28representing the consumer in the civil action, administrative
29proceeding, claim, or cause of action.
307. “Person” means an individual or an entity.
318. “Regulated lender” means any of the following:
32a. A bank, building and loan association, savings and loan
33association, trust company, credit union, credit association,
34consumer loan licensee, deferred deposit loan licensee,
35residential mortgage lender licensee, development corporation,
-2-1bank holding company, or mutual or stock insurance company
2organized pursuant to state or federal statutory authority and
3subject to supervision, control, or regulation by any of the
4following:
5(1) An agency of the state of Iowa.
6(2) An agency of the federal government.
7b. A subsidiary of an entity described in paragraph “a”.
8c. An Iowa state agency or a federal agency that is
9authorized to lend money.
10d. A corporation or other entity established by congress or
11the state of Iowa that is owned, in whole or in part, by the
12United States or the state of Iowa and that is authorized to
13lend money.
14 Sec. 3. NEW SECTION. 537C.3 Registration.
151. A person shall not engage in litigation financing in this
16state unless the person is registered with the secretary of
17state as a litigation financer pursuant to this chapter.
182. If the person registering as a litigation financer is an
19entity:
20a. The entity must be active and in good standing as
21reflected in the office of the secretary of state.
22b. The entity’s articles of incorporation, charter, articles
23of organization, certificate of limited partnership, or other
24organizational or governing document must contain a statement
25that the entity has the power to engage in the business of
26litigation financing and is designated as a litigation financer
27pursuant to this chapter.
283. To register as a litigation financer, a person shall file
29a registration statement with the secretary of state setting
30forth all of the following information:
31a. The legal name of the litigation financer.
32b. The physical street address and mailing address of the
33litigation financer.
34c. A telephone number or electronic mail address through
35which the litigation financer may be contacted.
-3- 1d. The physical street address and mailing address of the
2licensed financer’s registered office and the name of the
3registered agent at the registered office who is authorized to
4accept service of process on behalf of the licensed financer.
5e. Any other information the secretary of state considers
6necessary.
74. If the person seeking to register as a litigation
8financer is an entity, the following information must be set
9forth in the registration statement with respect to each person
10that, directly or indirectly, owns, controls, holds with the
11power to vote, or holds proxies representing five percent or
12more of the voting securities of the litigation financer:
13a. The legal name, physical street address, and mailing
14address of each person.
15b. If the person is an individual, all of the following:
16(1) The individual’s occupation.
17(2) Any offices and positions held with the litigation
18financer during the past five years.
19(3) Any conviction of a crime other than misdemeanor traffic
20violations during the past ten years.
21c. If the person is an entity, all of the following:
22(1) The nature of the entity’s business operations, if
23any, during the past five years or a description of the
24business intended to be done by the entity and the entity’s
25subsidiaries, if any.
26(2) A list of all individuals who are or who have been
27selected to become directors or officers of the entity and
28each subsidiary of the entity. The list must include for each
29individual the information required by paragraph “b”.
305. A litigation financer subject to registration under this
31chapter shall file an amended registration within thirty days
32whenever the information contained in the most recently filed
33registration changes or becomes inaccurate or incomplete in any
34respect.
356. The secretary of state is authorized to prescribe the
-4-1forms and the filing fees the secretary of state considers
2necessary for the purposes of this chapter.
37. All documents and information filed with the secretary of
4state pursuant to this section are public records.
58. The secretary of state’s duty to file documents under
6this section is ministerial. The secretary of state’s filing
7or refusing to file a document does not create a presumption
8of any of the following:
9a. That the document does or does not conform to the
10requirements of this chapter.
11b. That the information contained in the document is correct
12or incorrect.
13 Sec. 4. NEW SECTION. 537C.4 Litigation financing
14protections.
151. A litigation financer shall not do any of the following:
16a. Pay or offer commissions, referral fees, rebates, or
17other forms of consideration to any person in exchange for
18referring a consumer to a litigation financer.
19b. Accept any commissions, referral fees, rebates, or other
20forms of consideration from any person providing any goods or
21rendering any services to the consumer.
22c. Charge a rate of interest that exceeds the rate of
23interest allowed under chapter 535.
24d. Receive or recover any payment that exceeds twenty-five
25percent of the amount of any judgment, award, settlement,
26verdict, or other form of monetary relief obtained in the civil
27action, administrative proceeding, claim, or cause of action
28that is the subject of the litigation contract.
29e. Advertise false or misleading information regarding the
30litigation financer’s products or services.
31f. Refer or require any consumer to hire or engage any
32person providing any goods or rendering any services to the
33consumer.
34g. Fail to promptly deliver a fully completed and signed
35litigation financing contract to the consumer and the
-5-1consumer’s legal representative.
2h. Attempt to secure a remedy or obtain a waiver of any
3remedy, including but not limited to compensatory, statutory,
4or punitive damages, that the consumer may or may not be
5entitled to pursue or recover otherwise.
6i. Offer or provide legal advice to the consumer.
7j. Assign, including securitizing, a litigation financing
8contract in whole or in part.
9k. Report a consumer to a credit reporting agency if
10insufficient funds remain to repay the litigation financer
11in full from the proceeds received from any judgment, award,
12settlement, verdict, or other form of monetary relief obtained
13in the civil action, administrative proceeding, claim, or cause
14of action that is the subject of the litigation financing
15contract.
16l. Demand, request, receive, or exercise any right to
17influence, affect, or otherwise make any decision in the
18handling, conduct, administration, litigation, settlement, or
19resolution of any civil action, administrative proceeding,
20claim, or cause of action in which the litigation financer has
21provided litigation financing. All rights remain solely with
22the consumer and the consumer’s legal representative.
232. A person who provides any goods or renders any services
24to the consumer shall not have a financial interest in
25litigation financing and shall not receive any commissions,
26referral fees, rebates, or other forms of consideration from
27any litigation financer or the litigation financer’s employees,
28owners, or affiliates.
29 Sec. 5. NEW SECTION. 537C.5 Litigation financing contract
30— disclosures.
311. The terms and conditions of a litigation financing
32contract must be set forth in a fully completed written
33contract with no terms or conditions omitted. The litigation
34financing contract must contain all terms and conditions at
35the time it is signed by any party to the litigation financing
-6-1contract.
22. On execution of a litigation financing contract, a
3litigation financer shall not amend the terms or conditions of
4the litigation financing contract without full disclosure to
5and the prior written consent of all parties to the litigation
6financing contract.
73. A litigation financing contract must set forth the name,
8physical street address, and mailing address of the litigation
9financer on the first page of the litigation financing
10contract.
114. A litigation financing contract must contain the
12following disclosures that constitute material terms and
13conditions of the litigation financing contract and must be
14typed in at least fourteen point bold font and be placed
15clearly and conspicuously immediately above the consumer’s
16signature line in the litigation financing contract:
17IMPORTANT DISCLOSURES — PLEASE READ CAREFULLY
18Right to Cancellation: You may cancel this litigation
19financing contract without penalty or further obligation within
20five business days from the date you sign this contract or
21the date you receive financing from the litigation financer,
22whichever date is later. You may cancel by sending a notice
23of cancellation to the litigation financer and returning to
24the litigation financer any funds received from the litigation
25financer at the litigation financer’s address set forth on the
26first page of this contract.
27The maximum amount the litigation financer may receive or
28recover from any contingent payment shall not exceed twenty
29five percent of the amount of any judgment, award, settlement,
30verdict, or other form of monetary relief obtained in the civil
31action, administrative proceeding, claim, or cause of action
32that is the subject of this litigation contract.
33The litigation financer agrees that it has no right to,
34and will not demand, request, receive, or exercise any right
35to, influence, affect, or otherwise make any decision in the
-7-1handling, conduct, administration, litigation, settlement, or
2resolution of your civil action, administrative proceeding,
3claim, or cause of action. All of these rights remain solely
4with you and your legal representative.
5If there is no recovery of any money from your civil action,
6administrative proceeding, claim, or cause of action, or if
7there is not enough money to satisfy in full the portion
8assigned to the litigation financer, you will not owe anything
9in excess of your recovery.
10You are entitled to a fully completed contract with no terms
11or conditions omitted prior to signing. Before signing this
12contract, you should read the contract completely and consult
13an attorney.
145. If the consumer is represented by a legal representative
15in the civil action, administrative proceeding, claim, or cause
16of action that is the subject of the litigation financing
17contract, the legal representative shall acknowledge in
18the contract that the legal representative and the legal
19representative’s employer and employees have not received or
20paid a referral fee or any other consideration from or to the
21litigation financer and have no obligation to do so in the
22future.
236. If the consumer’s legal representative is a party to a
24litigation financing contract related to the consumer’s civil
25action, administrative proceeding, claim, or cause of action
26that is the subject of the litigation financing contract, the
27legal representative shall disclose and deliver the litigation
28financing contract to the consumer. Following this disclosure
29and delivery, the consumer shall sign an acknowledgment that
30the consumer has read and understands the terms and conditions
31of the litigation financing contract and the consumer must be
32provided with a copy of the acknowledgment.
33 Sec. 6. NEW SECTION. 537C.6 Disclosure and discovery of
34litigation financing contracts.
351. Except as otherwise stipulated or ordered by the court, a
-8-1consumer or the consumer’s legal representative shall, without
2awaiting a discovery request, disclose and deliver to all of
3the following persons the litigation financing contract:
4a. Each party to the civil action, administrative
5proceeding, claim, or cause of action, or to each party’s legal
6representative.
7b. The court, agency, or tribunal in which the civil action,
8administrative proceeding, claim, or cause of action may be
9pending.
10c. Any known person, including an insurer, with a
11preexisting contractual obligation to indemnify or defend a
12party to the civil action, administrative proceeding, claim,
13or cause of action.
142. The disclosure obligation under subsection 1 exists
15regardless of whether a civil action or an administrative
16proceeding has commenced.
173. The disclosure obligation under subsection 1 is a
18continuing obligation, and within thirty days of entering
19into a litigation financing contract or amending an existing
20litigation financing contract, the consumer or the consumer’s
21legal representative shall disclose and deliver any new or
22amended litigation financing contracts.
234. The existence of the litigation financing contract
24and all participants or parties to a litigation financing
25contract are permissible subjects of discovery in any civil
26action, administrative proceeding, claim, or cause of action
27to which litigation financing is provided under the litigation
28financing contract, regardless of whether a civil action or an
29administrative proceeding has commenced.
30 Sec. 7. NEW SECTION. 537C.7 Exemptions.
31This chapter does not apply to any of the following:
321. A nonprofit organization that provides litigation
33financing, directly or indirectly, for the benefit of the
34nonprofit organization or one or more of the nonprofit
35organization’s members without receiving, in consideration for
-9-1the litigation financing, any of the following:
2a. The payment of interest, fees, or other consideration.
3b. Except for in-house counsel of the nonprofit
4organization, any right to recovery or payment from the amount
5of any judgment, award, settlement, verdict, or other form of
6monetary relief obtained in the civil action, administrative
7proceeding, claim, or cause of action.
82. Any litigation financing provided by an entity engaged in
9commerce or business activity, but only if the entity does not
10do any of the following:
11a. Charge or collect any interest, fees, or other
12consideration.
13b. Retain or receive any financial interest in the outcome
14of the civil action, administrative proceeding, claim, or cause
15of action.
16c. Receive any right to recovery or payment from the amount
17of any judgment, award, settlement, verdict, or other form of
18monetary relief obtained in the civil action, administrative
19proceeding, claim, or cause of action.
203. A regulated lender that does not receive, in
21consideration for loaning money to any person, a right to
22receive payment from the value of any proceeds or other
23consideration realized from any judgment award, settlement,
24verdict, or other form of monetary relief any person
25may receive or recover in relation to any civil action,
26administrative proceeding, claim, or cause of action.
27 Sec. 8. NEW SECTION. 537C.8 Class actions.
28This chapter shall apply to any civil action filed or
29certified as a class action in which litigation financing
30is provided. A litigation financer owes a fiduciary
31duty to all class members or intended beneficiaries of a
32certified class and shall act in a manner consistent with the
33litigation financer’s fiduciary duty throughout the civil
34action. In addition to the disclosure requirements, the
35legal representative of the putative class shall disclose
-10-1to all parties, putative class members, and the court any
2legal, financial, or other relationship between the legal
3representative and the litigation financer. A class member is
4entitled to receive from the class counsel a true and correct
5copy of the litigation financing contract on request.
6 Sec. 9. NEW SECTION. 537C.9 Joint and several liability for
7costs.
8A litigation financer is jointly and severally liable for
9any award or order imposing or assessing costs or monetary
10sanctions against a consumer arising from or relating to any
11civil action, administrative proceeding, claim, or cause
12of action for which the litigation financer is providing
13litigation financing.
14 Sec. 10. NEW SECTION. 537C.10 Regulatory oversight —
15rulemaking.
16The secretary of state may adopt rules and other policies in
17overseeing the practice of litigation financing consistent with
18this chapter.
19 Sec. 11. NEW SECTION. 537C.11 Violation — unenforceable
20contract.
211. Any violation of this chapter by the litigation financer
22renders the litigation financing contract unenforceable by
23the litigation financer or any successor-in-interest to the
24litigation financing contract.
252. If a litigation financer charges a rate of interest that
26exceeds the rate of interest allowed under chapter 535, the
27litigation financer shall be subject to a penalty for usury and
28an action to recover excessive interest as authorized under
29chapter 535.
30 Sec. 12. EFFECTIVE DATE. This Act takes effect January 1,
312025.
32 Sec. 13. APPLICABILITY. This Act applies to any civil
33action or administrative proceeding involving a litigation
34financer pending on or commenced on or after January 1, 2025.
35EXPLANATION
-11-1The inclusion of this explanation does not constitute agreement with
2the explanation’s substance by the members of the general assembly.
3This bill creates the litigation financing transparency and
4consumer protection Act.
5The bill requires the registration of litigation financers
6with the secretary of state. The bill provides registration
7requirements and procedures for the litigation financer. The
8bill provides that all documents and information filed with the
9secretary of state pursuant to the registration of the ligation
10financer are public records.
11The bill provides limitations on how a litigation financer
12may conduct business. A litigation financer may not (1) pay or
13offer any form of consideration to any person in exchange for
14referring a consumer to a litigation financer, (2) accept any
15type of consideration from any person providing any goods or
16rendering any services to the consumer, (3) charge a rate of
17interest that exceeds the rate of interest allowed under Code
18chapter 535 (money and interest), (4) receive or recover any
19payment that exceeds 25 percent of the reward obtained in the
20action subject to the litigation contract, (5) advertise false
21or misleading information regarding the litigation financer
22products or services, (6) refer or require any consumer to
23hire or engage any person providing any goods or rendering
24any services to the consumer, (7) fail to promptly deliver
25a fully completed and signed litigation financing contract
26to the consumer and the consumer’s legal representative, (8)
27attempt to secure a remedy or obtain a waiver of any remedy,
28including but not limited to compensatory, statutory, or
29punitive damages, (9) offer or provide legal advice to the
30consumer, (10) assign a litigation financing contract in whole
31or in part, (11) report a consumer to a credit reporting
32agency, or (12) demand, request, receive, or exercise any right
33to influence, affect, or otherwise make any decision in the
34handling, conduct, administration, litigation, settlement, or
35resolution of any civil action, administrative proceeding,
-12-1claim, or cause of action in which the litigation financer has
2provided litigation financing. The bill also provides that a
3person who provides any goods or renders any services to the
4consumer shall not have a financial interest in litigation
5financing.
6The bill provides the terms, conditions, and disclosures
7required in a litigation financer contract. Upon execution
8of the contract, the litigation financer may not amend any
9terms or conditions of the contract without full disclosure and
10written consent of all parties.
11The bill provides that a consumer or legal representative
12of a consumer, unless otherwise stipulated or ordered by the
13court, shall disclose and deliver the litigation financing
14contract to each party of the matter, the court, and any known
15person with a contractual obligation in the matter.
16The bill provides exemptions to the new Code chapter,
17including: (1) a nonprofit organization that provides
18litigation financing for the benefit of the nonprofit
19organization or one or more of the nonprofit organization’s
20members; (2) an entity engaged in commerce or business
21activity, but only if the entity does not: charge or collect
22any interest, fees, or other consideration; retain or receive
23any financial interest in the outcome of the civil action,
24administrative proceeding, claim, or cause of action; and
25receive any right to recovery or payment from the amount of any
26judgment, award, settlement, verdict, or other form of monetary
27relief obtained in the matter; or (3) a regulated lender that
28does not receive a right to receive payment from the value of
29any proceeds or other consideration realized from any reward
30received or recovered in relation to the matter.
31The bill provides that the new Code chapter applies to class
32actions.
33The bill provides that a litigation financer is jointly and
34severally liable for any award or order imposing or assessing
35costs or monetary sanctions against a consumer arising from
-13-1or relating to matters for which the litigation financer is
2providing litigation financing.
3The bill authorizes the secretary of state to adopt rules or
4other policies to enforce the new Code chapter.
5The bill provides that any violation of the new Code chapter
6by the litigation financer shall render the contract void and
7may be subject to penalties.
8The bill takes effect on January 1, 2025, and applies to
9any civil action or administrative proceeding involving a
10litigation financer pending on or commenced after January 1,
112025.
-14-cm/jh
2effective date and applicability provisions.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 537C.1 Title.
2This chapter shall be known as the “Litigation Financing
3Transparency and Consumer Protection Act”.
4 Sec. 2. NEW SECTION. 537C.2 Definitions.
5As used in this chapter, unless otherwise required by the
6context:
71. “Consumer” means any individual who resides, is present,
8or is domiciled in this state or who is or may become a
9plaintiff, claimant, or complainant in a civil action or an
10administrative proceeding or in pursuit of any claim or cause
11of action in this state.
122. “Entity” means any domestic or foreign corporation,
13partnership, limited partnership, limited liability company,
14trust, fund, plan, or any other business, enterprise,
15association, or organization of any kind or nature.
163. “Legal representative” means any attorney, group
17of attorneys, or law firm duly licensed and authorized to
18practice law and to represent a consumer in a civil action,
19administrative proceeding, or claim to recover damages in this
20state.
214. “Litigation financer” means any person or group of
22persons engaged in, formed, created, or established for the
23purpose of engaging in the business of litigation financing or
24any other business or economic activity in which a person or
25group of persons receive consideration of any kind in exchange
26for providing litigation financing.
275. “Litigation financing” means the financing, funding,
28advancing, or loaning of money to pay fees, costs, expenses, or
29any other sums arising from or in any manner related to a civil
30action, administrative proceeding, claim, or cause of action,
31if the financing, funding, advancing, or loaning of money is
32provided by any person other than a person who is any of the
33following:
34a. A party to the civil action, administrative proceeding,
35claim, or cause of action.
-1- 1b. A legal representative engaged, directly or indirectly
2through another legal representative, to represent a party in
3a civil action, administrative proceeding, claim, or cause of
4action.
5c. An entity or insurer with a preexisting contractual
6obligation to indemnify or defend a party in a civil action,
7administrative proceeding, claim, or cause of action.
86. a. “Litigation financing contract” means a written
9contract in which a person agrees to provide litigation
10financing to any person in conjunction with a civil action or
11an administrative proceeding or in pursuit of any claim or
12cause of action in consideration for any of the following:
13(1) The payment of interest, fees, or other consideration to
14the person providing the litigation financing.
15(2) Granting or assigning to the person providing the
16litigation financing a right to receive payment from the
17value of any proceeds or other consideration realized from
18any judgment, award, settlement, verdict, or other form of
19monetary relief any consumer, legal representative, or other
20person may receive or recover in relation to the civil action,
21administrative proceeding, claim, or cause of action.
22b. “Litigation financing contract” does not include any
23agreement, contract, or engagement of a legal representative
24to render legal services to a consumer on a contingency fee
25basis, including the advancement of legal costs by the legal
26representative, in which the services or costs are provided
27to or on behalf of a consumer by the legal representative
28representing the consumer in the civil action, administrative
29proceeding, claim, or cause of action.
307. “Person” means an individual or an entity.
318. “Regulated lender” means any of the following:
32a. A bank, building and loan association, savings and loan
33association, trust company, credit union, credit association,
34consumer loan licensee, deferred deposit loan licensee,
35residential mortgage lender licensee, development corporation,
-2-1bank holding company, or mutual or stock insurance company
2organized pursuant to state or federal statutory authority and
3subject to supervision, control, or regulation by any of the
4following:
5(1) An agency of the state of Iowa.
6(2) An agency of the federal government.
7b. A subsidiary of an entity described in paragraph “a”.
8c. An Iowa state agency or a federal agency that is
9authorized to lend money.
10d. A corporation or other entity established by congress or
11the state of Iowa that is owned, in whole or in part, by the
12United States or the state of Iowa and that is authorized to
13lend money.
14 Sec. 3. NEW SECTION. 537C.3 Registration.
151. A person shall not engage in litigation financing in this
16state unless the person is registered with the secretary of
17state as a litigation financer pursuant to this chapter.
182. If the person registering as a litigation financer is an
19entity:
20a. The entity must be active and in good standing as
21reflected in the office of the secretary of state.
22b. The entity’s articles of incorporation, charter, articles
23of organization, certificate of limited partnership, or other
24organizational or governing document must contain a statement
25that the entity has the power to engage in the business of
26litigation financing and is designated as a litigation financer
27pursuant to this chapter.
283. To register as a litigation financer, a person shall file
29a registration statement with the secretary of state setting
30forth all of the following information:
31a. The legal name of the litigation financer.
32b. The physical street address and mailing address of the
33litigation financer.
34c. A telephone number or electronic mail address through
35which the litigation financer may be contacted.
-3- 1d. The physical street address and mailing address of the
2licensed financer’s registered office and the name of the
3registered agent at the registered office who is authorized to
4accept service of process on behalf of the licensed financer.
5e. Any other information the secretary of state considers
6necessary.
74. If the person seeking to register as a litigation
8financer is an entity, the following information must be set
9forth in the registration statement with respect to each person
10that, directly or indirectly, owns, controls, holds with the
11power to vote, or holds proxies representing five percent or
12more of the voting securities of the litigation financer:
13a. The legal name, physical street address, and mailing
14address of each person.
15b. If the person is an individual, all of the following:
16(1) The individual’s occupation.
17(2) Any offices and positions held with the litigation
18financer during the past five years.
19(3) Any conviction of a crime other than misdemeanor traffic
20violations during the past ten years.
21c. If the person is an entity, all of the following:
22(1) The nature of the entity’s business operations, if
23any, during the past five years or a description of the
24business intended to be done by the entity and the entity’s
25subsidiaries, if any.
26(2) A list of all individuals who are or who have been
27selected to become directors or officers of the entity and
28each subsidiary of the entity. The list must include for each
29individual the information required by paragraph “b”.
305. A litigation financer subject to registration under this
31chapter shall file an amended registration within thirty days
32whenever the information contained in the most recently filed
33registration changes or becomes inaccurate or incomplete in any
34respect.
356. The secretary of state is authorized to prescribe the
-4-1forms and the filing fees the secretary of state considers
2necessary for the purposes of this chapter.
37. All documents and information filed with the secretary of
4state pursuant to this section are public records.
58. The secretary of state’s duty to file documents under
6this section is ministerial. The secretary of state’s filing
7or refusing to file a document does not create a presumption
8of any of the following:
9a. That the document does or does not conform to the
10requirements of this chapter.
11b. That the information contained in the document is correct
12or incorrect.
13 Sec. 4. NEW SECTION. 537C.4 Litigation financing
14protections.
151. A litigation financer shall not do any of the following:
16a. Pay or offer commissions, referral fees, rebates, or
17other forms of consideration to any person in exchange for
18referring a consumer to a litigation financer.
19b. Accept any commissions, referral fees, rebates, or other
20forms of consideration from any person providing any goods or
21rendering any services to the consumer.
22c. Charge a rate of interest that exceeds the rate of
23interest allowed under chapter 535.
24d. Receive or recover any payment that exceeds twenty-five
25percent of the amount of any judgment, award, settlement,
26verdict, or other form of monetary relief obtained in the civil
27action, administrative proceeding, claim, or cause of action
28that is the subject of the litigation contract.
29e. Advertise false or misleading information regarding the
30litigation financer’s products or services.
31f. Refer or require any consumer to hire or engage any
32person providing any goods or rendering any services to the
33consumer.
34g. Fail to promptly deliver a fully completed and signed
35litigation financing contract to the consumer and the
-5-1consumer’s legal representative.
2h. Attempt to secure a remedy or obtain a waiver of any
3remedy, including but not limited to compensatory, statutory,
4or punitive damages, that the consumer may or may not be
5entitled to pursue or recover otherwise.
6i. Offer or provide legal advice to the consumer.
7j. Assign, including securitizing, a litigation financing
8contract in whole or in part.
9k. Report a consumer to a credit reporting agency if
10insufficient funds remain to repay the litigation financer
11in full from the proceeds received from any judgment, award,
12settlement, verdict, or other form of monetary relief obtained
13in the civil action, administrative proceeding, claim, or cause
14of action that is the subject of the litigation financing
15contract.
16l. Demand, request, receive, or exercise any right to
17influence, affect, or otherwise make any decision in the
18handling, conduct, administration, litigation, settlement, or
19resolution of any civil action, administrative proceeding,
20claim, or cause of action in which the litigation financer has
21provided litigation financing. All rights remain solely with
22the consumer and the consumer’s legal representative.
232. A person who provides any goods or renders any services
24to the consumer shall not have a financial interest in
25litigation financing and shall not receive any commissions,
26referral fees, rebates, or other forms of consideration from
27any litigation financer or the litigation financer’s employees,
28owners, or affiliates.
29 Sec. 5. NEW SECTION. 537C.5 Litigation financing contract
30— disclosures.
311. The terms and conditions of a litigation financing
32contract must be set forth in a fully completed written
33contract with no terms or conditions omitted. The litigation
34financing contract must contain all terms and conditions at
35the time it is signed by any party to the litigation financing
-6-1contract.
22. On execution of a litigation financing contract, a
3litigation financer shall not amend the terms or conditions of
4the litigation financing contract without full disclosure to
5and the prior written consent of all parties to the litigation
6financing contract.
73. A litigation financing contract must set forth the name,
8physical street address, and mailing address of the litigation
9financer on the first page of the litigation financing
10contract.
114. A litigation financing contract must contain the
12following disclosures that constitute material terms and
13conditions of the litigation financing contract and must be
14typed in at least fourteen point bold font and be placed
15clearly and conspicuously immediately above the consumer’s
16signature line in the litigation financing contract:
17IMPORTANT DISCLOSURES — PLEASE READ CAREFULLY
18Right to Cancellation: You may cancel this litigation
19financing contract without penalty or further obligation within
20five business days from the date you sign this contract or
21the date you receive financing from the litigation financer,
22whichever date is later. You may cancel by sending a notice
23of cancellation to the litigation financer and returning to
24the litigation financer any funds received from the litigation
25financer at the litigation financer’s address set forth on the
26first page of this contract.
27The maximum amount the litigation financer may receive or
28recover from any contingent payment shall not exceed twenty
29five percent of the amount of any judgment, award, settlement,
30verdict, or other form of monetary relief obtained in the civil
31action, administrative proceeding, claim, or cause of action
32that is the subject of this litigation contract.
33The litigation financer agrees that it has no right to,
34and will not demand, request, receive, or exercise any right
35to, influence, affect, or otherwise make any decision in the
-7-1handling, conduct, administration, litigation, settlement, or
2resolution of your civil action, administrative proceeding,
3claim, or cause of action. All of these rights remain solely
4with you and your legal representative.
5If there is no recovery of any money from your civil action,
6administrative proceeding, claim, or cause of action, or if
7there is not enough money to satisfy in full the portion
8assigned to the litigation financer, you will not owe anything
9in excess of your recovery.
10You are entitled to a fully completed contract with no terms
11or conditions omitted prior to signing. Before signing this
12contract, you should read the contract completely and consult
13an attorney.
145. If the consumer is represented by a legal representative
15in the civil action, administrative proceeding, claim, or cause
16of action that is the subject of the litigation financing
17contract, the legal representative shall acknowledge in
18the contract that the legal representative and the legal
19representative’s employer and employees have not received or
20paid a referral fee or any other consideration from or to the
21litigation financer and have no obligation to do so in the
22future.
236. If the consumer’s legal representative is a party to a
24litigation financing contract related to the consumer’s civil
25action, administrative proceeding, claim, or cause of action
26that is the subject of the litigation financing contract, the
27legal representative shall disclose and deliver the litigation
28financing contract to the consumer. Following this disclosure
29and delivery, the consumer shall sign an acknowledgment that
30the consumer has read and understands the terms and conditions
31of the litigation financing contract and the consumer must be
32provided with a copy of the acknowledgment.
33 Sec. 6. NEW SECTION. 537C.6 Disclosure and discovery of
34litigation financing contracts.
351. Except as otherwise stipulated or ordered by the court, a
-8-1consumer or the consumer’s legal representative shall, without
2awaiting a discovery request, disclose and deliver to all of
3the following persons the litigation financing contract:
4a. Each party to the civil action, administrative
5proceeding, claim, or cause of action, or to each party’s legal
6representative.
7b. The court, agency, or tribunal in which the civil action,
8administrative proceeding, claim, or cause of action may be
9pending.
10c. Any known person, including an insurer, with a
11preexisting contractual obligation to indemnify or defend a
12party to the civil action, administrative proceeding, claim,
13or cause of action.
142. The disclosure obligation under subsection 1 exists
15regardless of whether a civil action or an administrative
16proceeding has commenced.
173. The disclosure obligation under subsection 1 is a
18continuing obligation, and within thirty days of entering
19into a litigation financing contract or amending an existing
20litigation financing contract, the consumer or the consumer’s
21legal representative shall disclose and deliver any new or
22amended litigation financing contracts.
234. The existence of the litigation financing contract
24and all participants or parties to a litigation financing
25contract are permissible subjects of discovery in any civil
26action, administrative proceeding, claim, or cause of action
27to which litigation financing is provided under the litigation
28financing contract, regardless of whether a civil action or an
29administrative proceeding has commenced.
30 Sec. 7. NEW SECTION. 537C.7 Exemptions.
31This chapter does not apply to any of the following:
321. A nonprofit organization that provides litigation
33financing, directly or indirectly, for the benefit of the
34nonprofit organization or one or more of the nonprofit
35organization’s members without receiving, in consideration for
-9-1the litigation financing, any of the following:
2a. The payment of interest, fees, or other consideration.
3b. Except for in-house counsel of the nonprofit
4organization, any right to recovery or payment from the amount
5of any judgment, award, settlement, verdict, or other form of
6monetary relief obtained in the civil action, administrative
7proceeding, claim, or cause of action.
82. Any litigation financing provided by an entity engaged in
9commerce or business activity, but only if the entity does not
10do any of the following:
11a. Charge or collect any interest, fees, or other
12consideration.
13b. Retain or receive any financial interest in the outcome
14of the civil action, administrative proceeding, claim, or cause
15of action.
16c. Receive any right to recovery or payment from the amount
17of any judgment, award, settlement, verdict, or other form of
18monetary relief obtained in the civil action, administrative
19proceeding, claim, or cause of action.
203. A regulated lender that does not receive, in
21consideration for loaning money to any person, a right to
22receive payment from the value of any proceeds or other
23consideration realized from any judgment award, settlement,
24verdict, or other form of monetary relief any person
25may receive or recover in relation to any civil action,
26administrative proceeding, claim, or cause of action.
27 Sec. 8. NEW SECTION. 537C.8 Class actions.
28This chapter shall apply to any civil action filed or
29certified as a class action in which litigation financing
30is provided. A litigation financer owes a fiduciary
31duty to all class members or intended beneficiaries of a
32certified class and shall act in a manner consistent with the
33litigation financer’s fiduciary duty throughout the civil
34action. In addition to the disclosure requirements, the
35legal representative of the putative class shall disclose
-10-1to all parties, putative class members, and the court any
2legal, financial, or other relationship between the legal
3representative and the litigation financer. A class member is
4entitled to receive from the class counsel a true and correct
5copy of the litigation financing contract on request.
6 Sec. 9. NEW SECTION. 537C.9 Joint and several liability for
7costs.
8A litigation financer is jointly and severally liable for
9any award or order imposing or assessing costs or monetary
10sanctions against a consumer arising from or relating to any
11civil action, administrative proceeding, claim, or cause
12of action for which the litigation financer is providing
13litigation financing.
14 Sec. 10. NEW SECTION. 537C.10 Regulatory oversight —
15rulemaking.
16The secretary of state may adopt rules and other policies in
17overseeing the practice of litigation financing consistent with
18this chapter.
19 Sec. 11. NEW SECTION. 537C.11 Violation — unenforceable
20contract.
211. Any violation of this chapter by the litigation financer
22renders the litigation financing contract unenforceable by
23the litigation financer or any successor-in-interest to the
24litigation financing contract.
252. If a litigation financer charges a rate of interest that
26exceeds the rate of interest allowed under chapter 535, the
27litigation financer shall be subject to a penalty for usury and
28an action to recover excessive interest as authorized under
29chapter 535.
30 Sec. 12. EFFECTIVE DATE. This Act takes effect January 1,
312025.
32 Sec. 13. APPLICABILITY. This Act applies to any civil
33action or administrative proceeding involving a litigation
34financer pending on or commenced on or after January 1, 2025.
35EXPLANATION
-11-1The inclusion of this explanation does not constitute agreement with
2the explanation’s substance by the members of the general assembly.
3This bill creates the litigation financing transparency and
4consumer protection Act.
5The bill requires the registration of litigation financers
6with the secretary of state. The bill provides registration
7requirements and procedures for the litigation financer. The
8bill provides that all documents and information filed with the
9secretary of state pursuant to the registration of the ligation
10financer are public records.
11The bill provides limitations on how a litigation financer
12may conduct business. A litigation financer may not (1) pay or
13offer any form of consideration to any person in exchange for
14referring a consumer to a litigation financer, (2) accept any
15type of consideration from any person providing any goods or
16rendering any services to the consumer, (3) charge a rate of
17interest that exceeds the rate of interest allowed under Code
18chapter 535 (money and interest), (4) receive or recover any
19payment that exceeds 25 percent of the reward obtained in the
20action subject to the litigation contract, (5) advertise false
21or misleading information regarding the litigation financer
22products or services, (6) refer or require any consumer to
23hire or engage any person providing any goods or rendering
24any services to the consumer, (7) fail to promptly deliver
25a fully completed and signed litigation financing contract
26to the consumer and the consumer’s legal representative, (8)
27attempt to secure a remedy or obtain a waiver of any remedy,
28including but not limited to compensatory, statutory, or
29punitive damages, (9) offer or provide legal advice to the
30consumer, (10) assign a litigation financing contract in whole
31or in part, (11) report a consumer to a credit reporting
32agency, or (12) demand, request, receive, or exercise any right
33to influence, affect, or otherwise make any decision in the
34handling, conduct, administration, litigation, settlement, or
35resolution of any civil action, administrative proceeding,
-12-1claim, or cause of action in which the litigation financer has
2provided litigation financing. The bill also provides that a
3person who provides any goods or renders any services to the
4consumer shall not have a financial interest in litigation
5financing.
6The bill provides the terms, conditions, and disclosures
7required in a litigation financer contract. Upon execution
8of the contract, the litigation financer may not amend any
9terms or conditions of the contract without full disclosure and
10written consent of all parties.
11The bill provides that a consumer or legal representative
12of a consumer, unless otherwise stipulated or ordered by the
13court, shall disclose and deliver the litigation financing
14contract to each party of the matter, the court, and any known
15person with a contractual obligation in the matter.
16The bill provides exemptions to the new Code chapter,
17including: (1) a nonprofit organization that provides
18litigation financing for the benefit of the nonprofit
19organization or one or more of the nonprofit organization’s
20members; (2) an entity engaged in commerce or business
21activity, but only if the entity does not: charge or collect
22any interest, fees, or other consideration; retain or receive
23any financial interest in the outcome of the civil action,
24administrative proceeding, claim, or cause of action; and
25receive any right to recovery or payment from the amount of any
26judgment, award, settlement, verdict, or other form of monetary
27relief obtained in the matter; or (3) a regulated lender that
28does not receive a right to receive payment from the value of
29any proceeds or other consideration realized from any reward
30received or recovered in relation to the matter.
31The bill provides that the new Code chapter applies to class
32actions.
33The bill provides that a litigation financer is jointly and
34severally liable for any award or order imposing or assessing
35costs or monetary sanctions against a consumer arising from
-13-1or relating to matters for which the litigation financer is
2providing litigation financing.
3The bill authorizes the secretary of state to adopt rules or
4other policies to enforce the new Code chapter.
5The bill provides that any violation of the new Code chapter
6by the litigation financer shall render the contract void and
7may be subject to penalties.
8The bill takes effect on January 1, 2025, and applies to
9any civil action or administrative proceeding involving a
10litigation financer pending on or commenced after January 1,
112025.
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