2015 -- H 5762

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LC001695

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2015

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A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE -- LITIGATION LENDING

AGREEMENTS

     

     Introduced By: Representative Robert E. Craven

     Date Introduced: February 26, 2015

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 9 of the General Laws entitled "COURTS AND CIVIL

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PROCEDURE--PROCEDURE GENERALLY" is hereby amended by adding thereto the

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following chapter:

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CHAPTER 3.1

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LITIGATION LENDING AGREEMENTS

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     9-3.1-1. Legislative findings. -- The legislature finds and declares that:

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     (1) Litigation financing contracts are being entered into where companies advance money

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to a litigant in return for payment from litigation proceeds at effective annual interest rates far

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exceeding state usury limits; and

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     (2) Such contracts often bear annual interest rates over one hundred percent (100%); and

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     (3) Such rates are detrimental to the general welfare of the citizens of this state and it is

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necessary to enact legislation to insure litigation-funding advances conform to state laws

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regarding usurious loans.

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     9-3.1-2. Litigation lending agreement defined. -- A litigation lending agreement (LLA)

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is any agreement whereby monies are paid to parties to civil litigation (litigants) in consideration

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for a litigant's agreement to repay such monies (with or without interest, one-time charges, use

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fees, or any other add-on charges) from proceeds of the litigation. Not included in the definition

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of an LLA are advancements of expenses of litigation made by attorneys on behalf of their

 

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clients, as permitted by rule 1.8(e) of the Rhode Island rules of professional conduct.

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     9-3.1-3. Litigation advances considered loans within usury statute. -- All payments

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made by a litigant under an LLA greater than the amount received by the litigant under the LLA

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shall be considered interest on loans within the purview of § 6-26-2 regardless of:

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     (1) Whether an LLA characterizes itself as a "loan," an "advance," an "investment," an

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"assignment of proceeds," or any other characterization;

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     (2) Whether monies to be repaid under the LLA are called "interest," "use fees," or any

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other term;

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     (3) Whether the amount received by the litigant under the LLA otherwise exceeds any

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monetary limit for loans falling within Rhode Island’s usury statute; and

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     (4) Whether the obligation on the part of the litigant to repay monies is contingent upon

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the outcome of the litigation.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE -- LITIGATION LENDING

AGREEMENTS

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     This act would make litigation loan agreements subject to state usury statutes.

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     This act would take effect upon passage.

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LC001695

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