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A BILL TO BE ENTITLED
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AN ACT
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relating to litigation financing transactions. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle B, Title 4, Finance Code, is amended by |
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adding Chapter 354 to read as follows: |
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CHAPTER 354. LITIGATION FINANCING AGREEMENTS |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 354.001. DEFINITIONS. In this chapter: |
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(1) "Charge" or "charges" means the amount paid to a |
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litigation financing company by or on behalf of the consumer, in |
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addition to the funded amount provided by or on behalf of the |
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company to a consumer. |
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(2) "Consumer" means an individual who has a pending |
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legal claim and who: |
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(A) resides in this state; or |
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(B) has the legal claim in this state. |
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(3) "Funded amount" means the amount provided to or on |
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behalf of the consumer under a litigation financing agreement. The |
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term does not include a charge. |
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(4) "Funding date" means the date on which the |
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litigation financing company: |
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(A) transfers the funded amount to the consumer |
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by personal delivery or by wire, ACH debit, or other electronic |
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means; or |
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(B) mails the funded amount to the consumer by |
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insured, certified, or registered United States mail. |
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(5) "Immediate family member" means: |
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(A) a parent, sibling, spouse, grandparent, or |
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grandchild of an individual; or |
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(B) a child related by blood, adoption, or |
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marriage to an individual. |
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(6) "Legal claim" includes: |
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(A) a civil action; |
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(B) an alternative dispute resolution |
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proceeding; or |
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(C) an administrative proceeding before an |
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agency of this state. |
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(7) "Litigation financing agreement" means an |
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agreement under which: |
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(A) money is provided to or on behalf of a |
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consumer by a litigation financing company for a purpose other than |
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prosecuting the consumer's legal claim; and |
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(B) the repayment of the money is in accordance |
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with a litigation financing transaction the terms of which are |
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included as part of the litigation financing agreement. |
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(8) "Litigation financing company" or "company" means |
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a person that enters into a litigation financing agreement with a |
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consumer. |
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(9) "Litigation financing transaction" means a |
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non-recourse transaction in which a litigation financing company |
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purchases, and a consumer assigns to the company, a contingent |
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right to receive an amount of the potential proceeds of a |
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settlement, judgment, award, or verdict obtained in the consumer's |
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legal claim. |
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(10) "Resolution date" means the date on which the sum |
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of the amount funded to the consumer and the agreed-to charges is |
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delivered to the litigation financing company. |
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Sec. 354.002. NONAPPLICABILITY OF CHAPTER. Except as |
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specifically provided by this chapter, this chapter does not apply |
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to the following persons who enter into a litigation financing |
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agreement with a consumer: |
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(1) an immediate family member of the consumer; |
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(2) an accountant who provides accounting services to |
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the consumer; or |
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(3) an attorney who, at the time money is provided to |
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or on behalf of a consumer under a litigation financing agreement, |
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has an attorney-client relationship with the consumer concerning |
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the consumer's legal claim. |
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SUBCHAPTER B. AGREEMENT REQUIREMENTS |
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Sec. 354.051. FORM OF AGREEMENT. (a) A litigation |
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financing agreement must: |
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(1) be in writing; |
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(2) contain the initials of the consumer on each page; |
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and |
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(3) be otherwise complete when presented to the |
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consumer for signature. |
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Sec. 354.052. REQUIRED TERMS; DISCLOSURES. (a) On the |
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front page of the agreement under appropriate headings, the |
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agreement must disclose: |
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(1) the funded amount to be paid to the consumer by the |
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litigation financing company; |
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(2) an itemization of one-time charges; |
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(3) the total amount to be assigned by the consumer to |
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the company, including the funded amount and all charges; and |
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(4) a payment schedule that: |
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(A) includes the funded amount and charges; and |
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(B) lists all dates and the amount due at the end |
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of each 180-day period from the funding date until the due date of |
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the maximum amount due to the company by the consumer to satisfy the |
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amount owed under the agreement. |
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SECTION 2. The changes in law made by this Act apply only to |
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a litigation financing agreement entered into on or after the |
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effective date of this Act. A litigation financing agreement |
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entered into before the effective date of this Act is governed by |
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the law in effect on the date the agreement was entered into, and |
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the former law is continued in effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2013. |