Judiciary Committee Approves Regulations on Third-Party Litigation Financing

The Senate Committee on the Judiciary met yesterday afternoon to discuss and debate in great detail over litigation financing.

A litigation financing transaction is a non-recourse transaction in which financing by a third-party, who is unrelated to the case, is provided to a consumer in return for a consumer assigning to the litigation financier a contingent right to receive an amount of the potential proceeds of the consumer’s judgment, award, settlement, or verdict obtained with respect to the consumer’s legal claim.

Senate Bill 360 would add regulations to this type of business in West Virginia. The proposed regulations with this legislation would include:

• All litigation financiers to register with the secretary of state.
• Litigation financiers must:
  • Provide the consumer with a completed, written agreement.
  • Contract must contain a right of rescission within five days of receiving funds.
•  Prohibits litigation financiers from:
  • Paying, offering to pay, or accepting any commissions or referral fees to or from any attorney, law firm, medical provider, chiropractor, or physical therapist.
  • May not use false or misleading advertisements.
  • May not charge a consumer an annual fee of more than 18 percent of the original amount of money provided to the consumer.

Committee members heard testimonies from insurance agencies, the West Virginia Association for Justice, and local attorneys who were all in favor of passage of the bill. Senators expressed most concerns over the 18 percent rate, and if that requirement was too low or too high. After hearing the testimonies, the members agreed that the original 19 percent was a fair rate for both the litigation financiers and the consumers.

The Committee also discussed Senate Bill 601 which would authorize the Division of Corrections to release inmates 180 days prior to his or her discharge date if they have not been released on parole.  Inmates may be placed on electronic monitoring during the period of supervision. This bill was proposed in result over overcrowded prisons throughout the state.

The Committee approved both bills unanimously, and will be reported to the full Senate to be voted upon.

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