Our Phoenix business lawyers regularly counsel clients on how changes in Arizona law can influence their litigation strategy and commercial exposure. Effective January 1, 2026, Arizona Senate Bill 1215 (SB 1215) introduces comprehensive consumer protection and disclosure requirements for litigation financing agreements. This significantly alters the landscape for third-party funding in civil actions. In this blog, we’ll go over what Arizona business owners and their legal counsel need to know about this new legislation.
What is Litigation Financing and Why is this Important?
Litigation financing involves a third party (a “litigation funder”) providing funds to a plaintiff in exchange for a portion of any financial recovery . While this approach can help even the playing field against defendants with significant capital, SB 1215 intends to increase transparency and prevent exploitation. SB 1215 applies to any civil action, administrative proceeding, or claim pending or commenced on or after January 1, 2026 . Here are the critical sections every Phoenix business owner should understand:
Mandatory Disclosure
Within 30 days after an action commences, parties or their counsel must disclose whether they have entered into a litigation financing agreement and name the litigation financier. This admission is mandatory without awaiting a discovery request . This is a continuing requirement, triggered again if a new agreement is signed or an existing one is amended.
Prevention of Funder Control
The law explicitly prohibits a litigation financier from directing, strategizing, or making any decisions regarding the lawsuit. This includes decisions about appointing or changing counsel, choice of witnesses, and litigation strategy. The named party and their counsel of record retain all rights to manage the lawsuit. Additionally, a funder cannot collect a larger share of the proceeds than the funded party.
Protection Against Foreign Influence
Notably, SB 1215 prohibits litigation financiers from providing funding that is directly or indirectly financed by a “foreign entity of concern” (as identified by federal regulations or the Arizona Governor). This allows parties to seek discovery regarding whether any owner or investor in the financier is a foreign party of concern.
Consequences of Non-Compliance
Infringement of these requirements is deemed an unlawful practice under the Arizona Consumer Fraud Act. Furthermore, any litigation financing agreement found to be in violation of the law is voidable, and courts may impose sanctions for failure to make required disclosures.
Why This Matters for Your Business
If your company is involved in litigation—whether as a plaintiff or defendant—this law creates strategic considerations:
For Plaintiffs: If you are considering litigation funding to pursue a claim, you must be prepared for early disclosure of the funder’s identity. Having a Phoenix business lawyer review a lawsuit loan agreement is recommended before accepting any litigation funding.
For Defendants: You now have a legal right to know if your opponent is backed by a third party. This knowledge can be crucial in settlement negotiations and trial strategy. You may also appeal for additional information if you believe a funding agreement may impact your rights or proprietary information. Consulting with a Phoenix business lawyer is recommended as they will be able to identify your legal options to protect your business interests.
How a Phoenix Business Lawyer Can Help
Navigating these new disclosure requirements is essential to avoiding penalties and protecting your interests. As dedicated Phoenix business lawyers, we can help you ensure compliance, develop a legal strategy, and address any financing disclosures. If your business is currently involved in litigation or considering third-party funding, contact our office today to discuss how SB 1215 affects your rights and obligations.
