Senate Commerce Committee Statement — Senate Bill No. 2357 (New Jersey, June 8, 2026)

Summary

Senate Commerce Committee Statement to Senate, No. 2357, dated June 8, 2026, reporting favorably Senate Bill No. 2357. The bill requires disclosure of third-party litigation funding agreements and establishes certain responsibilities for litigation funders. A party or party’s attorney is to disclose a litigation funding agreement at the time of the filing of an initial pleading or at the time of the agreement if it occurs after the initial pleading. The bill prohibits a funder from receiving any payment that exceeds 25 percent of the litigation proceeds and makes an agreement unenforceable if the funder breaches its fiduciary duty or engages in prohibited conduct. The bill will not apply to pre-settlement funding obtained by an individual who is a party to a civil or administrative action.

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     SENATE COMMERCE COMMITTEE

                     STATEMENT TO

                   SENATE, No. 2357

 STATE OF NEW JERSEY
                        DATED: JUNE 8, 2026

    The Senate Commerce Committee reports favorably Senate Bill
No. 2357.
    This bill requires disclosure of third-party litigation funding
agreements and establishes certain responsibilities for litigation
funders.
    The bill provides that, in any civil or administrative action, a party
or party’s attorney is to, without awaiting a discovery request, disclose
any litigation funding agreement, defined, in part, to mean a written
agreement in which a third party agrees to provide funding to one of
the named parties or affiliated law firms and that creates a direct or
collateralized interest in the proceeds of the civil or administrative
action or group of civil or administrative actions.
    The bill also provides that the litigation funding agreement is to be
disclosed at the time of the filing of an initial pleading or at the time of
the agreement, if the agreement occurs after the initial pleading. Any
amendment to a litigation funding agreement that is required to be
disclosed is to be provided to all parties at the time the amendment is
made. The participants to any litigation funding agreement and nature
of that investment or arrangement also are permissible subjects for
discovery.
    The court, executive branch agency, or tribunal is authorized to
impose sanctions for a party’s failure to make the required disclosures.
The bill does not require disclosure of a contingent fee agreement
entered into by a party and the party’s legal representative in a civil or
administrative action.
    The bill additionally codifies a fiduciary duty by litigation funders
to the party whose civil or administrative action is subject to the
funding agreement to ensure the funder acts in the interests of the
party. The litigation funder is jointly liable for costs and any monetary
sanction against the party or party’s attorney.
    The bill also prohibits a litigation funder from engaging in certain
conduct that can interfere with the party’s civil or administrative
action. Specifically, a funder is prohibited from (1) influencing,
making or overturning decisions relating to the initiation, conduct,
settlement, or resolution of the underlying civil or administrative
action, (2) offering to provide or providing legal advice to the party or
party’s attorney, or selecting a party’s attorney, (3) attempting to
secure a particular remedy or obtain a waiver of any remedy
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potentially available to the party, (4) receiving any payment that
exceeds 25 percent of the litigation proceeds, or receiving without
express consent of the party whose civil or administrative action is
subject to the funding agreement, a combined payment with the
party’s attorney fee that exceeds 50 percent of the monetary relief
obtained, and (5) assigning or securitizing a litigation funding
agreement in whole or in part.
    The bill provides that a litigation funding agreement is
unenforceable by the litigation funder or any successor-in-interest if
the funder breaches its fiduciary duty or engages in conduct prohibited
by the bill. The bill also provides that a court, executive branch
agency, or tribunal may find a litigation funding agreement violates
the bill and is unenforceable. Further, a funder’s breach of fiduciary
duty or engagement in conduct prohibited by the bill constitutes an
unfair or deceptive act or practice and a violation of the New Jersey
consumer fraud act. The bill also authorizes a court, executive branch
agency, or tribunal to impose sanctions, in addition to any remedy
otherwise available, for noncompliance with any provision of the bill.
    Lastly, the bill provides that it will not apply to pre-settlement
funding obtained by an individual who is a party to a civil or
administrative action. For purposes of the bill, “pre-settlement
funding” means funding solely intended to pay costs of living or other
personal or familial expenses during the pendency of a civil action
where those funds are not used to defray litigation expenses.
    This bill was prefiled for introduction in the 2026-2027 session
pending technical review. As reported, the bill includes the changes
required by technical review, which has been performed.


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