A2159 1R

An Act concerning third-party litigation funding agreements and supplementing Title 2A of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in this act:

¹“Administrative action” means any administrative proceeding brought before an executive branch agency or administrative tribunal of this State, except for workers’ compensation claims. ¹

“Court” means any court, agency, or tribunal in which a civil action is brought.

“Civil action” means¹[:

a. any form of civil action;

b. an alternative dispute resolution proceeding; and

c. an administrative proceeding before an agency of this State, except for workers’ compensation claims.]

any action where a complaint is filed in the Civil part of the Law Division of the Superior Court of this State, except for workers’ compensation claims.¹

“Litigation expenses” means costs incurred to pursue a civil ¹or administrative¹ action, including, but not limited to, court costs, filing fees, attorneys’ fees, expert witness fees, travel expenses, and expenses related to identifying or soliciting potential clients to participate in the litigation before, during, or after filing or resolving the civil action.

“Litigation funder” means a person or entity that enters a litigation funding agreement or any person or entity who has a direct or indirect right to receive compensation from the agreement. A litigation funder shall not include:

a. a parent, sibling, spouse, grandparent, grandchild, or child related by blood, adoption, or marriage of the party being funded;

b. an attorney who, at the time money is provided to or on behalf of a client under a litigation funding agreement, has an attorney-client relationship with the party concerning the party’s civil ¹or administrative¹ action;

c. a licensed or registered financial institution that does not receive, in consideration for loaning money to any person, a right to receive payment from the value of any proceeds or other consideration realized from any judgment, award, settlement, verdict, or other form of monetary relief any person may receive or recover in relation to any civil ¹or administrative¹ action;

d. a nonprofit entity that provides pro bono legal services to the party with no right to receive payment from the amount of any judgment, award, settlement, verdict, or other form of monetary compensation obtained in the civil ¹or administrative¹ action. ¹[Court ordered awards of costs or attorney fees] Awards of costs or attorney fees ordered by a court, executive branch agency, or a tribunal¹ to nonprofit legal organizations shall not be affected by this section; or

e. a person or entity that provides money to a party to litigation solely for purposes other than funding litigation expenses.

“Litigation funding agreement” means, with respect to any civil ¹or administrative¹ action or group of civil ¹or administrative¹ actions, any written agreement:

a. whereby a third party agrees to provide funds to one of the named parties, or any law firm affiliated with the action or group of civil ¹or administrative¹ actions; and

b. which creates a direct or collateralized interest in the proceeds of a civil ¹or administrative¹ action or group of civil ¹or administrative¹ actions, by settlement, verdict, judgment or otherwise, and whose interest is based, in whole or in part, on a funding-based obligation to the action or group of actions or the appearing counsel or any contractual co-counsel or the law firms of the counsel or co-counsel executed with:

(1) any attorney representing a party;

(2) any co-counsel in the litigation with a contingent fee interest in the representation of that party; or

(3) any third-party who has a collateral-based interest in the contingency fees of the counsel or co-counsel firm related in whole or part to the fees derived from representing that party

¹“Pre-settlement funding” means funding solely intended to pay costs of living or other personal or familial expenses during the pendency of a civil or administrative action where those funds are not used to defray litigation expenses.¹

¹[2. a. In any civil action, except as otherwise stipulated by the parties or ordered by a court, a party or party’s attorney shall, without awaiting a discovery request, provide the court and all parties with any litigation funding agreement with respect to the action.

b. Disclosure of a litigation funding agreement required by subsection a. of this section shall include all correspondence, documents, or other statements that comprise the agreement and shall be made at the time of the filing of an initial pleading or at the time of the agreement, if the agreement occurs after the initial pleading. Any amendment to a litigation funding agreement disclosed pursuant to subsection a. of this section shall be provided to the court and all parties at the time the amendment is made.

c. In addition to the disclosures required by this section, the participants or parties to any litigation funding agreement and the nature of that investment or arrangement shall be permissible subjects for discovery in any civil action.

d. The court shall determine sanctions for any party that fails to make the disclosures required by this section. An evasive or incomplete disclosure shall be treated as failure to make the disclosure.

e. This section shall not require disclosure of a contingent fee agreement entered into by a party and the party’s legal representative in a civil action.]¹

¹2. a. A party to any civil action shall provide to the court, for in camera review, any litigation funding agreement within 30 days after the commencement of a civil action or 30 days after the execution of a litigation funding agreement, whichever is later.

b. A party may seek discovery of the terms of an agreement with a litigation funder, including the litigation funding agreement, upon a showing that:

(1) the funding arrangement is relevant to the claims or defenses of the party;

(2) a litigation funder may have engaged in conduct that violates section 3 or 4 of this act; or

(3) other good cause.

c. Nothing in this section precludes a court from ordering such other relief as may be appropriate.¹

3. a. A litigation funder shall have a fiduciary duty to a party in a civil action if it has provided litigation funding to that civil ¹or administrative¹ action.

b. A litigation funder shall not engage in any act, practice, or course of business that is inconsistent with the funder’s fiduciary duty pursuant to subsection a. of this section.

c. A litigation funder shall ¹agree as a condition of providing funding to¹ be jointly liable for any award or order imposing or assessing costs or monetary sanctions against ¹[a funded] the¹ party ¹whose civil or administrative claims is subject to the funding agreement¹ or ¹[funded] the¹ party’s attorney arising from or relating to the funded civil ¹or administrative¹ action.

4. It shall be prohibited for a litigation funder to engage in the following conduct:

a. influence, make, or overturn a decision relating to the initiation, conduct, settlement, or resolution of the underlying civil ¹or administrative¹ action, the power of which shall remain solely with the party and attorney handling the action for the party;

b. offer to provide or provide legal advice to a ¹[funded]¹ party or party’s attorney, or identify, recommend, or select a ¹[funded]¹ party’s attorney;

c. attempt to secure a remedy or obtain a waiver of any remedy, including but not limited to compensatory, statutory, or punitive damages, that a party to a civil ¹or administrative¹ action may or may not be entitled to pursue or otherwise recover;

d. receive or recover any payment that exceeds 25 percent of the amount of any settlement, judgment, award, or other monetary relief obtained as a result of the civil ¹or administrative¹ action that is the subject of the litigation funding agreement. Absent express consent of the funded party or funded parties to the litigation, the combined payment to the litigation funder and fee to the attorney of a funded party shall not exceed 50 percent of the monetary relief obtained as a result of the civil ¹or administrative¹ action; or

e. assign, including securitizing, a litigation funding agreement in whole or in part.

5. a. A litigation funding agreement shall be unenforceable by the litigation funder or any successor-in-interest to the litigation funding agreement if the funder has engaged in conduct that violates sections 3 or 4 of this act.

b. A court¹, executive branch agency, or a tribunal¹ may, upon a motion of a party to litigation funded through a litigation funding agreement or sua sponte, find that a litigation funding agreement, or a provision thereof, violates this act and is unenforceable.

c. A violation of sections 3 or 4 of this act shall constitute an unfair or deceptive act or practice and shall be a violation of P.L.1960, c.39 (C.56:8-1 et seq.).

d. A court¹, executive branch agency, or a tribunal¹ may impose sanctions, in addition to any remedy otherwise available, for noncompliance with any provision of this act.

¹6. Nothing in this act shall apply to pre-settlement funding obtained by an individual who is a party to a civil or administrative action.¹

¹[6.] 7.¹ This act shall take effect on the 90th day next following enactment and shall apply to litigation funding agreements entered into on or after that date.