A bill to regulate third-party litigation funding transactions; to require disclosures in those transactions; to establish the responsibilities of litigation funding companies and of attorneys; to require registration of litigation funding companies; to impose fees; to provide for the powers and duties of state governmental officers and entities; to prescribe civil fines and to provide remedies; and to require and allow the promulgation of rules.
House Bill No. 5281 establishes comprehensive regulations for third-party litigation funding in Michigan, mandating registration, transparency, consumer protections, and prohibiting foreign entities of concern from participating in such transactions.
Co-sponsored by Reps.
Referred to the Committee on Judiciary
Reported with substitute H-1
Referred to the Committee on Rules
Reported with substitute H-4
Substitute H-4 concurred in by voice vote
1. Amend page 13, line 12, by striking out all of subsections (1) to (3), inserting:
“(1) A consumer must not be required to automatically disclose a consumer litigation funding contract to an opposing party, insurer, or any other person unless ordered by the court under this section.
(2) On motion and a showing of good cause, the court may conduct an in-camera review of a consumer litigation funding contract to determine whether disclosure, in whole or in part, is necessary to address any of the following:
(a) A conflict of interest.
(b) Improper control or influence over the legal claim.
(c) Funding by a foreign entity of concern or a foreign country or person of concern.
(d) A matter directly relevant to a claim or defense in the legal claim.
(3) If the court determines that disclosure is necessary under subsection (2), the court shall order only the minimum disclosure necessary and shall issue a protective order to protect privileged, confidential, proprietary, personal financial, settlement strategy, attorney-client, and attorney work-product information.
(4) A consumer litigation funding contract and the identity of the participants or parties to the contract are not presumed discoverable solely because a consumer has entered into a consumer litigation funding contract.
(5) Disclosure ordered under this section does not constitute a waiver of attorney-client privilege, attorney work-product protection, common-interest protection, or any other privilege or protection recognized by law.”, and renumbering the remaining subsection.
2. Amend page 13, line 26, after “disclosed” by striking out “under subsection (1) or (2)”.
3. Amend page 13, line 28, after “under” by striking out “subsection (3) are” and inserting “this section is”.
4. Amend page 18, line 27, by striking out all of section 14 and inserting:
“Sec. 14. (1) A claimant or the claimant’s attorney may not be required to automatically provide a commercial litigation financing agreement to all parties, an insurer, or any other person unless ordered by the court under this section.
(2) On motion and a showing of good cause, a court may conduct an in-camera review of a commercial litigation financing agreement to determine whether disclosure, in whole or in part, is necessary to address any of the following:
(a) A conflict of interest.
(b) Improper control or influence over the legal claim.
(c) Funding by a foreign entity of concern or a foreign country or person of concern.
(d) A matter directly relevant to a claim or defense in the legal claim.
(3) If the court determines that disclosure is necessary under subsection (2), the court shall order only the minimum disclosure necessary and shall issue a protective order to protect privileged, confidential, proprietary, personal financial, settlement strategy, attorney-client, and attorney work-product information.
(4) A commercial litigation financing agreement and the identity of the participants or parties to the agreement are not presumed discoverable solely because a claimant, attorney, or law firm has entered into a commercial litigation financing agreement.
(5) Disclosure ordered under this section does not constitute a waiver of attorney-client privilege, attorney work-product protection, common-interest protection, or any other privilege or protection recognized by law.
Sec. 14a. (1) This act must be applied in a manner that does not create a litigation advantage for 1 party over another.
(2) Before ordering disclosure under section 7 or section 14, the court shall consider whether disclosure would unfairly reveal a party’s financial capacity, litigation resources, settlement vulnerability, litigation strategy, or ability to continue litigation.
(3) A court shall not order disclosure unless the probative value of the disclosure outweighs the risk of unfair prejudice, intimidation, delay, harassment, coercive settlement pressure, or invasion of privileged or protected information.
(4) If a court orders disclosure of a consumer litigation funding contract or commercial litigation financing agreement to an opposing party, the court may, on motion, require comparable disclosure of litigation-support arrangements held by the opposing party, including insurance coverage, indemnity agreements, defense-side financing agreements, or other arrangements that bear directly on settlement authority, conflicts of interest, or control of litigation.
(5) This act must not be construed to limit access to the courts for workers, consumers, patients, survivors, small businesses, or other persons seeking to vindicate legal rights.
Sec. 14b. Any disclosure ordered under section 7 or section 14 must be subject to a protective order that, at a minimum, does all of the following:
(a) Limits disclosure to counsel of record, the court, and any other person specifically authorized by the court.
(b) Prohibits public filing except under seal.
(c) Prohibits use of the disclosed information for any purpose outside the legal claim.
(d) Requires redaction of privileged, confidential, proprietary, personal financial, settlement strategy, attorney-client, and attorney work-product information.
(e) Provides sanctions for misuse or unauthorized disclosure.”.
The amendment failed by voice vote
Substitute H-3 offered
by
The substitute failed by voice vote
Passed in the House 60 to 45 (details)
Motion to give immediate effect
by
The motion prevailed by voice vote
Referred to the Committee on Regulatory Affairs
