HOUSE BILL 312

57th legislature - STATE OF NEW MEXICO - first session, 2025

INTRODUCED BY

Marian Matthews and Alan T. Martinez

 

 

 

 

 

AN ACT

RELATING TO LITIGATION; ENACTING THE LITIGATION FINANCING TRANSPARENCY ACT; REQUIRING DISCLOSURES; PROVIDING ENFORCEMENT.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Litigation Financing Transparency Act".

     SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Litigation Financing Transparency Act:

          A. "action" means a civil action, an administrative proceeding, a claim or other cause of action;

          B. "financial institution" means a bank, a trust company, a savings and loan association, a credit union, a consumer lender, an international banking facility or a financial holding company under the jurisdiction of the state or federal government;

          C. "foreign person" means a person that is not:

                (1) a citizen of the United States;

                (2) an alien lawfully admitted for permanent residence in the United States;

                (3) an unincorporated association with a majority number of members of which are citizens of the United States or aliens lawfully admitted for permanent residence in the United States; or

                (4) a corporation, a limited liability company, a partnership, a society or other business entity that was formed or incorporated in the United States;

          D. "foreign principal" means:

                (1) the government or a government official of a country other than the United States;

                (2) a political subdivision or political party of a country other than the United States; or

                (3) a partnership, an association, a corporation, an organization or other combination of persons organized under the laws or having its principal place of business in a country other than the United States whose shares or other ownership interest is owned by the government or a government official of a country other than the United States or owned by a political subdivision or political party of a country other than the United States;

          E. "funded consumer" means a person who has entered into a litigation financing agreement or whose recovery or outcome in an action is affected by or subject to a litigation financing agreement;

          F. "leadership position" means a lead counsel, a co-lead counsel, a common benefit counsel, a steering committee member, an executive committee member and similar positions or roles;

          G. "licensed health care provider" means:

                (1) a person, a corporation or an institution licensed by the state to provide health care, medical services, nursing services or other health-related services and includes officers, employees and agents working under the supervision of the person, corporation or institution in providing the health care, medical services, nursing services or other health-related services; or

                (2) a federally licensed, regulated or registered blood bank, blood center or plasma center that collects, processes or distributes whole human blood, blood components, plasma, blood fractions or blood derivatives for use by a licensed health care provider and includes the officers, employees and agents of the blood bank, blood center or plasma center;

          H. "litigation financier" means a person that has entered into a litigation financing agreement with a funded consumer or with the counsel of record for a party to an action;

          I. "litigation financing agreement" means an agreement for which a person agrees to provide financing, funding, advancing or loaning of money to pay for fees, costs, expenses or other sums arising from or in a manner related to an action in exchange for the right to receive repayment, interest, fees or other consideration that cumulatively exceeds the amount of money given by the person and that is contingent on the outcome of an action or on the outcome of a matter within a portfolio that includes the action and involves the same counsel or affiliated counsel but excludes agreements, contracts or arrangements entered into with or by:

                (1) a named party to the action if payments made to the named party are provided exclusively for personal and family use and are provided on the condition that they are not to be used for legal filings, legal document preparation and drafting, appeals, creation of a litigation strategy, drafting testimony or other expenses directly related to litigation;

                (2) a counsel of record for legal services provided on a contingency fee basis or advanced legal costs provided by a counsel of record;

                (3) a person with a preexisting contractual obligation to indemnify or defend a party to the action or a health insurer who has paid or is obligated to pay sums for health care services rendered to an injured person under the terms of a health insurance policy, plan or agreement;

                (4) a financial institution for repayment of loans made directly to a party or a party's counsel when repayment of the loan is not contingent on the outcome of an action by settlement, judgment or otherwise or on the outcome of a matter within a portfolio that includes the action and involves the same counsel or affiliated counsel;

                (5) an organization that is exempt from taxation under Section 501(c)(3) of the United States Internal Revenue Code of 1986 if the funding provided to the organization is used to seek relief other than compensatory damages in excess of one hundred thousand dollars ($100,000) or punitive damages, whether as a party or on behalf of a client or member of the organization and regardless of whether the organization seeks an award of costs or attorney fees in providing pro bono representation;

                (6) an organization that is exempt from taxation under Section 501(c)(3) of the United States Internal Revenue Code of 1986 that provides funding by grant or otherwise to support the pursuit of litigation that does not seek compensatory damages in excess of one hundred thousand dollars ($100,000) or punitive damages; or

                (7) a person that provides funding to a medical practice or facility solely for its receivables;

          J. "proprietary information" means information that is developed, created or discovered by a person or that became known by or was conveyed to the person that has commercial value in the person's actual or anticipated business, research or development or that is received in confidence by or for the person from any source; and

           K. "sovereign wealth fund" means an investment fund that is owned or controlled by a foreign principal or an agent of a foreign principal.

     SECTION 3. [NEW MATERIAL] PROHIBITED CONDUCT.--A litigation financier shall not:

          A. direct or make decisions with respect to the course of an action that is subject to a litigation financing agreement, including decisions concerning appointing or changing counsel representing the funded consumer, choice of or use of expert witnesses and litigation strategy. The funded consumer and counsel of record shall retain all rights to control and decision making with regard to the action;

          B. pay or offer to pay a commission, a referral fee or other consideration to a person, including legal counsel, a law firm or a licensed health care provider, for referring a person to the litigation financier;

          C. assign, including securitizing, a litigation financing agreement in whole or in part; or

          D. be assigned rights to an action that is subject to a litigation financing agreement to which that litigation financier is a party.

     SECTION 4. [NEW MATERIAL] MANDATORY DISCLOSURES.--

          A. Legal counsel that enters into a litigation financing agreement must deliver a copy of the litigation financing agreement to all persons the legal counsel is representing in the subject action within thirty days after the earlier of being retained as legal counsel or entering into the litigation financing agreement.

          B. Except as otherwise stipulated or ordered by a court of competent jurisdiction, a party to an action or the party's legal counsel of record, without awaiting a discovery request and within thirty days after commencement of the action, shall:

                (1) deliver a copy of the litigation financing agreement to:

                     (a) all parties to the action or to the parties' legal counsels of record;

                     (b) the court, agency or tribunal in which the action is pending;

                     (c) a known person with a preexisting contractual obligation to indemnify or defend a party to the action, including an insurer providing indemnification or paying a party's defense costs;

                     (d) for a class action, a member of the class on request; and

                     (e) for multidistrict litigation consolidated in this state, all legal counsel approved or appointed to a leadership position;

                (2) disclose in writing to the persons listed in Paragraph (1) of this subsection the existence and nature of a legal, financial or other relationship between legal counsel for the party to the action that is subject to a litigation financing agreement and the litigation financier; and

                (3) disclose in writing to the persons listed in Paragraph (1) of this subsection, the United States department of state and the office of the attorney general of the United States the name, address and citizenship or country of incorporation or registration of a foreign person, foreign principal or sovereign wealth fund, other than named parties or legal counsel of record:

                     (a) that has a right to receive a payment that is contingent on the outcome of the action by settlement, judgment or otherwise, or on the outcome of a matter within a portfolio that includes the action and involves the same or affiliated legal counsel;

                     (b) from which money that is used to satisfy a term of the litigation financing agreement has been or will be directly or indirectly sourced, in whole or in part; or

                     (c) that has received or is entitled to receive proprietary information or information that encompasses national defense, foreign intelligence and counterintelligence, international and internal security and foreign relations of the United States.

          C. The disclosure obligations required by this section are continuing obligations and are triggered on a named party or the named party's legal counsel of record entering into a new litigation financing agreement or amending an existing litigation financing agreement.

          D. Prior to production of a litigation financing agreement in response to a discovery request, a named party may request and a court must conduct an in-camera review of the agreement to determine whether it meets the requirements for a litigation financing agreement. A party may redact information that may identify the litigation financier before submitting the agreement for in-camera review. If the court concludes that the agreement is a litigation financing agreement, a named party may obtain discovery of the litigation financing agreement and all parties to the litigation financing agreement.

          E. The court shall determine sanctions for a party that fails to make the disclosures required by the Litigation Financing Transparency Act. An evasive or incomplete disclosure shall be treated as a failure to make the required disclosure.

          F. The disclosure obligations prescribed by this section apply to class actions and multidistrict litigation.

     SECTION 5. [NEW MATERIAL] PROTECTION FROM ADVERSE DETERMINATIONS.--

          A. In a litigation financing agreement, a litigation financier shall indemnify the funded consumers against adverse costs, attorney fees, damages or sanctions that may be ordered or awarded in an action for which a litigation financier is providing financing for the litigation.

          B. Notwithstanding Subsection A of this section, indemnification is not required for adverse costs, attorney fees, damages or sanctions that result from the consumer's intentionally wrongful conduct.

     SECTION 6. [NEW MATERIAL] VIOLATION OF ACT.--

          A. A litigation financing agreement that is entered into in violation of the Litigation Financing Transparency Act is void.

          B. A litigation financier that violates a section of the Litigation Financing Transparency Act commits an unlawful act under the Unfair Practices Act.

     SECTION 7. APPLICABILITY.--The Litigation Financing Transparency Act applies to a civil action, an administrative proceeding, a claim or a cause of action that is pending or commenced on or after the effective date of that act.

     SECTION 8. EFFECTIVE DATE.--The effective date of the provisions of this act is December 31, 2025.

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