SB 2101

ON MARCH 9, 2026, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 2108, AS AMENDED. AMENDMENT #1 rewrites the bill to, instead, require a commercial litigation financier to meet the same registration and bond requirements as a litigation financier. Present law prohibits a litigation financier from engaging in a litigation financing tra nsaction unless it is registered as a litigation financier. This amendment prohibits a commercial litigation financier from engaging in a commercial litigation financing transaction unless it is registered as a commercial litigation financier. As used i n this amendment, a "commercial litigation financing transaction"" means funding provided by a person to another person that is a party or has standing to become a party to a civil action, administrative proceeding, legal claim, or other legal proceeding seeking to recover monetary damages, or to the legal representative for s uch party, in exchange for a right to receive payment that is contingent on the outcome of such action, claim, or proceedings by settlement, judgment, or otherwise, or on the outcome of a ny matter within a portfolio that includes such action, claim, or proceedings and involves the same legal representative or affiliated legal representative . However, the term does not include (i) a party to the civil action, (ii) an attorney engaged directly or indirectly through another legal representative to represent a party in the civil action, (iii) an entity or insurer with a preexisting contractual obligation to indemnify or defend a party to the civil action, or (iv) a nonprofit organization that is funded by private donations, represents one or more clients on a pro-bono basis, and seeks only injunctive relief on behalf of its clients. Present law requires a litigation financier to file and have approved by the secretary of state a $50, 000, surety bond. Such bond must be payable to this state for the use of the attorney general and any person who may have a cause of action against the obligor of the bond. This amendment requires a commercial litigation financier to file and have approved with the secretary of state the same surety bond. FOREIGN PERSONS AND SOVEREIGN WEALTH FUND This amendment prohibits a person from registering as a litigation financier or commercial litigation financier, or engaging in litigation financing in this state if the person is, in any capacity related to such person's litigation or commercial litigat ion financing business, affiliated with a foreign person, foreign principal, or sovereign wealth fund of a foreign government or foreign nongovernment person designated as a foreign adversary. As used in this amendment, a ""foreign person"" means a person wh o is not (i) a citizen of the United States, (ii) an alien lawfully admitted for permanent residence in the United States, (iii) an unincorporated association with a majority of members who are citizens of the United States or aliens lawfully admitted for permanent residence in the United States, or (iv) a corporation that is incorporated in the United States. As used in this amendment, a ""sovereign wealth fund"" means an investment fund owned or controlled by a foreign principal or an agent of a foreign pr incipal. Federal regulations designate the following as foreign adversaries: (i) the People's Republic of China, (ii) Republic of Cuba, (iii) Islamic Republic of Iran (iv) Democratic People's Republic of Korea, (v) Russian Federation, and (vi) Venezuelan politician Nicholas Maduro. COMMERCIAL LITIGATION FINANCIERS This amendment prohibits a commercial litigation financier from directing or making decisions with respect to the course of a civil action, administrative proceeding, legal claim, or other legal proceeding for which the financier has provided commercial litigation financing. All decision making rights remain solely with the parties to the action, claim, or proceeding and their legal representatives. Further, a commercial litigation financier is prohibited from contracting for, receiving, or recovering an amount greater than an amount equal to the share of the proceeds collectively recovered by the parties in a civil action, administrative proceeding, legal claim, or other legal proceeding after the payment of attorney fees and costs owed in connection to such action, claim, or proceeding. CONTRACT DISCLOSURES Present law requires a litigation financing contract to contain specific disclosures for the applicable type of contract. This amendment clarifies that the disclosures constitute material terms of the litigation financing contract. Further, a commercia l litigation financing contract must also contain the appropriate disclosures. Specifically, this amendment requires a commercial litigation financing contract to contain a disclaimer discussing decision making rights. The disclosure must use the specif ic language found in the full text of the amendment, and must be typed in at least 14 point, bold font. This amendment requires a party or party's legal representative to file a commercial litigation financing contract with the court and provide a copy to the other parties within 14 days after the party files its initial pleading or within 14 days after su ch a contract is executed or modified. The party or the party's legal representative may request a protective order to restrict further disclosure of the document. COSTS This amendment provides that a commercial litigation financier is jointly and severally liable for an award or order imposing or assessing costs or monetary sanctions against a party or the party's legal representative arising from or relating to a civil action, administrative proceeding, legal claim, or other legal proceeding for which the commercial litigation financier is providing commercial litigation financing to the party or the party's legal representative. Further, a commercial litigation financing contract must indemnify the party to the civil action, administrative proceeding, legal claim, or other legal proceeding that is the subject of a commercial litigation financing contract and any s uch party's legal representatives against any adverse costs, attorney fees, damages, or sanctions that may be ordered or awarded against such persons in such action. However, such indemnification is not required or enforceable for adverse costs, attorney fees, damages, or sanctions that the commercial litigation financier can show resulted from intentional misconduct of the party or the party's legal representative. ANNUAL FEES This amendment prohibits a commercial litigation financier from charging an annual fee of more than 10% of the original amount of money provided pursuant to a commercial litigation financing transaction. APPLICABILITY This amendment applies to contracts entered into, amended, or renewed on or after the bill becomes a law."