2017 -- S 0517

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LC000872

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE -- LITIGATION LENDING

AGREEMENTS

     Introduced By: Senators McCaffrey, Lombardi, Conley, Nesselbush, and Archambault

     Date Introduced: March 02, 2017

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

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

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

following chapter:

CHAPTER 3.1

LITIGATION LENDING AGREEMENTS

     9-3.1-1. Legislative findings.

     The legislature finds and declares that:

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

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

exceeding state usury limits; and

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

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

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

regarding usurious loans.

     9-3.1-2. Litigation lending agreement defined.

     A litigation lending agreement (LLA) is any agreement whereby monies are paid to

parties to civil litigation (litigants) in consideration for a litigant's agreement to repay such

monies (with or without interest, one-time charges, use fees, or any other add-on charges) from

proceeds of the litigation. Not included in the definition of an LLA are advancements of expenses

of litigation made by attorneys on behalf of their clients, as permitted by rule 1.8(e) of the Rhode

Island rules of professional conduct.

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

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

litigant under the LLA shall be considered interest on loans within the purview of §6-26-2

regardless of:

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

"assignment of proceeds," or any other characterization;

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

other term;

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

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

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

the outcome of the litigation.

     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.

     This act would take effect upon passage.

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LC000872

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