California’s legal landscape is poised for significant change with the introduction of two bills aimed at reforming litigation funding and client recruitment practices. Assembly Bill 931 (AB 931) and Senate Bill 37 (SB 37) propose measures to enhance transparency, protect consumers, and uphold ethical standards within the state’s legal profession.
AB 931, introduced by Assemblymember Ash Kalra, seeks to establish a regulatory framework for consumer legal funding transactions, which have operated without substantial oversight in California. The bill mandates clear disclosures of loan terms, including interest rates and repayment schedules, in plain language. It also grants consumers a five-day right to rescind legal funding agreements and prohibits attorneys from referring clients to funding companies in which they have a financial interest. Additionally, AB 931 restricts litigation funders from influencing legal strategies or requiring clients to hire specific attorneys. Violations of these provisions could result in statutory damages up to $10,000 per incident or triple the amount advanced, and attorneys may face disciplinary actions from the State Bar of California. ([jdsupra.com](https://www.jdsupra.com/legalnews/attorney-fee-sharing-prohibited-8840366/?utm_source=openai))
SB 37, authored by Senator Tom Umberg, targets attorney advertising and client solicitation practices. The bill introduces a private right of action against attorneys engaging in unlawful solicitation, including “capping”—the illegal practice of paying for client recruitment. Civil penalties range from $5,000 to $100,000 per violation, depending on severity and intent. SB 37 also tightens advertising restrictions by prohibiting unverifiable claims, misleading guarantees, and the use of awards or titles that may confuse consumers. Attorneys are required to clearly identify themselves in all promotional content. ([jdsupra.com](https://www.jdsupra.com/legalnews/attorney-fee-sharing-prohibited-8840366/?utm_source=openai))
These legislative efforts reflect California’s commitment to protecting consumers and maintaining ethical standards in the legal profession. By introducing clear regulations and penalties, AB 931 and SB 37 aim to foster a more transparent and trustworthy legal environment in the state.