As we have seen in recent weeks and months, there has been accelerated momentum behind state legislatures moving forward with legislation to govern and more heavily regulate the use of third-party litigation funding at the state level. However, in an unexpected turn of events, it appears that California’s proposed bill to impose stricter guidelines on litigation financing will not be moving forward this year.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
As we have seen in recent weeks and months, there has been accelerated momentum behind state legislatures moving forward with legislation to govern and more heavily regulate the use of third-party litigation funding at the state level. However, in an unexpected turn of events, it appears that California’s proposed bill to impose stricter guidelines on litigation financing will not be moving forward this year.
An article by The Recorder covers an announcement by California State Senator Anna Caballero that the advancement of SB 581, a bill which would have increased restrictions on the funding of consumer litigation, is now on hold until January 2024. According to the reporting, this decision was announced alongside numerous other bills as part of the Legislature’s ‘suspense file day’, when decisions are made as to the future progression of bills in the committee stage.
Whilst Sen. Caballero’s announcement did not offer any explanation as to why the bill’s advancement had been stalled, it is notable that SB 581 had already seen its scope reduced from the initial draft text published in February. The revised bill announced in April had shed the mandatory disclosure requirements for third-party funding, and narrowed its scope to focus on lending to small-scale consumer litigation, rather than commercial litigation.
With these changes made after significant criticism from the likes of ILFA and Consumer Attorneys of California, it is difficult to predict what the final version of SB 581 will look like, if it indeed moves forward in 2024.
