Tennessee limits commercial lawsuit funders’ fees and control over cases

Commercial lawsuit funders must follow limits on annual fees and payments from a claim’s proceeds. These limits cover commercial funding for claims seeking money. The funder’s payment depends on the outcome of the claim or a group of cases involving the same or affiliated lawyers. A funder cannot agree to collect, receive, or recover more than the parties collectively recover after paying their lawyers’ fees and case costs. The annual fee cannot exceed 10% of the original amount provided. The law took effect May 19, 2026, and applies to contracts entered into, amended, or renewed on or after that date.

Commercial lawsuit funders cannot direct a funded case or decide how it is settled. The rule covers cases and other legal proceedings included in a commercial funding agreement. Decisions about lawyers, expert witnesses, case strategy, and settlements remain with the parties and their lawyers. The funding contract must state that the funder has no right to direct the case or make those decisions. The law applies to contracts entered into, amended, or renewed on or after May 19, 2026.

Commercial lawsuit funders share responsibility for ordered costs and financial penalties and must cover losses imposed on funded parties and their lawyers. These duties cover commercial funders and the parties or lawyers they fund in lawsuits and other legal proceedings. A funder can be held responsible for the full amount of costs or financial penalties imposed on a funded party or lawyer in connection with the proceeding. The funder must promise to cover costs, lawyer fees, damages, and penalties awarded against the funded party or lawyer, and must cover them even without that promise. That duty to cover losses does not apply when the funder proves they resulted from the party’s or lawyer’s intentional misconduct. The law applies to contracts entered into, amended, or renewed on or after May 19, 2026.

A party or its lawyer must file the commercial funding contract with the court and give other parties a copy. The duty covers commercial funding contracts that include the pending court case. Before filing, the party or lawyer may ask the court for an order restricting further disclosure. The deadline is 14 days after the party’s first court filing, or after a contract is signed or modified following that filing. The law covers contracts entered into, amended, or renewed on or after May 19, 2026.

Consumer and commercial lawsuit funders must register in Tennessee and maintain a $50,000 bond, a financial guarantee for claims involving violations. Registration covers consumer and commercial lawsuit funding in Tennessee. Consumer funding excludes lawyers’ outcome-based fees or advanced legal costs, commercial tort claims, and workers’ compensation claims. Business entities and partnerships must be active and in good standing and identify their funding role in their organizational records. Other funders must apply and pay a $100 filing fee. Funders cannot register or operate when their funding business has direct or indirect ties to foreign people, foreign principals, or foreign investment funds covered by the federal foreign-adversary designation. Commercial funding excludes case parties, representing lawyers, and those already required by contract to defend or cover a party. It also excludes privately funded nonprofits serving clients free of charge and seeking only court orders rather than money; awards of costs or lawyer fees remain allowed. Funders must update registration within 30 days when information changes or becomes inaccurate or incomplete. The bond lasts throughout registration. The law covers contracts entered into, amended, or renewed on or after May 19, 2026.