A California tort reform group has expressed support for a state Senate bill that aims to protect consumers and the state’s justice system from problems arising from the third-party financing of civil lawsuits.
SB 581, authored by state Sen. Anna Caballero (D-Merced), would bar litigation financiers from making transactions in California unless they register with the secretary of state and follow certain procedures, including the filing of a surety bond.
“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 …” an analysis of the bill by the state’s legislative counsel states.
California Citizens Against Lawsuit Abuse (CALA) applauded Caballero for introducing the bill.
“Betting on lawsuits has become a multibillion-dollar global industry and has opened the doors for financiers to not only profit off the lawsuits of others but become hidden parties to the case in ways that could impact plaintiff’s rights, potential settlements and the length of the case,” Victor Gomez, executive director of California CALA, told the Northern California Record in an email.
Having unknown parties financing civil lawsuits can introduce an agenda to the proceedings unrelated to the merits of a court case, Gomez said.
“SB 581 creates transparency in the third-party litigation financing process to protect consumers from being pawns in an unscrupulous loan shark’s game and preserves our courtrooms as halls of justice, and not casinos to make a quick buck,” he said.
The legislation also helps ensure that defendants know all the parties involved in a lawsuit, according to Gomez.
The bill would apply transparency procedures to class action lawsuits and require the proposed class to disclose legal and financial relationships between the attorneys and the litigation financier, according to the legislature’s analysis of the bill.
The bill was referred to the Senate Judiciary Committee last month.