Florida Lawmakers Move to Restrict Litigation Finance Industry

Florida lawmakers moved to regulate the litigation finance industry on Wednesday, as some argued that investor involvement in lawsuits leaves courts open to domestic or foreign manipulation.

A state Senate committee voted favorably on proposed legislation by Senator Jay Collins, a Republican, that would require litigants to disclose when their lawsuits are financed by investors who seek a financial return if cases are successful.

“The ability to step in and have sway in our court system, that’s frightening,” Collins said. The Senate Committee on Fiscal Policy approved the bill, 15 to six.

The bill (SB 1276) is among a cluster of proposals backed by groups including the US Chamber of Commerce that have been introduced in states this year in an effort to restrain the $13.5 billion litigation finance industry. Kansas, Rhode Island and Arizona also introduced litigation finance bills in January.

The Florida bill includes more than just disclosure of a litigation finance agreement. It also takes a cue from the federal bill introduced last year by Senators John Kennedy (R-La.) and Joe Manchin (D-W.Va.) by requiring the disclosure of foreign investments.

“Floridians should know when and how outsiders, like hedge funds and foreign governments, are funding lawsuits in exchange for big pieces of settlements or awards,” said Nathan Morris, a senior vice president at the Chamber’s Institute for Legal Reform.

During Wednesday’s hearing in Florida, Collins added an amendment that would allow redaction of the amount of financing and expanded protections for nonprofits.

The bill also takes aim at funder’s returns by not allowing investors to receive a larger share of the proceeds than the plaintiff being funded. There is also a requirement that litigation funders indemnify the plaintiffs against any adverse costs, attorney fees, damages or sanctions. Without these inclusions, a litigation finance agreement would be void and unenforceable.

Kansas is the only other state where legislation has gone before a committee. The International Legal Finance Association, the trade association for the industry, has been lobbying against the bills in Florida and Kansas but does not have lobbyists registered in Arizona or Rhode Island. The industry group did not testify at the Florida hearing.

“ILFA has strong relationships with legislators across the country and is educating them on 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 the court system within a balanced regulatory environment that prioritizes the rule of law, not special interests.”

The Florida bill is the furthest along of the state efforts, with the committee passage Wednesday and an earlier approval in the Senate Judiciary Committee.

The parallel bill in the Florida House was voted favorably in the Civil Justice Subcommittee, though it has been postponed twice for consideration in the on the agenda for the House Justice Appropriations Subcommittee.

The bill must win approval on the House and Senate floors before it can go to Republican Governor Ron DeSantis for his possible signature.

Democratic State Senator Shevrin Jones suggested during Wednesday’s hearing that the bill is unnecessary. “I don’t buy the national security concern that we’re speaking of or any foreign manipulation,” he said.