S T A T E O F N E W Y O R K
________________________________________________________________________
7891--A
2009-2010 Regular Sessions
I N A S S E M B L Y
April 28, 2009
___________
Introduced by M. of A. TOWNS, CASTRO -- read once and referred to the
Committee on Judiciary -- recommitted to the Committee on Judiciary in
accordance with Assembly Rule 3, sec. 2 -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee
AN ACT to amend the general obligations law, in relation to the regu-
lation of non-recourse civil litigation advance contracts
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Article 5 of the general obligations law is amended by
adding a new title 8 to read as follows:
TITLE 8
NON-RECOURSE CIVIL LITIGATION ADVANCE CONTRACTS
SECTION 5-801. NON-RECOURSE CIVIL LITIGATION ADVANCE CONTRACTS.
S 5-801. NON-RECOURSE CIVIL LITIGATION ADVANCE CONTRACTS. 1. AS USED
IN THIS SECTION, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
(A) "NON-RECOURSE CIVIL LITIGATION ADVANCE" MEANS A TRANSACTION OR
AGREEMENT WHEREIN A COMPANY MAKES A PAYMENT OF MONEY TO A CONSUMER WHO
EITHER (I) HAS, IN THE MANNER PROVIDED BY LAW, COMMENCED A CIVIL ACTION
OR PROCEEDING FOR MONEY DAMAGES BEFORE A COURT OF COMPETENT JURISDICTION
IN THIS STATE, OR (II) HAS A CAUSE OF ACTION WHICH COULD REASONABLY BE
ANTICIPATED TO RESULT IN MONEY DAMAGES BUT HAS NOT YET COMMENCED AN
ACTION OR PROCEEDING BEFORE A COURT OF COMPETENT JURISDICTION IN THIS
STATE, IN EXCHANGE FOR THE RIGHT TO RECEIVE AN AMOUNT FROM THE PROCEEDS
OF ANY REALIZED SETTLEMENT, JUDGMENT, AWARD, OR VERDICT THE CONSUMER MAY
RECEIVE IN SUCH ACTION OR PROCEEDING.
(B) "COMPANY" MEANS ANY PERSON, PARTNERSHIP, CORPORATION OR OTHER
BUSINESS ENTITY THAT ENTERS INTO A NON-RECOURSE CIVIL LITIGATION ADVANCE
TRANSACTION CONTRACT WITH A CONSUMER.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10915-02-0
A. 7891--A 2
(C) "CONSUMER" MEANS A PERSON OR ENTITY RESIDING OR DOMICILED IN THIS
STATE WHO IS BOTH (I) REPRESENTED BY AN ATTORNEY ADMITTED TO PRACTICE IN
THIS STATE; AND (II) EITHER (1) HAS, IN THE MANNER PROVIDED BY LAW,
COMMENCED A CIVIL ACTION OR PROCEEDING FOR MONEY DAMAGES BEFORE A COURT
OF COMPETENT JURISDICTION IN THIS STATE, OR (2) HAS A CAUSE OF ACTION
WHICH COULD REASONABLY BE ANTICIPATED TO RESULT IN MONEY DAMAGES BUT HAS
NOT YET COMMENCED AN ACTION OR PROCEEDING BEFORE A COURT OF COMPETENT
JURISDICTION IN THIS STATE.
2. ON AND AFTER THE DATE UPON WHICH THIS SECTION SHALL HAVE BECOME A
LAW, ALL CONTRACTS THEREAFTER ENTERED INTO FOR A NON-RECOURSE CIVIL
LITIGATION ADVANCE SHALL COMPLY WITH THE FOLLOWING REQUIREMENTS:
(A) THE CONTRACT SHALL BE IN WRITING, AND SHALL BE COMPLETELY FILLED
IN AND CONTAIN ON THE FRONT PAGE APPROPRIATELY HEADED AND IN AT LEAST
TWELVE-POINT BOLD TYPE, THE FOLLOWING DISCLOSURES:
(I) THE TOTAL DOLLAR AMOUNT TO BE ADVANCED TO THE CONSUMER;
(II) AN ITEMIZATION OF ANY ONE-TIME FEES IF ANY, TO BE CHARGED TO THE
CONSUMER BY, OR ON BEHALF OF, THE COMPANY FOR ENTERING INTO THE
CONTRACT;
(III) THE TOTAL DOLLAR AMOUNT TO BE REPAID TO THE COMPANY BY THE
CONSUMER, IN SIX-MONTH INTERVALS FOR THIRTY-SIX MONTHS, AND INCLUDING
ALL FEES AS WELL AS ANY MINIMUM MONTHLY REQUIRED PAYMENT AMOUNT; AND
(IV) THE ANNUAL PERCENTAGE RATE OF RETURN, CALCULATED AS OF THE LAST
DAY OF EACH SIX-MONTH INTERVAL, INCLUDING FREQUENCY OF COMPOUNDING.
(B) THE CONTRACT SHALL PROVIDE THAT THE CONSUMER MAY CANCEL THE
CONTRACT WITHIN FIVE BUSINESS DAYS FOLLOWING THE CONSUMER'S RECEIPT OF
FUNDS, WITHOUT PENALTY OR FURTHER OBLIGATION. THE CONTRACT SHALL CONTAIN
THE FOLLOWING NOTICE WRITTEN IN A CLEAR AND CONSPICUOUS MANNER, ALSO IN
AT LEAST TWELVE-POINT BOLDFACE TYPE: "CONSUMER'S RIGHT TO CANCELLATION:
YOU MAY CANCEL THIS CONTRACT WITHOUT PENALTY OR FURTHER OBLIGATION WITH-
IN FIVE BUSINESS DAYS FROM THE DATE YOU RECEIVE FUNDING FROM [INSERT
NAME OF COMPANY]." THE CONTRACT ALSO SHALL SPECIFY THAT IN ORDER FOR THE
CANCELLATION TO BE EFFECTIVE, THE CONSUMER MUST EITHER RETURN TO THE
COMPANY THE FULL AMOUNT OF DISBURSED FUNDS BY DELIVERING THE COMPANY'S
UNCASHED CHECK TO THE OFFICE ADDRESS OF THE COMPANY IN PERSON, WITHIN
FIVE BUSINESS DAYS OF THE DISBURSEMENT OF FUNDS, OR MAIL A NOTICE OF
CANCELLATION AND INCLUDE IN THAT MAILING A RETURN OF THE FULL AMOUNT OF
DISBURSED FUNDS IN THE FORM OF THE COMPANY'S CHECK, OR A REGISTERED OR
CERTIFIED CHECK OR MONEY ORDER, BY INSURED, REGISTERED OR CERTIFIED
UNITED STATES MAIL, POSTMARKED WITHIN FIVE BUSINESS DAYS OF RECEIVING
FUNDS FROM THE COMPANY, AT THE ADDRESS SPECIFIED IN THE CONTRACT FOR
SUCH CANCELLATION.
(C) THE CONTRACT SHALL ADDITIONALLY CONTAIN THE FOLLOWING STATEMENT IN
AT LEAST TWELVE-POINT BOLDFACE TYPE: "THE COMPANY AGREES THAT IT SHALL
HAVE NO RIGHT TO AND WILL NOT MAKE ANY DECISIONS WITH RESPECT TO THE
CONDUCT OF THE UNDERLYING CIVIL ACTION OR CLAIM OR ANY SETTLEMENT OR
RESOLUTION THEREOF AND THAT THE RIGHT TO MAKE SUCH DECISIONS REMAIN
SOLELY WITH THE CONSUMER AND THE CONSUMER'S ATTORNEY."
(D) THE CONTRACT SHALL CONTAIN THE INITIALS OF THE CONSUMER ON EACH
PAGE.
(E) THE CONTRACT SHALL ALSO CONTAIN THE FOLLOWING STATEMENT IN AT
LEAST TWELVE-POINT BOLDFACE TYPE LOCATED IMMEDIATELY ABOVE THE PLACE ON
THE CONTRACT WHERE THE CONSUMER'S SIGNATURE IS REQUIRED: "DO NOT SIGN
THIS CONTRACT BEFORE YOU READ IT COMPLETELY OR IF IT CONTAINS ANY BLANK
SPACES. BEFORE YOU SIGN THIS CONTRACT YOU SHOULD OBTAIN THE ADVICE OF
YOUR ATTORNEY. YOU ARE ENTITLED TO A COMPLETELY FILLED IN COPY OF THIS
CONTRACT. DEPENDING ON YOUR CIRCUMSTANCES, YOU MAY WANT TO CONSULT A TAX
A. 7891--A 3
BENEFIT PLANNING AND/OR A FINANCIAL PROFESSIONAL. YOU ACKNOWLEDGE THAT
YOUR ATTORNEY HAS PROVIDED NO TAX BENEFIT PLANNING OR FINANCIAL ADVICE
REGARDING THIS TRANSACTION."
(F) THE CONTRACT SHALL CONTAIN A WRITTEN ACKNOWLEDGMENT BY THE ATTOR-
NEY WHO REPRESENTS THE CONSUMER THAT STATES ALL OF THE FOLLOWING:
(I) THE ATTORNEY HAS REVIEWED THE CONTRACT AND ALL COSTS AND FEES HAVE
BEEN DISCLOSED TO THE CONSUMER, INCLUDING THE ANNUALIZED RATE OF RETURN
APPLIED TO CALCULATE THE AMOUNT TO BE REPAID TO THE COMPANY BY THE
CONSUMER OUT OF THE PROCEEDS.
(II) THE ATTORNEY IS BEING PAID ON A CONTINGENCY BASIS PER A WRITTEN
FEE AGREEMENT.
(III) ALL PROCEEDS FROM THE SETTLEMENT, JUDGMENT, AWARD OR VERDICT
WILL BE DISBURSED VIA THE ATTORNEY'S ESCROW ACCOUNT OR SETTLEMENT FUND
ESTABLISHED TO RECEIVE PROCEEDS FROM THE DEFENDANT IN THE ACTION OR
PROCEEDING ON BEHALF OF THE CONSUMER.
(IV) THE ATTORNEY IS FOLLOWING THE WRITTEN INSTRUCTIONS OF THE CONSUM-
ER WITH REGARD TO THE NON-RECOURSE CIVIL LITIGATION ADVANCE.
(G) FOR ENGLISH, FRENCH, AND SPANISH SPEAKING AGGRIEVED PARTIES, THE
CONTRACT SHALL BE WRITTEN IN THE SAME LANGUAGE IN WHICH THE ORAL NEGOTI-
ATIONS ARE CONDUCTED BETWEEN THE COMPANY AND THE CONSUMER. FOR CONSUMERS
WHOSE PRIMARY LANGUAGE IS NEITHER ENGLISH, FRENCH, NOR SPANISH, THE
PRINCIPAL TERMS OF THE CONTRACT SHALL BE TRANSLATED IN WRITING INTO THE
CONSUMER'S NATIVE LANGUAGE; AT THE REQUEST OF THE CONSUMER, THE CONSUMER
SHALL SIGN THE TRANSLATED DOCUMENT CONTAINING THE PRINCIPAL TERMS AND
INITIAL EACH PAGE, AND THE TRANSLATOR SHALL SIGN A NOTARIZED AFFIRMATION
CONFIRMING THAT THE PRINCIPAL TERMS HAVE BEEN PRESENTED TO THE AGGRIEVED
PARTY IN THE AGGRIEVED PARTY'S NATIVE LANGUAGE AND ACKNOWLEDGED BY THE
CONSUMER, IN WRITING. PRINCIPAL TERMS SHALL INCLUDE ALL ITEMS THAT ARE
REQUIRED TO BE DISCLOSED BY THIS SECTION.
(H) IN THE EVENT OF A SUBSEQUENT DISPUTE ARISING BETWEEN THE CONSUMER
AND THE COMPANY WITH RESPECT TO THE TERMS, CONDITIONS OR ANY OTHER
MATTER CONCERNING THE NON-RECOURSE CIVIL LITIGATION CONTRACT ENTERED
INTO PURSUANT TO THIS TITLE, THE ATTORNEY REPRESENTING THE CONSUMER
SHALL ONLY BE RESPONSIBLE FOR CIVIL LIABILITY TO THE EXTENT PROVIDED FOR
IN THE APPLICABLE RULES OF THIS STATE'S CODE OF PROFESSIONAL RESPONSI-
BILITY.
S 2. This act shall take effect on the ninetieth day after it shall
have become a law.