A Financial Arrangement
New Jersey defendants would see who bankrolls lawsuits
The bill would treat litigation funders as fiduciaries and block them from picking lawyers, giving legal advice or shaping settlement decisions. It excludes money used only for living or family expenses while a case is pending.
New Jersey lawmakers are taking aim at the business of backing lawsuits for a share of the payout. The bill would impose duties, payment limits and disclosure rules on litigation funders, while carving out pre-settlement help for personal expenses.
- Outside money behind lawsuits would have to be disclosed.
- Funders would owe duties and face limits on how much they can collect.
- Pre-settlement help for living expenses is carved out.
- The bill advanced without recorded no votes.
- In New Jersey, a lawsuit backed by outside money would no longer be able to keep that financing hidden from the people on the other side of the case
In New Jersey, a lawsuit backed by outside money would no longer be able to keep that financing hidden from the people on the other side of the case. A bill in Trenton would require disclosure of litigation funding agreements in covered cases, bringing a financial arrangement that often sits outside the public eye into the court record.
The measure concerns third-party litigation funding agreements and supplements Title 2A of the Revised Statutes. It defines a litigation funder broadly as a person or entity with a direct or indirect right to receive compensation from the agreement, and it defines a civil action as a case filed in the Civil Part of the Law Division of the Superior Court of New Jersey.
Following the money
The disclosure requirement is the core change for plaintiffs, defendants and judges. A party or attorney that enters into a litigation funding agreement would have to give written notice to the court within 30 days after the case begins, or within 30 days of signing the agreement if that happens later. Copies would go to the other parties, and the court could review the agreement in camera, meaning privately.
The bill also says the terms of the deal could become part of discovery if a party shows the arrangement matters to the claims or defenses, or that the funder may have violated the act. Contingency-fee agreements between a party and that party’s lawyer would not have to be disclosed.
The guardrails on funders
The proposal does more than shine a light on the contracts. A litigation funder would owe a fiduciary duty to the funded party in a civil action, and the bill would bar funders from steering strategy, choosing counsel, giving legal advice or trying to alter the course of the case.
It also sets limits on the money flow. A funder could not receive more than 25% of any settlement, judgment or other monetary relief, and the combined payment to the funder and the lawyer could not top 50% without express consent. If a funder violates the law, the agreement could become unenforceable and the conduct could count as an unfair or deceptive practice.
What stays outside the rule
Not every advance is covered. Pre-settlement funding used only for living or family expenses is carved out, so the bill is aimed at litigation finance rather than short-term personal support.
Available vote records show the bill advanced without recorded no votes. If enacted, it would take effect on the 90th day after enactment and apply to litigation funding agreements entered into on or after that date.