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Bill

S 2357

Requires disclosure of third-party litigation funding agreements and establishes certain responsibilities for litigation funders.

2026-2027 Regular Session Introduced by Joe Lagana and 3 co-sponsors

Requires mandatory disclosure of third-party litigation funding agreements in civil/administrative actions to increase transparency and curb funder influence.

Referred to Senate Budget and Appropriations Committee
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WeVote Research Nonpartisan
Bill Summary · S 2357

Summary of S.2357 (New Jersey, 222nd Legislature)

Main purpose and intent

  • To require disclosure of third-party litigation funding agreements in civil and administrative actions and to establish certain duties, responsibilities, and boundaries for litigation funders.
  • Aims to increase transparency in litigation financing and curb potential conflicts of interest or improper influence by funders.

Key provisions and changes

1) Definitions
- Clarifies terms used in the act:
- Administrative action, Court, Civil action.
- Litigation expenses (broadly defined to include court costs, attorneys’ fees, expert fees, travel, and expenses related to identifying or soliciting potential clients).
- Litigation funder: a person or entity providing funds or who has a direct/indirect right to proceeds from the action. Several exceptions include family members, certain attorneys, licensed financial institutions with restricted rights, nonprofit pro bono providers, and funders providing funds for purposes other than litigation expenses.
- Litigation funding agreement: a written contract where a third party funds a party or affiliated law firm and holds a direct or collateralized interest in the proceeds (based on funding obligations to the action or counsel) including specific relationships to counsel or co-counsel.
- Pre-settlement funding: funds used only for living or personal expenses and not to cover litigation costs.

2) Mandatory disclosure of funding agreements
- In civil or administrative actions, parties or their lawyers must disclose the entire litigation funding agreement without waiting for a discovery request.
- Disclosures include all correspondence and documents that comprise the funding agreement, due at filing or when the agreement is reached; amendments must be disclosed when made.
- Discovery: The funding arrangement and the nature of the investment can be subject to discovery.
- Sanctions: Courts/agencies may sanction parties for evasive or incomplete disclosures.
- Disclosure exemptions: The act does not require disclosure of a contingent fee agreement between a party and their legal representative.

3) Fiduciary duties and conduct by funders
- A litigation funder that provides funding owes a fiduciary duty to the funded party.
- Funders must avoid acts that conflict with that fiduciary duty and must agree to be jointly liable for any costs or monetary sanctions awarded against the funded party or the funded party’s attorney.

4) Prohibited conduct by funders
- Funders may not:
- Influence or overturn decisions about the initiation, conduct, settlement, or resolution of the action.
- Provide or advise on legal strategy or select the party’s attorney.
- Seek to secure remedies or waivers beyond what is legally permissible.
- Receive payments exceeding 25% of the monetary relief; absent consent, total combined payment to funder and attorney cannot exceed 50% of the relief.
- Assign or securitize the funding agreement.

5) Enforceability and penalties
- A funding agreement can be unenforceable if the funder engages in prohibited conduct.
- Courts/agencies may declare a funding provision unenforceable if it violates the act.
- Violations constitute unfair or deceptive acts or practices and can incur penalties, including sanctions.

6) Exclusions and scope
- Pre-settlement funding obtained by a party to the action is excluded from the act’s requirements.
- The act applies to funding agreements entered into after the effective date.

7) Effective date
- The act takes effect on the 90th day after enactment and applies to funding agreements entered into on or after that date.

Who or what would be affected

  • Civil and administrative actions in New Jersey involving third-party litigation funding.
  • Parties to litigation and their attorneys, who would face disclosure obligations and potential sanctions for noncompliance.
  • Litigation funders, who would bear fiduciary duties, disclosure requirements, and limitations on fees and permissible activities.
  • Courts, executive branch agencies, and tribunals that oversee enforcement, sanctions, and interpretation of funding agreements.

Procedural and timeline aspects

  • Disclosure timing: Upon filing initial pleadings (or at the time funding is arranged if after filing).
  • Amendments to funding agreements must be disclosed when amended.
  • The act becomes effective 90 days after enactment and applies only to agreements entered into after that date.
  • Sanctions and unenforceability mechanisms provide enforcement tools for noncompliance.

Note: The bill is currently the subject of committee reporting and is pre-filed for the 2026 session in New Jersey.

Compiled from official sources — confirm details with the bill’s official record.

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