A Bill for an Act
Page 1, Line 101Concerning foreign third-party litigation financing for
Page 1, Line 102civil actions.
Bill Summary
(Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://leg.colorado.gov.)
The bill requires a foreign third-party funder that enters into a litigation financing agreement to disclose and submit certain information to the Colorado attorney general.
The bill prohibits a foreign third-party funder from taking part in certain activities.
The bill subjects a litigation financing agreement to discovery under the Colorado rules of civil procedure and Colorado rules of evidence.
The bill deems a litigation financing agreement entered into by a foreign third-party litigation funder void if the foreign third-party litigation funder fails to comply with the activity and disclosure requirements.
The bill allows the attorney general to bring legal action against a foreign third-party litigation funder to enforce compliance with the bill, impose fines, prohibit a foreign third-party litigation funder from operating in this state, or impose any other sanction the attorney general deems appropriate for a violation of the activity or disclosure requirements.
This Unofficial Version Includes Committee
Amendments Not Yet Adopted on Second Reading
Page 2, Line 1Be it enacted by the General Assembly of the State of Colorado:
Page 2, Line 2SECTION 1. In Colorado Revised Statutes, add 13-16-126 as follows:
Page 2, Line 313-16-126. Transparency and limitations on third-party
Page 2, Line 4litigation funding - unfair or deceptive trade practices - enforcement
Page 2, Line 5- report - definitions. (1) As used in this section, unless the context otherwise requires:
Page 2, Line 6(a) "Attorney" means an attorney, group of attorneys, or law firm that represents a party in a civil action in this state.
Page 2, Line 7(b) "Foreign country of concern" means a foreign
Page 2, Line 8government listed in 15 CFR 7.4 and includes an agency of, or
Page 2, Line 9any other entity with significant control of, the foreign country of concern.
Page 2, Line 10(c) "Foreign entity" means an entity that is either owned
Page 2, Line 11or controlled by the government of a foreign country of
Page 2, Line 12concern or a partnership, association, corporation, or
Page 2, Line 13organization under the law of, or having its principal place of
Page 2, Line 14business in, a foreign country of concern or a subsidiary
Page 2, Line 15thereof.
Page 3, Line 1(d) "Foreign third-party litigation funder" means a foreign entity that is a third-party litigation funder.
Page 3, Line 2(e) "Litigation expenses" means costs typically incurred
Page 3, Line 3in the course of civil litigation, including filing fees, expert
Page 3, Line 4witness fees, transcript fees, court costs, travel expenses, and
Page 3, Line 5office overhead. "Litigation expenses" does not include funds
Page 3, Line 6intended for use by a party for personal or familial expenses
Page 3, Line 7such as food, rent, mortgage payments, car payments, or medical bills.
Page 3, Line 8(f) "Litigation financing" means the financing, funding,
Page 3, Line 9advancing, or lending of money to pay for litigation expenses or
Page 3, Line 10an agreement to pay litigation expenses directly related to
Page 3, Line 11pursuing a legal claim, administrative proceeding, or cause of
Page 3, Line 12action if the financing, funding, advancing, or lending of money is provided by a person other than the person who is:
Page 3, Line 13(I) A party to the civil action, administrative proceeding, claim, or cause of action;
Page 3, Line 14(II) An attorney engaged directly or indirectly through
Page 3, Line 15another legal representative to represent a party in the civil action; or
Page 3, Line 16(III) An entity or insurer with a preexisting contractual obligation to indemnify or defend a party to the civil action.
Page 3, Line 17(g) "Litigation financing agreement" means a transaction
Page 3, Line 18that provides litigation financing to a party or a party's
Page 3, Line 19attorney in return for assigning the third-party litigation
Page 3, Line 20funder a right to receive an amount that includes the payment
Page 3, Line 21of interest, fees, or any other consideration contingent on the
Page 4, Line 1outcome of the claim or action. "Litigation financing agreement" does not include:
Page 4, Line 2(I) Legal services provided to a party by an attorney on
Page 4, Line 3a contingency fee basis or legal costs advanced by an attorney
Page 4, Line 4when the services or costs are provided to or on behalf of a
Page 4, Line 5party by an attorney in the dispute and in accordance with the rules of professional conduct;
Page 4, Line 6(II) Bills, receivables, or liens held by a health-care provider or their assignee;
Page 4, Line 7(III) Loans made directly to a party or a party's attorney
Page 4, Line 8when repayment of the loan is not contingent upon the judgment, award, settlement, or verdict in a claim or action; or
Page 4, Line 9(IV) Funding provided by a nonprofit organization exempt
Page 4, Line 10from federal income taxation under section 501(c)(3) of the federal "Internal Revenue Code of 1986".
Page 4, Line 11(h) "National security interest" means interests relating
Page 4, Line 12to the national defense, foreign intelligence and
Page 4, Line 13counterintelligence, international and domestic security, and foreign relations.
Page 4, Line 14(i) "Party" means a person or entity in a civil action.
Page 4, Line 15(j) "Proprietary information" means information
Page 4, Line 16developed, created, or discovered by a person, or that became
Page 4, Line 17known by or was conveyed to the person, that has a commercial
Page 4, Line 18value in the person's business and includes domain names, trade
Page 4, Line 19secrets, copyrights, ideas, techniques, inventions, and other
Page 4, Line 20information relating to designs, configurations, documentation,
Page 4, Line 21recorded data, schematics, circuits, mask works, layouts,
Page 5, Line 1source code, object code, master works, master databases,
Page 5, Line 2algorithms, flow charts, formulas, works of authorship,
Page 5, Line 3mechanisms, research, manufacture, improvements, assembly,
Page 5, Line 4installation, intellectual property including patents and
Page 5, Line 5patent applications, and information concerning a person's actual or anticipated business, research, or development.
Page 5, Line 6(k) "Third-party litigation funder" means a person or
Page 5, Line 7entity that provides litigation financing to a party or attorney
Page 5, Line 8in a civil action and has the contractual right to receive or
Page 5, Line 9make a payment that is contingent on the outcome of an
Page 5, Line 10identified civil action by settlement, judgment, or otherwise on
Page 5, Line 11the outcome of a matter within a portfolio that includes the civil action . This term does not apply to:
Page 5, Line 12(I) The named parties or attorneys who provide funding for litigation expenses related to the civil action;
Page 5, Line 13(II) A person or entity providing funding solely intended
Page 5, Line 14to pay costs of living or other personal or familial expenses during the pendency of the civil action;
Page 5, Line 15(III) The named parties or attorneys who provide funding,
Page 5, Line 16including on a contingency fee basis or to advance the named parties' legal expenses related to the civil action;
Page 5, Line 17(IV) A health insurer, medical provider, or assignee that
Page 5, Line 18has paid, is obligated to pay, or is owed money for health-care
Page 5, Line 19services rendered to an injured person who is a party to the civil
Page 5, Line 20action pursuant to the terms of a health insurance plan or other agreement;
Page 5, Line 21(V) A financial institution providing loans made directly
Page 6, Line 1to a party or attorney when repayment of the loan is not
Page 6, Line 2contingent upon the outcome of the civil action or on the
Page 6, Line 3outcome of a matter within a portfolio that includes the civil action and involves the same attorney; or
Page 6, Line 4(VI) A nonprofit legal organization exempt from federal
Page 6, Line 5income taxation under section 501(c)(3) of the federal "Internal
Page 6, Line 6Revenue Code of 1986", or a person providing funding to a
Page 6, Line 7nonprofit legal organization that represents clients on a pro
Page 6, Line 8bono basis. This subsection (1)(k)(VI) does not affect the award
Page 6, Line 9of costs or attorney fees to a nonprofit legal organization or related attorney.
Page 6, Line 10(2) A foreign third-party litigation funder shall:
Page 6, Line 11(a) Disclose in writing to the attorney general the name,
Page 6, Line 12address, and citizenship or country of incorporation or
Page 6, Line 13registration of the foreign entity that has a financial stake in
Page 6, Line 14the outcome of the civil action or portfolio that includes the civil action; and
Page 6, Line 15(b) Submit to the attorney general a copy of the
Page 6, Line 16litigation financing agreement creating the contingent right to receive payment described in subsection (2)(a) of this section.
Page 6, Line 17(3) The disclosure and certification required by
Page 6, Line 18subsection (2) of this section must be made upon filing the civil
Page 6, Line 19action or, if the civil action is filed prior to the execution of a
Page 6, Line 20litigation financing agreement, within thirty-five days after the execution of the litigation financing agreement.
Page 6, Line 21(4) The declarant shall make the disclosure and
Page 6, Line 22certification required by subsection (2) of this section under
Page 7, Line 1penalty of perjury based on actual knowledge of the declarant
Page 7, Line 2formed after reasonable inquiry. The foreign third-party
Page 7, Line 3litigation funder shall provide the disclosure and certification
Page 7, Line 4to the attorney general, and the attorney general shall
Page 7, Line 5maintain the disclosure to preserve the confidentiality of the parties and attorneys.
Page 7, Line 6(5) If, after submitting the disclosure and certification
Page 7, Line 7required by subsection (2) of this section, the foreign
Page 7, Line 8third-party litigation funder learns that the information
Page 7, Line 9disclosed is incomplete or inaccurate, the foreign third-party
Page 7, Line 10litigation funder must supplement or correct the incomplete or
Page 7, Line 11inaccurate disclosure or certification within thirty-five days after learning of the incomplete or inaccurate information.
Page 7, Line 12(6) A foreign third-party litigation funder shall not:
Page 7, Line 14(a) Utilize a domestic entity as a means of providing litigation financing to a party or attorney in a civil action;
Page 7, Line 15(b) Decide, influence, or direct an attorney with respect
Page 7, Line 16to the conduct of the civil action or any settlement or
Page 7, Line 17resolution of the civil action. The right to decide, influence, or
Page 7, Line 18direct matters related to a case belongs solely to the parties and attorneys.
Page 7, Line 19(c) Be assigned rights to profits other than the right to
Page 7, Line 20receive a share of the proceeds awarded in the civil action as outlined in the litigation financing agreement; or
Page 7, Line 21(d) Share proprietary information, or information
Page 7, Line 22affecting national security interests obtained as a result of the
Page 8, Line 1litigation financing agreement for the civil action, with anyone who is not a party or an attorney.
Page 8, Line 2(7) The existence of a litigation financing agreement is
Page 8, Line 3subject to discovery pursuant to the Colorado rules of civil
Page 8, Line 4procedure and Colorado rules of evidence in the civil action to which the litigation financing agreement pertains.
Page 8, Line 5(8) A litigation financing agreement that does not comply with the requirements of this section is void.
Page 8, Line 6(9) A violation of this section constitutes a deceptive or unfair trade practice pursuant to section 6-1-105.
Page 8, Line 7(10) The attorney general may institute a legal action in
Page 8, Line 8a court of competent jurisdiction to enforce compliance with
Page 8, Line 9this section, impose fines, prohibit a foreign third-party
Page 8, Line 10litigation funder from operating within this state, or impose any
Page 8, Line 11other sanction the attorney general deems appropriate for a violation of this section.
Page 8, Line 12(11) (a) Notwithstanding section 24-1-136 (11)(a)(I),
Page 8, Line 13beginning January 1, 2026, and annually thereafter, the
Page 8, Line 14attorney general shall submit a report to the president of the
Page 8, Line 15senate and the speaker of the house of representatives
Page 8, Line 16describing foreign involvement in litigation financing agreements in the preceding year. The report must include:
Page 8, Line 17(I) The name, citizenship, or country of incorporation or
Page 8, Line 18registration of the foreign entity and whether the foreign
Page 8, Line 19entity provided funds for a purpose other than to defray
Page 8, Line 20litigation expenses or the financial impact of a negative
Page 8, Line 21judgement; and
Page 9, Line 1(II) Whether a foreign third-party litigation funder
Page 9, Line 2violated the provisions of this section, and if so, what the
Page 9, Line 3violations were and whether the attorney general took
Page 9, Line 4enforcement action against the foreign third-party litigation funder.
Page 9, Line 5(b) The report described in subsection (11)(a) of this
Page 9, Line 6section must not identify the parties involved in a civil action or the attorney representing the parties in the civil action.
Page 9, Line 7(12) This section does not apply to a nonprofit
Page 9, Line 8organization funded by private donors that represents clients on a pro bono basis.
Page 9, Line 9SECTION 2. In Colorado Revised Statutes, 6-1-105, add (1)(iiii) as follows:
Page 9, Line 106-1-105. Unfair or deceptive trade practices - definitions.
Page 9, Line 11(1) A person engages in a deceptive trade practice when, in the course of the person's business, vocation, or occupation, the person:
Page 9, Line 12(iiii) Violated section 13-16-126.
Page 9, Line 13SECTION 3. In Colorado Revised Statutes, 24-31-101, amend (1)(i)(XXII) and (1)(i)(XXIII); and add (1)(i)(XXIV) as follows:
Page 9, Line 1424-31-101. Powers and duties of attorney general. (1) The attorney general:
Page 9, Line 15(i) May independently initiate and bring civil and criminal actions to enforce state laws, including actions brought pursuant to:
Page 9, Line 16(XXII) Part 14 of article 12 of title 38;
and(XXIII) Section 24-34-806; and
Page 9, Line 17(XXIV) Section 13-16-126.
Page 9, Line 18SECTION 4. Act subject to petition - effective date. This act
Page 10, Line 1takes effect at 12:01 a.m. on the day following the expiration of the
Page 10, Line 2ninety-day period after final adjournment of the general assembly; except
Page 10, Line 3that, if a referendum petition is filed pursuant to section 1 (3) of article V
Page 10, Line 4of the state constitution against this act or an item, section, or part of this
Page 10, Line 5act within such period, then the act, item, section, or part will not take
Page 10, Line 6effect unless approved by the people at the general election to be held in
Page 10, Line 7November 2026 and, in such case, will take effect on the date of the official declaration of the vote thereon by the governor.