Relates to the disclosure of third-party consumer litigation financing agreements in which there is a right to receive compensation or proceeds from the consumer that is contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7599
SPONSOR: Septimo TITLE OF BILL:
An act to amend the civil practice law and rules, in relation to
disclosing third-party consumer litigation financing agreements
PURPOSE OR GENERAL IDEA OF BILL:
The bill establishes provisions related to the discoverability of liti-
gation financing agreements in all matters arising out of personal inju-
ries including actions for wrongful death and personal injury actions,
including infants or judicially declared incapacitated persons. This
bill may be cited as the "Sunshine in Lawsuit Funding Act."
SUMMARY OF PROVISIONS:
The civil practice law and rules is amended by adding a new rule 3120-a
to read as follows: Rule 3120-a. Disclosure of financing agreements;
discovery. Except as otherwise stipulated or ordered by the court, a
consumer or their legal representative shall, without awaiting a discov-
ery request, provide to all parties to the litigation, including their
insurer if prior to litigation, any litigation funding contract or
agreement under which anyone, other than a legal representative permit-
ted to charge a contingent fee representing a party, has a right to
receive compensation or proceeds from the consumer that are contingent
on and sourced from any proceeds of the civil action, by settlement,
judgment, or otherwise. The existence of litigation funding and all
participants in such arrangements are permissible subjects of discovery
in all personal injury litigation and matters arising out of personal
injuries including actions for wrongful death and personal injury
actions involving infants or judicially declared incapacitated persons.
JUSTIFICATION:
In April 2024, the Office of Court Administration sought public comment
on proposed rules to require the disclosure of information relating to
litigation financing agreements in certain cases. A majority of stake-
holders-including the City of New York, the New York State Bar Associ-
ation, and the Defense Association of New York State-strongly supported
the proposed amendments. Most called for disclosure of litigation
contracts in all actions for personal injury and wrongful death. New
York City Corporation Counsel emphasized that "the City supports the
passage of legislation that requires general oversight and regulation of
the litigation financing industry, and the passage of amendments to the
State Civil Practice Law and Rules and other relevant statutes to
require transparency in all actions pending in courts of this state."
Mandating disclosure of litigation financing to both the court and all
parties is essential to ensure fairness, judicial oversight, and to
identify conflicts of interest. Litigation financing arrangements can
distort litigation strategies by creating economic incentives that bene-
fit outside funders over parties in litigation. Current law already
mandates that parties disclose insurance coverage early in the discovery
process, permitting courts and litigants to understand the available
resources and potential settlement parameters.
No equivalent requirement exists for consumer litigation financing
agreements, even though these contracts can have a similarly powerful
impact on a case's trajectory. In the most extreme instances, third-par-
ty litigation funding has been found to underwrite fraudulent claims
that involve vulnerable people--including undocumented migrants and the
unhoused--coerced to stage accidents and undergo medically unnecessary
surgeries to inflate the value of a settlement or verdict.
Further, the inefficient and costly resolution of claims created by
undisclosed financing leads to prolonged • litigation, ultimately
increasing costs for consumers and undermining innovation. Adequate
disclosure would allow courts to understand the financial incentives
involved, spot problematic arrangements early, guard against unscrupu-
lous operators, and curb the most egregious abuses. Requiring plaintiffs
and their attorneys to disclose any financing at the outset of liti-
gation during discovery would help ensure that the court system is truly
an instrument of justice and fairness, not a profit center ripe for
abuse.
In line with the majority of the comments received by the court, this
bill sets forth requirements for complete disclosure of consumer liti-
gation financing contracts during discovery in all actions for personal
injury or wrongful death. By formally requiring disclosure of litigation
financing agreements, the legislature would protect consumers, shine a
light on gruesome fraud schemes, and strengthen the overall integrity of
New York's civil justice system.
PRIOR LEGISLATIVE HISTORY:
None.
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall become a
law.
STATE OF NEW YORK
________________________________________________________________________
7599
2025-2026 Regular Sessions
IN ASSEMBLY
April 1, 2025
___________
Introduced by M. of A. SEPTIMO -- read once and referred to the Commit-
tee on Judiciary
AN ACT to amend the civil practice law and rules, in relation to
disclosing third-party consumer litigation financing agreements
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Short title. This act shall be known and may be cited as
2 the "sunshine in lawsuit funding act".
3 § 2. The civil practice law and rules is amended by adding a new rule
4 3120-a to read as follows:
5 Rule 3120-a. Disclosure of financing agreements; discovery. 1. Except
6 as otherwise stipulated or ordered by the court, a consumer or their
7 legal representative shall, without awaiting a discovery request,
8 provide to all parties to the litigation, including their insurer if
9 prior to litigation, any litigation funding contract or agreement under
10 which anyone, other than a legal representative permitted to charge a
11 contingent fee representing a party, has a right to receive compensation
12 or proceeds from the consumer that are contingent on and sourced from
13 any proceeds of the civil action, by settlement, judgment, or otherwise.
14 2. The existence of litigation funding and all participants in such
15 arrangements are permissible subjects of discovery in all personal inju-
16 ry litigation and matters arising out of personal injuries including
17 actions for wrongful death and personal injury actions involving infants
18 or judicially declared incapacitated persons.
19 § 3. This act shall take effect on the thirtieth day after it shall
20 have become a law.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11245-01-5
