SB 581

Bill Subjects

Abstract

Under existing law, the Secretary of State is charged with various duties in connection with business filings. Existing law also specifies procedures for a person, whether represented by an attorney or self-represented, to file a civil action in superior court. Existing law specifies additional procedures for an action to proceed through trial and judgment or to resolve by settlement before trial. This bill would prohibit a litigation financer, as defined, from engaging in a litigation financing transaction in California unless it is registered with the Secretary of State in accordance with certain procedures, including filing an application and surety bond. The bill would prohibit a litigation financer from taking certain actions, including paying or offering commissions, referral fees, or other forms of consideration to a legal representative, medical provider, or any of their employees for a referral to that financer, or making false or misleading statements. This bill would require the terms of a litigation financing contract to be set forth in writing, in a specified format, with disclosures regarding the consumer's right to cancellation, the fees charged, and other related information. With respect to consumer fees, the bill would prohibit a litigation financer from charging the consumer an annual fee of more than 36% of the original amount of money provided to the consumer for the litigation financing transaction, subject to other terms and conditions. This bill would, if a court has good cause to believe that a litigation financing transaction involving litigation before the court is being conducted in violation of the bill, authorize the court to order a consumer and the consumer's legal representative to disclose to the court, in an in-camera proceeding, a litigation financing contract involving the litigation before the court, as specified. The bill would authorize the court, if there is a reasonable basis to believe a violation has occurred, to, in its discretion, refer the matter to the Secretary of State for appropriate administrative enforcement. This bill would make a litigation financer jointly liable for costs assessed pursuant to these provisions, as specified. The bill would also provide that a violation of these provisions would make the litigation financing contract unenforceable by the litigation financer, the consumer, or any successor-in-interest to the litigation financing contract. The bill would require the practice of litigation financing to be regulated by the Secretary of State and would require the Secretary of State to adopt regulations pursuant to these provisions. The bill would authorize the Secretary of State to take certain actions if the Secretary of State determines that a litigation financer intentionally violated the bill's provisions, including assessing an administrative penalty of not more than $10,000 for each violation. This bill would require each litigation financer to file an annual report with the Secretary of State in accordance with certain procedures, containing specific information about the business structure of the litigation financer, transactions, and other related information. The bill would require the Secretary of State to submit an annual confidential report to the Legislature on this information, as prescribed. Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. This bill would make legislative findings to that effect.