The House Civil Justice Subcommittee has passed CJS 20-01. The legislation would more tightly regulate the unfair practice of litigation financing, also known as lawsuit lending.
The subcommittee voted unanimously to refer the bill to the full Judiciary Committee. If signed into laws, the measure would regulate interest rates on lawsuit loans.
Bill Herrle, NFIB’s state executive director for Florida, calls the practice of lending money to plaintiffs so they can file a lawsuit an aberration and a perversion of the state’s justice system. Rather than helping injured parties recover their losses, Herrle said, the loans discourage plaintiffs from settling out of court, even when they’re unlikely to win at trial.
“With a lawsuit loan, the interest can compound so quickly that the plaintiff simply can’t afford to settle the case for the true value of the claim,” Herrle said. That’s because the proposed settlement wouldn’t cover the cost the loan, he said. Plaintiffs are under tremendous financial pressure to take the case to trial, even if they are unlikely to win, in hopes of receiving enough money to repay the loan plus interest.
“That not only clutters up the courts with frivolous cases but hurts plaintiffs,” Herrle said. “It’s especially damaging to small businesses, which aren’t sitting on piles of cash and don’t have teams of lawyers standing by waiting to swat down nuisance suits.
“Plaintiff’s attorneys usually don’t get paid unless the plaintiff settles or wins, but defendants typically pay their lawyers by the hour,” Herrle said. “The longer a case drags on, the more the small business owner has to pay, even if the judge eventually dismisses the case.
“The cost of defending itself against one bogus lawsuit can be enough drive a small business into bankruptcy,” Herrle said.
Last week, Herrle joined legislative leaders at a news conference to discuss a new report on the Economic Benefits of Tort Reform. Click here to read the report.
“The small business community is eager to work with Governor DeSantis and legislative leaders to curb lawsuit lending, pass accuracy-in-damages reform, and stop lawsuits brought in ‘bad faith’ with the intent to cancel policy limits,” he said.
