Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                  Enrolled Committee Substitute for Senate Bill 850
                By Senator Trump [Passed March 9, 2024; in effect 90 days from passage]
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  AN ACT to amend and reenact §46A-6N-1, §46A-6N-4, §46A-6N-6, §46A-6N-7, and §46A-6N-9 of
          the Code of West Virginia, 1931, as amended, all relating to consumer litigation financing;
          defining terms; adding term; removing commercial tort claims exclusion from definition of
          litigation financing; excluding certain non-profit organizations from the definition of litigation
          financing; prohibiting assignment of litigation financing contract in certain instances;
          requiring disclosure of third-party litigation financing agreements to parties; clarifying who
          is to provide disclosure of third-party litigation financing agreements; and establishing cap
          for the annual fee a litigation financier may charge a natural person.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE 6N. CONSUMER LITIGATION FINANCING.
     §46A-6N-1. Definitions.
          For purposes of this article:
          (1) "Consumer" means any person who resides, is present, or is domiciled in this state who
  claims an entitlement to a judgment, award, settlement, or verdict with respect to a legal claim but
  does not include an attorney representing that person;
          (2) "Litigation financier" means a person, entity, or partnership engaged in the business of
  litigation financing; and
          (3) "Litigation financing" or "litigation financing transaction":
          (A) Means a transaction in which financing is provided to a consumer in return for a
  consumer's assigning to the litigation financier a right to receive payment contingent in any respect
 on the outcome of the legal claim; and
         (B) Does not include:
         (i) Legal services provided on a contingency fee basis, or advanced legal costs, where
 such services or costs are provided to or on behalf of a consumer by an attorney representing the
 consumer in the dispute and in accordance with the West Virginia Rules of Professional Conduct;
         (ii) A consumer loan, as defined by §46A-1-102 of this code;
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         (iii) A claim under the Workers' Compensation Law, compiled in §23-1-1 et seq. of this
 code;
         (iv) Lending or financing arrangements between an attorney or law firm and a lender,
 provided such arrangements do not give the lender any particularized interest in the outcome of
 any legal claim or portfolio of legal claims; or
         (v) Nonprofit organizations provided any financing provided to or by the nonprofit
 organization does not afford the non-party agreeing to pay legal expenses profit from the legal
 claim beyond repayment of the amount it has contractually agreed to provide, along with
 reasonable interest not to exceed the Wall Street Journal prime rate at the time the agreement was
 executed, plus three percent per year.
     §46A-6N-4. Litigation financier prohibitions.
          (a) A litigation financier shall not:
          (1) Pay or offer to pay commissions, referral fees, or other forms of consideration to any
  attorney, law firm, medical provider, chiropractor, physical therapist, or any of their employees for
  referring a consumer to a litigation financier;
          (2) Accept any commissions, referral fees, rebates, or other forms of consideration from an
  attorney, law firm, medical provider, chiropractor, physical therapist, or any of their employees;
          (3) Advertise false or misleading information regarding its products or services;
          (4) Refer a consumer or potential consumer to a specific attorney, law firm, medical
  provider, chiropractor, physical therapist, or any of their employees: Provided, That if a consumer
 does not have legal representation, the provider may refer the consumer to a local or state bar
 referral service operated by a bar association;
         (5) Fail to promptly supply copies of any and all complete litigation financing contracts to
 the consumer and the attorney representing the consumer in the dispute;
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         (6) Attempt to obtain in the litigation for which the litigation financing transaction exists a
 waiver of any remedy, including, but not limited to, compensatory, statutory, or punitive damages to
 which the consumer might otherwise be entitled;
         (7) Attempt to effect in the litigation for which the litigation financing transaction exists
 mandatory arbitration or otherwise effect waiver of a consumer’s right to a trial by jury;
         (8) Offer or provide legal advice to the consumer regarding the litigation financing or the
 underlying dispute;
         (9) Assign, which includes securitizing, a litigation financing contract between a consumer
 who is a natural person and a litigation financier, in whole or in part, to a third party: Provided, That:
         (A) §46A-6N-4(9) of this code does not prevent a litigation financier that retains
 responsibility for collecting payment, administering, or otherwise enforcing the litigation financing
 contract from making an assignment that is:
         (i) To a wholly owned subsidiary of the litigation financier;
         (ii) To an affiliate of the litigation financier that is under common control with the litigation
 financier; or
         (iii) A grant of a security interest that is made pursuant to §46-9-101 et seq. of this code or
 is otherwise permitted by law; and
         (B) If an assignment is authorized and made pursuant to §46A-6N-4(9) of this code, for
 purposes of this section, “litigation financier” includes a successor-in-interest to a litigation
 financing contract;
         (10) Report a consumer to a credit reporting agency if insufficient funds remain from the
 net proceeds to repay the litigation financier; or
         (11) Receive any right to direct or make any decisions with respect to the conduct of the
 consumer’s legal claim or any settlement or resolution. The right to make such decisions shall
 remain solely with the consumer and his or her attorney.
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          (b) An attorney or law firm retained by a consumer shall not have a financial interest in a
 company offering litigation financing to consumers and shall not receive a referral fee or other
 consideration from the company, its employees, or its affiliates.
          (c) A personal injury attorney or law firm, practicing in West Virginia, retained by a
 consumer shall not have a financial interest in a company offering litigation financing to consumers
 and shall not receive a referral fee or other consideration from the company, its employees, or its
 affiliates.
     §46A-6N-6. Third-party agreements.
           (a) Except as otherwise stipulated or ordered by the court, a party or his or her counsel
  shall, without awaiting a discovery request, provide to the other parties any agreement under
  which any litigation financier, other than an attorney permitted to charge a contingent fee
  representing a party, has a right to receive compensation that is contingent in any respect on the
  outcome of the legal claim.
           (b) For purposes of this section only, the terms "litigation financing" and "litigation financier"
  also include financing provided to an attorney or law firm where the right to receive repayment is
  contingent in any respect on the outcome of the consumer's legal claim.
     §46A-6N-7. Violation; enforcement.
           (a) Any violation of this article shall make the litigation financing contract unenforceable by
  the litigation financier, the consumer, law firm, or any successor-in-interest to the litigation
  financing contract. The court may, in the event that judgment is awarded to the plaintiff, assess
  costs of the action, including reasonable attorneys’ fees, against the defendant.
           (b) Nothing in this article shall be construed to limit the exercise of powers or the
  performance of the duties of the Attorney General, including those provided by the West Virginia
  Consumer Credit and Protection Act, which the Attorney General is otherwise authorized or
  required to           exercise or         perform by            law.
     §46A-6N-9. Fees; terms; incorporation of obligations in agreement.
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         (a) A litigation financier may not charge a consumer who is a natural person an annual fee
  of more than 18 percent of the original amount of money provided to the consumer for the litigation
  financing transaction.
         (b) Litigation financiers shall not charge a consumer the annual fee authorized by
  §46A-6N-9(a) of this code more than one time each year with regard to any single legal claim
  regardless of the number of litigation financing transactions that the litigation financier enters into
  with the consumer with respect to such legal claim.
         (c) Fees assessed by a litigation financier may compound semiannually but may not
  compound based on any lesser time period.
        (d) In calculating the annual percentage fee or rate of return, a litigation financier must
 include all charges payable directly or indirectly by the consumer and must compute the rate
 based only on amounts actually received and retained by the consumer.
        (e) A litigation financier may not assess fees for any period exceeding 42 months from the
 date of the contract with the consumer.
        (f) Litigation financiers shall not enter into an agreement with a consumer that has the
 effect of incorporating the consumer’s obligations to the litigation financier that are contained in the
 original litigation financing transaction into a subsequent litigation financing transaction.
        (g) Litigation financiers shall not knowingly provide financing to a consumer who has
 previously assigned and/or sold a portion of the consumer’s right to proceeds from his or her legal
 claim without first making payment to and/or purchasing a prior unsatisfied litigation financier’s
 entire funded amount and contracted charges unless a lesser amount is otherwise expressly
 agreed to in writing by the litigation financiers; except multiple litigation financiers may agree to
 contemporaneously provide financing to a consumer, provided that the consumer and the
 consumer’s attorney consent to the agreement in writing.
Statutes affected: 
Introduced Version: 46A-6N-1
Committee Substitute: 46A-6N-1, 46A-6N-4, 46A-6N-6, 46A-6N-7, 46A-6N-9
Enrolled Committee Substitute: 46A-6N-1, 46A-6N-4, 46A-6N-6, 46A-6N-7, 46A-6N-9