Florida Senate Committee Adopts Litigation Funding Rules; Expands Wrongful Death

Litigation financing could soon become more transparent and less influential in Florida, but a 34-year-old restriction on who can file medical malpractice wrongful death claims would be expanded under bills approved Monday by a key Florida legislative panel.

The Senate Judiciary Committee, by a vote of 10-0, endorsed Senate Bill 1276, which supporters said would require full disclosure on who may be funding lawsuits and would bar those lenders from directing or influencing the litigation.

“This will give control back to Floridians by ensuring that all rights to make decisions in a lawsuit remain with the person who was harmed,” said Sen. Jay Collins, R-Tampa, who sponsored the bill.

Third-party financing of major lawsuits has become a top issue for insurers and corporations around the country, and a number of states have passed similar legislation designed to shine a light on who’s footing the bill. Bloomberg news service reported last fall that the funding efforts have grown rapidly in recent years. One investment group, Fortress, has plowed $6 billion into litigation funding.

Under current Florida law, lenders and loan terms in Florida lawsuits can be found to a limited degree through the Florida Secured Transaction Registry. But that requires the names of parties involved and other information that may be difficult to obtain. Plaintiffs in some cases also must disclose to defendant insurance companies information about funding, as part of the discovery process in lawsuits.

The nation’s largest property insurance trade group said that SB 1276 would bring transparency to more cases.

“Third-party litigation financing is an extremely concerning trend in litigation that is turning courts into money-making machines for investors,” Logan McFaddin, with the American Property Casualty Insurance Association, said in a statement. “APCIA applauds the Florida Senate Judiciary Committee for supporting SB 1276 as a way to protect consumers and bring transparency to this highly predatory industry.”

She said that litigation funders often are large hedge funds or foreign actors that charge high interest rates, which can leave plaintiffs with little payout at the end of litigation.

Others argued that some financiers have prolonged litigation for their own clients, unnecessarily. Reuters news service reported last year that Burford Capital, one of the largest litigation funders, was sued by Sysco Corp. food distributor after Burford reportedly blocked a multi-million-dollar lawsuit settlement. Burford had invested $140 million in the litigation, the news service reported.

“These financiers operate in the shadows but we have evidence they are influencing legal strategy to fuel their own profits in conflict with the plaintiff’s best interest; fueling unmeritorious lawsuits in the courts through portfolio financing; and exposing our nation and its interests to foreign powers with adverse motives,” said George Feijoo, a lobbyist representing the U.S. Chamber of Commerce Institute for Legal Reform, which suports Collin’s bill.

Burford officials could not be reached for comment Monday.

Plaintiffs’ attorney Rebecca Timmons, representing the Florida Justice Association, argued at the committee hearing that the bill should be revised to require disclosure only to government agencies that can police foreign influence. The disclosure should not be made to opposing counsel, nor to insurance companies, she said.

Timmons said limiting litigation financing could hurt average Floridians, who don’t often have the means to wait out years-long court cases. “These people can’t go toe to toe when the other side has millions to spend on lawyers,” she said.

Specifically, according to a legislative analysis, the bill would prohibit litigation financiers from:

• Directing the course of legal proceedings
• Contracting for a larger share of the proceeds of a legal proceeding than is collectively recovered by the plaintiffs
• Paying or offering to pay a referral fee or commission to any person
• Assigning or securitizing litigation financing agreements.

The bill also would require:

• Attorneys and their clients to make disclosures on financing agreements or relationships they have with foreign or domestic litigation financiers.
• Litigation financiers to indemnify plaintiffs and their counsel for any adverse costs, attorney fees, damages, or sanctions awarded against them.
• Authorizes courts to take financing agreements into account when determining whether a class representative or counsel can fairly represent class interests.

Bills that would have required litigation funders to register with the Florida Department of State and to file surety bonds died in the Legislature last year.

On the medical malpractice issue, SB 248 would once again allow parents of grown children who died due to medical negligence, to sue the caregivers. The Senate Judiciary Committee approved the bill by a vote of 8-0 on Monday.

State lawmakers in 1990, as part of a move to limit costly med mal insurance rates, barred parents of adults, who had no children of their own and no spouse, from recovering damages in medical malpractice wrongful death cases. SB 248, sponsored by Committee Chair Clay Yarborough, R-Jacksonville, would reopen that category of plaintiffs.

“Reducing medical malpractice premiums in 1990 was worthy goal, but putting a ban on certain individuals, so that they cannot access the judicial system is an injustice,” Yarborough said at the committee meeting.

He acknowledged that expanding the class of plaintiffs could lead to higher malpractice premiums in the years ahead, and Florida medical providers already face some of the highest insurance costs in the nation. So, to counter that, the bill provides caps on non-economic damage awards – $500,000 for medical practitioners and $750,000 for non-practitioners.

An amendment by Sen. Lauren Book, D-Davie, would have removed those caps. Her amendment failed.

The bills come almost a year after Florida lawmakers approved a sweeping tort-reform measure that limited multipliers and one-way fees for plaintiffs attorneys; reduced the time frame for bringing negligence suits; apportioned fault in suits; and made it more difficult to prove bad-faith actions by insurers.

Advocates of Monday’s actions said further reforms are needed to curb unnecessary litigation.