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| 5 | 5 | | 2025 -- S 0534 |
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| 6 | 6 | | ======== |
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| 7 | 7 | | LC001512 |
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| 8 | 8 | | ======== |
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| 9 | 9 | | S T A T E O F R H O D E I S L A N D |
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| 10 | 10 | | IN GENERAL ASSEMBLY |
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| 11 | 11 | | JANUARY SESSION, A.D. 2025 |
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| 12 | 12 | | ____________ |
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| 13 | 13 | | |
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| 14 | 14 | | A N A C T |
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| 15 | 15 | | RELATING TO COURTS AND CIVIL PROCEDURE -- PROCEDURE GENERALLY -- |
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| 16 | 16 | | THIRD-PARTY LITIGATION FINANCING CONSUME R PROTECTION ACT |
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| 17 | 17 | | Introduced By: Senators Gu, Tikoian, and Bell |
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| 18 | 18 | | Date Introduced: February 26, 2025 |
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| 19 | 19 | | Referred To: Senate Judiciary |
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| 20 | 20 | | |
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| 21 | 21 | | |
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| 22 | 22 | | It is enacted by the General Assembly as follows: |
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| 23 | 23 | | SECTION 1. Title 9 of the General Laws entitled "COURTS AND CIVIL PROCEDURE 1 |
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| 24 | 24 | | -- PROCEDURE GENERALLY" is hereby amended by adding thereto the following chapter: 2 |
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| 25 | 25 | | CHAPTER 3.1 3 |
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| 26 | 26 | | THIRD-PARTY LITIGATION FINANCING CONSUMER PROTECTION ACT 4 |
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| 27 | 27 | | 9-3.1-1. Short title. 5 |
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| 28 | 28 | | This chapter shall be known and may be cited as the “Third-Party Litigation Financing 6 |
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| 29 | 29 | | Consumer Protection Act.” 7 |
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| 30 | 30 | | 9-3.1-2. Definitions. 8 |
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| 31 | 31 | | As used in this chapter: 9 |
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| 32 | 32 | | (1) "Consumer" means any natural person or persons who resides, is present or is domiciled 10 |
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| 33 | 33 | | in this state, or who is or may become a plaintiff or complainant in a lawsuit or other legal dispute 11 |
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| 34 | 34 | | in this state. 12 |
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| 35 | 35 | | (2) "Legal representative" means an attorney, group of attorneys, or law firm who may be 13 |
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| 36 | 36 | | entitled to represent a person or persons in a legal dispute in this state. 14 |
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| 37 | 37 | | (3) "Litigation financer'' means a person, group of persons, or legal entity, engaged in the 15 |
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| 38 | 38 | | business of litigation financing or any other mechanism created with the intent of so doing. 16 |
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| 39 | 39 | | (4) "Litigation financing" means the funding of litigation activities or related claims by 17 |
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| 40 | 40 | | anyone other than the parties to the claim or litigation themselves, their counsel, or entities with a 18 |
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| 41 | 41 | | |
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| 42 | 42 | | |
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| 43 | 43 | | LC001512 - Page 2 of 8 |
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| 44 | 44 | | preexisting contractual indemnitor or a liability insurer relationship with one of the parties. 1 |
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| 45 | 45 | | Litigation financing includes the purchase of bills, accounts or liens or otherwise paying for or 2 |
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| 46 | 46 | | purchasing services rendered related to claims or litigation. 3 |
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| 47 | 47 | | (5) "Litigation financing transaction" means a transaction in which litigation financing is 4 |
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| 48 | 48 | | provided to a consumer, legal representative, or medical provider in return for assigning to the 5 |
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| 49 | 49 | | litigation financer a contingent right to receive an amount or amounts of the potential proceeds of 6 |
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| 50 | 50 | | consumer judgments, awards, settlements or verdicts obtained with respect to the consumer's legal 7 |
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| 51 | 51 | | claim, or agreeing to pay the litigation financer interest, fees or any other consideration for the 8 |
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| 52 | 52 | | financing provided. The term "litigation financing transaction" does not include legal 9 |
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| 53 | 53 | | representation services provided to a consumer by a legal representative on a contingency fee basis, 10 |
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| 54 | 54 | | or legal costs advanced by a legal representative, where such services or costs are provided to or 11 |
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| 55 | 55 | | on behalf of a consumer by a legal representative in the dispute and in accordance with the Rhode 12 |
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| 56 | 56 | | Island Disciplinary Rules of Professional Conduct. 13 |
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| 57 | 57 | | (6) "Medical provider" means any person or business providing medical services of any 14 |
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| 58 | 58 | | kind to a consumer, including, but not limited to, physicians, nurse practitioners, hospitals, physical 15 |
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| 59 | 59 | | therapists, chiropractors, or radiologists, as well as any of their employees, contractors, practice 16 |
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| 60 | 60 | | groups, partnerships or incorporations of the same. 17 |
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| 61 | 61 | | 9-3.1-3. Litigation financer - Registration - Bond - Public record. 18 |
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| 62 | 62 | | (a)(1) No litigation financer shall engage in a litigation financing transaction in Rhode 19 |
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| 63 | 63 | | Island unless it is registered as a litigation financer in this state. 20 |
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| 64 | 64 | | (2) A litigation financer that is a business entity or partnership is registered in this state if: 21 |
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| 65 | 65 | | (i) It has a status of active and in good standing as reflected in the records of the secretary 22 |
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| 66 | 66 | | of state; and 23 |
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| 67 | 67 | | (ii) Its charter, articles of organization, certificate of limited partnership, or other 24 |
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| 68 | 68 | | organizational document, or, if a foreign entity, its Rhode Island application for a certificate of 25 |
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| 69 | 69 | | authority, to do business in this state, contains a statement that it shall be designated as a litigation 26 |
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| 70 | 70 | | financer pursuant to this chapter. 27 |
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| 71 | 71 | | (3) A litigation financer that is not a business entity or partnership is registered in this state 28 |
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| 72 | 72 | | if it files an application for registration as a litigation financer on a form prescribed by the secretary 29 |
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| 73 | 73 | | of state, along with a filing fee of one hundred dollars ($100), that contains the following: 30 |
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| 74 | 74 | | (i) Applicant's full legal name; 31 |
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| 75 | 75 | | (ii) Business name of applicant, if any; 32 |
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| 76 | 76 | | (iii) Physical street address and mailing address of the applicant; 33 |
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| 77 | 77 | | (iv) A telephone number through which the applicant can be reached; 34 |
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| 78 | 78 | | |
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| 79 | 79 | | |
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| 80 | 80 | | LC001512 - Page 3 of 8 |
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| 81 | 81 | | (v) The name, physical street address, mailing address, and telephone number for a Rhode 1 |
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| 82 | 82 | | Island registered agent appointed to accept service of process on behalf of the applicant; 2 |
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| 83 | 83 | | (vi) A statement that the applicant shall be designated as a litigation financer pursuant to 3 |
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| 84 | 84 | | this chapter; and 4 |
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| 85 | 85 | | (vii) Any other information the secretary of state deems necessary. 5 |
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| 86 | 86 | | (b) Each litigation financer shall file with the secretary of state a surety bond of not less 6 |
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| 87 | 87 | | than fifty thousand dollars ($50,000). The bond shall be payable to this state for the use of the 7 |
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| 88 | 88 | | attorney general and any person who may have a cause of action against the obligor of the bond for 8 |
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| 89 | 89 | | any violation of this chapter. The bond shall continue in effect as long as a litigation financer is 9 |
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| 90 | 90 | | designated as a litigation financer in the records of the secretary of state. 10 |
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| 91 | 91 | | (c) A litigation financer shall amend its registration with the secretary of state under 11 |
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| 92 | 92 | | subsection (a) of this section within thirty (30) days whenever the information contained in such 12 |
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| 93 | 93 | | record changes or becomes inaccurate or incomplete in any respect. A litigation financer that is not 13 |
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| 94 | 94 | | a business entity or partnership may amend its registration with the secretary of state by filing an 14 |
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| 95 | 95 | | amendment on a form prescribed by the secretary of state, along with a filing fee of twenty dollars 15 |
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| 96 | 96 | | ($20.00). 16 |
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| 97 | 97 | | (d) All documents filed pursuant to this section shall be a public record. 17 |
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| 98 | 98 | | 9-3.1-4. Litigation financing protections. 18 |
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| 99 | 99 | | (a) A litigation financer shall not: 19 |
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| 100 | 100 | | (1) Pay or offer commissions, referral fees or other forms of consideration to any legal 20 |
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| 101 | 101 | | representative, medical provider, or any of their employees for referring a consumer to a litigation 21 |
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| 102 | 102 | | financer; 22 |
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| 103 | 103 | | (2) Accept any commissions, referral fees, rebates or other forms of consideration from a 23 |
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| 104 | 104 | | legal representative, medical provider or any of their employees; 24 |
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| 105 | 105 | | (3) Advertise false or misleading information regarding its products or services; 25 |
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| 106 | 106 | | (4) Refer a consumer or potential consumer to a specific legal representative, medical 26 |
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| 107 | 107 | | provider or any of their employees; 27 |
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| 108 | 108 | | (5) Fail to promptly supply copies of any complete litigation financing contracts to the 28 |
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| 109 | 109 | | consumer and the consumer's legal representative; 29 |
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| 110 | 110 | | (6) Attempt to secure a remedy or obtain a waiver of any remedy, including, but not limited 30 |
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| 111 | 111 | | to, compensatory, statutory, or punitive damages, that the consumer might otherwise be or not be 31 |
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| 112 | 112 | | entitled to pursue; 32 |
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| 113 | 113 | | (7) Attempt to effect arbitration or otherwise effect waiver of a consumer's right to trial by 33 |
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| 114 | 114 | | jury; 34 |
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| 115 | 115 | | |
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| 116 | 116 | | |
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| 117 | 117 | | LC001512 - Page 4 of 8 |
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| 118 | 118 | | (8) Offer or provide legal advice to the consumer regarding the litigation financing or the 1 |
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| 119 | 119 | | underlying dispute; 2 |
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| 120 | 120 | | (9) Assign, which includes securitizing, a litigation financing contract in whole or in part; 3 |
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| 121 | 121 | | (10) Report a consumer to a credit reporting agency if insufficient funds remain from the 4 |
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| 122 | 122 | | net proceeds to repay the litigation financer; or 5 |
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| 123 | 123 | | (11) Receive or exercise any right to direct, or make any decisions with respect to, the 6 |
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| 124 | 124 | | conduct of the consumer's legal claim or any settlement or resolution thereof. The right to make 7 |
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| 125 | 125 | | such decisions shall remain solely with the consumer and their legal representative. 8 |
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| 126 | 126 | | (b) A legal representative retained by a consumer, or a medical provider for such consumer, 9 |
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| 127 | 127 | | or any of their employees shall not have a financial interest in litigation financing and shall not 10 |
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| 128 | 128 | | receive a referral fee or other consideration from any litigation financer, its employees, owners or 11 |
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| 129 | 129 | | its affiliates. 12 |
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| 130 | 130 | | 9-3.1-5. Litigation financing contracts - Disclosures. 13 |
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| 131 | 131 | | (a) The terms of the litigation financing agreement shall be set forth in a written contract 14 |
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| 132 | 132 | | that is completely filled in. There shall be no incomplete sections when the contract is offered or 15 |
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| 133 | 133 | | presented to the consumer, legal representative, or medical provider. 16 |
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| 134 | 134 | | (b) Litigation financing contracts shall contain the disclosures specified in this section, 17 |
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| 135 | 135 | | which shall constitute material terms of the litigation financing contract. 18 |
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| 136 | 136 | | (c) These disclosures shall be typed in at least fourteen (14)-point, bold font and be placed 19 |
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| 137 | 137 | | clearly and conspicuously immediately above the consumer's signature line in the litigation 20 |
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| 138 | 138 | | financing contract. The disclosures are as is follows: 21 |
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| 139 | 139 | | (1) Consumer's right to cancellation: You may cancel this contract without penalty or 22 |
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| 140 | 140 | | further obligation within five (5) business days from the date you signed this contract or received 23 |
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| 141 | 141 | | financing from [insert name of the litigation financer] by either returning the funds to [insert name, 24 |
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| 142 | 142 | | office address and office hours of the litigation financer] or by U.S. mail, [insert name and mailing 25 |
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| 143 | 143 | | address of litigation financer]. For return by U.S. mail, the postmark date on the returned funds or, 26 |
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| 144 | 144 | | if mailed by registered or certified mail, the date of the return receipt requested shall be the date of 27 |
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| 145 | 145 | | return; 28 |
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| 146 | 146 | | (2) The fees charged pursuant to this agreement shall not exceed [litigation financer to 29 |
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| 147 | 147 | | insert annual interest percentage rate, percentage of award or settlement proceeds, or dollar 30 |
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| 148 | 148 | | amount]; 31 |
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| 149 | 149 | | (3) The litigation financer agrees that it has no right to and will not make any decisions 32 |
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| 150 | 150 | | about the conduct of your lawsuit or dispute and that the right to make those decisions remains 33 |
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| 151 | 151 | | solely with you and your legal representative; 34 |
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| 152 | 152 | | |
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| 153 | 153 | | |
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| 154 | 154 | | LC001512 - Page 5 of 8 |
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| 155 | 155 | | (4) If there is no recovery of any money from your legal claim or if there is not enough 1 |
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| 156 | 156 | | money to satisfy the portion assigned to [insert name of the litigation financer] in full, you will not 2 |
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| 157 | 157 | | owe anything in excess of your recovery; and 3 |
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| 158 | 158 | | (5) Do not sign this contract before you read it completely. If this contract contains any 4 |
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| 159 | 159 | | incomplete sections, you are entitled to a completely filled-in copy of the contract prior to signing 5 |
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| 160 | 160 | | it. Before you sign this contract, you should obtain the advice of an attorney. Depending on the 6 |
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| 161 | 161 | | circumstances, you may want to consult a tax advisor, a financial professional or an accountant." 7 |
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| 162 | 162 | | (d) If the consumer is represented by a legal representative in the dispute that is the subject 8 |
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| 163 | 163 | | of the litigation financing contract, the legal representative shall acknowledge in the contract that 9 |
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| 164 | 164 | | they or their employer or employees have neither received nor paid a referral fee or any other 10 |
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| 165 | 165 | | consideration from or to the litigation financer, nor will in the future do so. 11 |
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| 166 | 166 | | (e) If the consumer's legal representative is a party to a litigation financing agreement 12 |
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| 167 | 167 | | related to the consumer's legal proceeding, the legal representative shall share with the consumer 13 |
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| 168 | 168 | | the agreement between the legal representative and the litigation financer. The agreement shall be 14 |
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| 169 | 169 | | accompanied by the disclosures required by this section, and the consumer shall sign both an 15 |
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| 170 | 170 | | acknowledgement that the agreement has been read and the required disclosures. 16 |
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| 171 | 171 | | 9-3.1-6. Disclosure of financing agreements – Discovery. 17 |
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| 172 | 172 | | (a) Except as otherwise stipulated or ordered by the court, a consumer or their legal 18 |
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| 173 | 173 | | representative shall, without awaiting a discovery request, provide to all parties to the litigation, 19 |
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| 174 | 174 | | including their insurer if prior to litigation, any litigation financing contract or agreement under 20 |
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| 175 | 175 | | which anyone, other than a legal representative permitted to charge a contingent fee representing a 21 |
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| 176 | 176 | | party, has received or has a right to receive compensation or proceeds from the consumer that are 22 |
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| 177 | 177 | | contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or 23 |
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| 178 | 178 | | otherwise. 24 |
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| 179 | 179 | | (b) The existence of litigation financing, litigation financing transactions and all 25 |
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| 180 | 180 | | participants in such financing arrangements are permissible subjects of discovery in all personal 26 |
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| 181 | 181 | | injury litigation or matters arising out of personal injuries. 27 |
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| 182 | 182 | | 9-3.1-7. Annual reporting. 28 |
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| 183 | 183 | | (a) Each litigation financer shall file a report annually with the secretary of state in 29 |
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| 184 | 184 | | accordance with such procedures as the secretary of state may require. The report shall contain at 30 |
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| 185 | 185 | | least the following: 31 |
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| 186 | 186 | | (1) For each person that, directly or indirectly, owns, controls, holds with the power to vote, 32 |
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| 187 | 187 | | or holds proxies representing, five percent (5%) or more of the voting securities of the litigation 33 |
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| 188 | 188 | | financer: 34 |
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| 189 | 189 | | |
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| 190 | 190 | | |
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| 191 | 191 | | LC001512 - Page 6 of 8 |
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| 192 | 192 | | (i) The legal name and address of each person; 1 |
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| 193 | 193 | | (ii) If the person is an individual, their principal occupation and offices and positions held 2 |
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| 194 | 194 | | during the past five (5) years, and any conviction of crimes other than minor traffic violations 3 |
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| 195 | 195 | | during the past ten (10) years; and 4 |
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| 196 | 196 | | (iii) If the person is not an individual, a report of the nature of its business operations during 5 |
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| 197 | 197 | | the past five (5) years or for the lesser period as the person and any predecessors shall have been in 6 |
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| 198 | 198 | | existence; a narrative description of the business intended to be done by the person and the person's 7 |
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| 199 | 199 | | subsidiaries; and a list of all individuals who are or who have been selected to become directors or 8 |
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| 200 | 200 | | executive officers of the person. The list shall include for each individual the information required 9 |
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| 201 | 201 | | by subsection (a)(2) of this section. 10 |
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| 202 | 202 | | (2) For each litigation financing transaction entered in this state or involving a claim to be 11 |
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| 203 | 203 | | litigated in this state, the litigation financer shall identify: 12 |
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| 204 | 204 | | (i) The amount, date(s) of payment(s), and name and address of each person that received 13 |
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| 205 | 205 | | any amount of financing from a litigation financer during the previous calendar year; 14 |
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| 206 | 206 | | (ii) The amount, date of payment, and source of payment for all proceeds obtained by the 15 |
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| 207 | 207 | | litigation financer during the previous calendar year from any judgment, award, settlement or 16 |
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| 208 | 208 | | verdict in a litigation financing transaction; and 17 |
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| 209 | 209 | | (iii) Any other information the secretary of state deems necessary for the administration of 18 |
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| 210 | 210 | | justice. 19 |
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| 211 | 211 | | (b) Secretary of state reporting obligations: 20 |
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| 212 | 212 | | (1) The secretary of state shall provide to the house and senate judiciary committees an 21 |
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| 213 | 213 | | annual report within six (6) months of the receipt of the information in subsection (a) of this section, 22 |
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| 214 | 214 | | containing all of the information therein and a summary. This report as filed shall not be made 23 |
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| 215 | 215 | | available to the public and shall be confidential by law and privileged, shall not be subject to the 24 |
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| 216 | 216 | | provisions of chapter 2 of title 38 ("public records"), shall not be subject to subpoena, and shall not 25 |
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| 217 | 217 | | be subject to discovery or admissible in evidence in any private civil action. 26 |
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| 218 | 218 | | (2) The secretary of state shall release the report and summary required pursuant to 27 |
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| 219 | 219 | | subsection (b)(l) of this section to the public subject to the removal of all personally identifiable 28 |
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| 220 | 220 | | information of any consumer. Nothing in this subsection shall affect the obligation to disclose 29 |
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| 221 | 221 | | litigation financing contracts or other agreements under § 9-3.1-6. 30 |
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| 222 | 222 | | 9-3.1-8. Class action lawsuits. 31 |
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| 223 | 223 | | This chapter shall apply to any class action. Putative class members and the court shall be 32 |
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| 224 | 224 | | advised that the proposed class attorney has a legal or financial relationship with a litigation 33 |
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| 225 | 225 | | financer. 34 |
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| 226 | 226 | | |
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| 227 | 227 | | |
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| 228 | 228 | | LC001512 - Page 7 of 8 |
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| 229 | 229 | | 9-3.1-9. Commercial litigation exemption - Limitation. 1 |
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| 230 | 230 | | This chapter shall not apply to litigation financing provided to commercial enterprises in 2 |
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| 231 | 231 | | support of commercial litigation. This exemption does not apply to situations arising from a 3 |
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| 232 | 232 | | personal injury claim or an aggregation of personal injury claims, whether by subrogation, 4 |
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| 233 | 233 | | assignment, or any other basis. 5 |
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| 234 | 234 | | 9-3.1-10. Regulatory oversight. 6 |
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| 235 | 235 | | The practice of litigation financing shall be regulated by the secretary of state. The 7 |
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| 236 | 236 | | secretary of state shall adopt rules and regulations consistent with this chapter and its authority 8 |
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| 237 | 237 | | under law. 9 |
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| 238 | 238 | | 9-3.1-11. Act violation - Unenforceable contract. 10 |
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| 239 | 239 | | Any violation of this chapter shall make the litigation financing contract unenforceable by 11 |
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| 240 | 240 | | the litigation financer, the consumer, or any successor-in-interest to the litigation financing 12 |
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| 241 | 241 | | contract. 13 |
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| 242 | 242 | | SECTION 2. This act shall take effect upon passage. 14 |
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| 243 | 243 | | ======== |
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| 244 | 244 | | LC001512 |
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| 246 | 246 | | |
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| 247 | 247 | | |
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| 248 | 248 | | LC001512 - Page 8 of 8 |
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| 249 | 249 | | EXPLANATION |
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| 250 | 250 | | BY THE LEGISLATIVE COUNCIL |
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| 251 | 251 | | OF |
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| 252 | 252 | | A N A C T |
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| 253 | 253 | | RELATING TO COURTS AND CIVIL PROCEDURE -- PROCEDURE GENERALL Y -- |
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| 254 | 254 | | THIRD-PARTY LITIGATION FINANCING CONSUME R PROTECTION ACT |
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| 255 | 255 | | *** |
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| 256 | 256 | | This act would comprehensively regulate the practices of third-party litigation financers in 1 |
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| 257 | 257 | | Rhode Island. 2 |
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| 258 | 258 | | This act would take effect upon passage. 3 |
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| 259 | 259 | | ======== |
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| 260 | 260 | | LC001512 |
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| 262 | 262 | | |
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