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:

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

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

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     The general assembly 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) These contracts often bear annual interest rates which exceed one hundred percent

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(100%); and

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     (3) These 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 ensure that litigation-funding advances conform to state laws

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governing usurious loans.

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     9-3.1-2. Litigation lending agreement defined.

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

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

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

 

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

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

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of professional conduct.

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     9-3.1-3. Litigation advances considered loans pursuant to state usury law.

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

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litigant under the LLA shall be considered interest on loans subject to the provisions of chapter 26

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

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

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particular 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 -- PROCEDURE GENERALLY --

LITIGATION LENDING AGREEMENTS

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

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     This act would take effect upon passage.

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