ARIZONA HOUSE OF REPRESENTATIVES Fifty-seventh Legislature First Regular Session
	Senate: JUDE W/D | RAGE DPA 4-2-1-0 | 3^rd Read 27-1-0-2 House: JUD DPA 8-0-0-1

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SB 1215: litigation; financing; consumer protection; enforcement

Sponsor: Senator Leach, LD 17

Caucus & COW

Overview

Establishes disclosure requirements and restrictions on third-party litigation financing and financiers.

History

According to the American Bar Association, litigation finance is the practice of an unrelated third party providing capital to a plaintiff to fund litigation in return for a portion of any monetary recovery.

The Arizona Consumer Fraud Act, which is codified in A.R.S. Title 44 Chapter 10, Article 7, relates generally to elimination and remedying of unlawful practices in merchant-consumer transactions. Under A.R.S. § 44-1522, the use by any person of any deceptive or unfair practice, fraud, false pretense, false promise or misrepresentation — or concealment, suppression or omission of any material fact with intent that others rely on such — in connection with the sale or advertisement of any merchandise, whether or not any person has in fact been misled, is declared to be an unlawful practice. The Arizona Attorney General is authorized to take certain actions to investigate and enforce violations of this provision (A.R.S. §§ 44-1524 through 44-1534).

Provisions

1. Establishes that a litigation financier may not control or influence litigation decisions, including strategy, counsel selection or settlement. (Sec. 1)

2. Mandates that courts in class action and multidistrict litigation consider the existence of litigation financing and any potential conflicts of interest when evaluating representation or leadership appointments. (Sec. 1)

3. Prohibits litigation financiers from paying referral fees or similar compensation to attorneys, law firms or licensed health care providers. (Sec. 1)

4. Prohibits litigation financiers from providing funding, in connection with a litigation financing agreement, that is financed directly or indirectly by a foreign entity of concern. (Sec. 1)

5. Requires parties to a case, except as otherwise stipulated by the court, to disclose to all other parties and indemnifying entities:

a) whether a litigation financing agreement exists; and

b) the name of the litigation financier. (Sec. 1)

6. Imposes a continuing disclosure obligation for any new or amended litigation financing agreements that occur during the course of litigation. (Sec. 1)

7. Permits any party, after receiving the initial disclosures, to apply to the court for additional information about the litigation financing agreement if the requesting party has a reasonable belief or factual basis that the agreement may negatively affect the party’s rights, interests or proprietary information. (Sec. 1)

8. Authorizes a party to seek discovery on any of the following:

a) whether the financier or its investors are foreign entities of concern;

b) whether the financier or any associated parties are hedge funds, or whether the agreement is part of a portfolio or similar pooled financing arrangement; and

c) whether the agreement includes provisions enabling the financier to control or influence the litigation. (Sec. 1)

9. Asserts that all disclosure obligations also apply in class actions and multidistrict litigation. (Sec. 1)

10. Provides that a litigation financing agreement entered into in violation of this Act is voidable. (Sec. 1)

11. Establishes that a litigation financier influencing litigation decisions or paying referral fees constitutes an unlawful practice under The Arizona Consumer Fraud Act. (Sec. 1)

12. Directs the court to determine sanctions for nondisclosure, including treating evasive or incomplete disclosures as a failure to disclose. (Sec. 1)

13. Applies to any civil action, administrative proceeding, claim or cause of action that is pending or filed on or after the effective date of this Act. (Sec. 2)

14. Contains a delayed effective date of January 1, 2026. (Sec. 3)

15. Defines pertinent terms. (Sec. 1)

Amendments

Committee on Judiciary

1. Modifies the definition of litigation financing agreement to add that such an agreement does not have a right to payment in excess of the funding provided. 

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                        SB 1215

Initials NM    Page 0 Caucus & COW

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