Senate Commerce Committee Statement to Senate, No. 4374 — State of New Jersey (June 12, 2025)

Summary

The Senate Commerce Committee of the State of New Jersey, in a statement dated June 12, 2025, reports favorably and with committee amendments Senate Bill No. 4374. As amended, 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. 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 influence settlement decisions, give legal advice, or receive any payment exceeding 25 percent of the litigation proceeds. The bill does not apply to pre-settlement funding obtained by an individual party.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

SENATE COMMERCE COMMITTEE

STATEMENT TO

SENATE, No.
4374

with
committee amendments

STATE
OF NEW JERSEY

DATED: JUNE 12,
2025

The Senate Commerce Committee reports favorably and with
committee amendments Senate Bill No. 4374.

As
amended, 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.

COMMITTEE AMENDMENTS :

The committee amended the bill to:

(1) add a definition of “administrative action” and modify
the definitions of “court” and “civil action;”

(2) incorporate executive branch agencies and
tribunals as part of provisions granting courts certain authorities or
assigning courts certain roles;

(3) clarify the court, executive branch agency, or
tribunal does not need a litigation funding agreement, including any amendment,
disclosed to it with respect to a civil or administrative action;

(4) remove certain references to a party or parties
as “funded;”

(5) require a motion be made prior to the issuance of
sanctions by the court for failure to disclose a litigation funding agreement;

(6) require a litigation funder to agree as a
condition of providing funding that it will be jointly liable for any award or
order imposing or assessing costs or monetary sanctions;

(7) clarify that it is the absence of express consent
of a party whose civil or administrative action is subject to a litigation
funding agreement that caps the combined payment to the litigation funder and
attorney fee at 50 percent; and

(8) provide that the bill will not apply to
pre-settlement funding obtained by an individual who is a party to a civil or
administrative action.

File and source

File

2025-06-12_SCM_S4374_S1.htm

Size

10,663 bytes

SHA-256

531291cb219decd4464f46032390ba29eed94fb041e12ca4ea50a92678d5c26b

Our copy

2025-06-12_SCM_S4374_S1.htm

Original

No public link identified.