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

Summary

A Senate Commerce Committee statement to the Senate on Senate Bill No. 2357, State of New Jersey, dated June 8, 2026, reporting the bill favorably. The bill requires a party or the party's attorney in any civil or administrative action to disclose any third-party litigation funding agreement without awaiting a discovery request, and lets the court, agency, or tribunal impose sanctions for failure to disclose. It codifies a fiduciary duty of litigation funders to the funded party and makes the funder jointly liable for costs and monetary sanctions. A funder may not control decisions in the action, give legal advice, receive more than 25 percent of the litigation proceeds, or assign or securitize the agreement. The bill does not apply to pre-settlement funding obtained by an individual party.

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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 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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