2023 -- H 5509

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LC001004

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO COURTS AND CIVIL PROCEDURE -- PROCEDURE GENERALLY --

LITIGATION LENDING AGREEMENTS

     Introduced By: Representatives Baginski, Potter, Dawson, Solomon, J. Brien, and
McEntee

     Date Introduced: February 10, 2023

     Referred To: House 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 general assembly 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) These contracts often bear annual interest rates which exceed one hundred percent

(100%); and

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

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

governing 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 these monies

(with or without interest, one-time charges, use fees, or any other add-on charges) from the 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 pursuant to state usury law.

     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 subject to the provisions of chapter 26

of title 6 ("interest and usury") 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 and interest rates falling within the provisions of chapter 26 of title 6; and

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

particular 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 -- PROCEDURE GENERALLY --

LITIGATION LENDING AGREEMENTS

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

     This act would take effect upon passage.

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