West Virginia Senate Bill 850 signed into law, updating TPLF statutes in the state.

April 10, 2024 / 11 min read

On March 27, 2024, West Virginia Governor Jim Justice (R) signed Senate Bill 850 (S.B. 850) (the Updating Consumer Credit and Protection Act) into law. S.B. 850 makes various amendments to West Virginia’s existing third-party litigation funding (TPLF) statutes. West Virginia’s TPLF statutes, which were initially enacted in 2019, are codified at Chapter 46A-6 (West Virginia Consumer Credit and Protection Act), Article 6N (Consumer Litigation Financing), W.Va. Code § 46A-6N-1, et. seq.

Regarding the updates, S.B. 850 states that it “amend[s] and reenact[s] §46A-6N-1 [Definitions], §46A-6N-4 [Litigation financier prohibitions], §46A-6N-6 [Third-party agreements], §46A-6N-7 [Violation; enforcement], and §46A-6N-9 [Fees, terms, incorporation of obligations in agreement].”^[1]

As outlined more fully below, S.B. 850 updates West Virginia’s existing TPLF statutes in several ways, including:

Makes certain definitional updates to key terms;
Removes commercial tort claims from the statutory exclusions;
Excludes certain non-profit organizations from the definition of litigation financing;
Revises the exclusion regarding lending or financing agreements between an attorney or law firm and a lender;
Amends West Virginia’s TPLF disclosure provision;
Updates existing provisions prohibiting assignment of litigation financing contracts; and
Extends the statutory provision capping a financier’s annual fee to a “natural person.”

S.B. 850 becomes effective “ninety days from passage [June 7, 2024].” ^[2]

The below provides a general overview of S.B. 850 as follows:

Updated definitions

S.B. 850 updates the definition of “consumer” to read as follows (with the “strike-throughs” denoting deleted language and “underlining” denoting added text): “’Consumer’ means any ~~natural~~ 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.”^[3]

The new legislation also updates the definition of the terms “litigation financing” and “litigation financing transaction” under W.Va. Code § 46a-6N-1(3). As amended by S.B. 850, the definition of these terms are revised as follows (with the “strike-throughs” denoting deleted language and “underlining” denoting added text): “’Litigation financing” and ‘litigation financing’ “[m]eans a ~~nonrecourse~~ transaction in which financing is provided to a consumer in return for a consumer's assigning to the litigation financier a ~~contingent~~ right to receive payment contingent in any respect on the outcome of the ~~an amount of the potential proceeds of the consumer's judgment, award, settlement, or verdict obtained with respect to the consumer's~~ legal claim.”^[4]

Commercial tort claims exclusion is eliminated

S.B. 850 removes “commercial tort claims” from the list of items excluded from the definition of litigation financing.^[5] Prior to S.B. 850’s passage, commercial tort claims were expressly excluded from West Virginia’s TPLF states.^[6] However, the new law has now removed these claims from the statute’s exclusions.

Certain non-profit organizations are excluded from the TPLF statutes

While the commercial tort claim exclusion has been removed (see above), S.B. 850 adds certain non-profit organizations to the list of items that do not fall within the definition of litigation financing. More specifically, S.B. 850 states that non-profit organizations are excluded from the definition of litigation financing “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.”^[7]

Provision excluding certain funding arrangements between an attorney or law firm from the TPLF statutes is revised

S.B. 850 revises the attorney/law firm exclusion under W.Va. Code § 46a-6N-1(3)(B)(iv). As revised by S.B. 850, this subsection is updated as follows (with the “strike-throughs” denoting deleted language and “underlining” denoting added text): “’Litigation financing’ and ‘litigation financing transaction’ does not include … ~~Normal or course of business~~ Lending or financing arrangements between an attorney or law firm and a ~~lending institution~~ lender, provided such arrangements do not give the lender any particularized interest in the outcome of any legal claim or portfolio of legal claims.”^[8]

TPLF disclosure statute is updated

S.B. 850 makes changes to the existing language contained in West Virginia’s TPLF disclosure statute (W.Va. Code § 46a-6N-6). This section, in general, requires the production of the TPLF agreement, without a discovery request in most instances. In this regard, S.B. 850 states that the updates are intended to “[c]larify[] who is to provide disclosure of third-party litigation financing agreements.”^[9]

Regarding the changes, S.B. 850, in general, adds language to the existing provisions by extending the disclosure requirements to a party’s counsel, along with other revisions to existing text as noted below. Further, S.B. 850 adds a new subsection requiring disclosure in certain situations where financing is provided to an attorney or law firm as described below.

Per S.B. 850’s changes, West Virginia’s TPLF disclosure statute is amended as follows (with the “strike-throughs” denoting deleted language and “underlining” denoting added text):

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 ~~and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise~~ 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.^[10]

Other changes

S.B. 850 also makes some nomenclature changes to existing W.Va. Code § 46A-6N-4(a)(9) which, in general, prohibits a litigation financier from assigning a litigation financing contract in certain situations.^[11] Further, S.B. 850 updates W.Va. Code § 46A-6N-7(a) by adding a “law firm” as an additional party against whom a litigation financing agreement would be unenforceable in the event there was violation of West Virginia’s TPLF statutes.^[12]In addition, S.B. 850 amends existing W.Va. Code § 46A-6N-9(a) (West Virginia’s statutory provision which caps the annual fee a litigation financier may charge) by updating the term “consumer” as used in that section as follows (with the updated verbiage in italics): “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.”^[13]

Effective Date

S.B. 850 becomes effective “ninety days from passage [June 7, 2024].” ^[14]

Claims Considerations

As outlined above, S.B. 850 makes several updates to West Virginia’s existing TPLF statutes, including what may be viewed as expanding West Virginia’s TPLF disclosure statute in certain respects. On this latter note, West Virginia remains one of only a handful of states with statutes requiring automatic production of the TPLF agreement without a formal discovery request. From the author’s research, Wisconsin and Montana are the only two other states with a similar disclosure requirement, while Indiana makes the “contents” of the TPLF agreement discoverable under the Indiana Rules of Trial Procedure.^[15]

It is also interesting to note that West Virginia’s passage of S.B. 850, comes on the heels of Indiana’s recent enactment of a new TPLF law which makes several significant changes and additions to Indiana’s TPLF statutes. Unlike Indiana’s new law, S.B. 850 contains no provisions regulating litigation funding sourced from foreign funders, states, or sovereign wealth funds – which has become an issue of increasing concern for many regarding TPLF practices. On this latter point, in September 2023 the Protecting Our Courts from Foreign Manipulation Act of 2023 was introduced in Congress which targets TPLF by foreign persons, states, and sovereign wealth funds.

As reported in the author’s recent article on Indiana’s new law, several other states have also introduced TPLF bills during the current state legislative season. From the author’s research, a non-exhaustive list of these states, as of the date of this article, include: Arizona, Florida, Illinois, Iowa, Kansas, Louisiana, Minnesota, Mississippi, and Rhode Island.^[16] Going forward, it will be interesting to see if other states will join Indiana and West Virginia in passing TPLF bills in 2024. The author will continue to monitor developments and provide future updates as warranted.

Questions?

Please feel free to contact the author if you have any questions regarding West Virginia’s new TPLF law as outlined above. Also, be sure to review the author’s other TPLF articles and resources for additional TPLF updates.

[1] This information is stated at the beginning of S.B. 850 as part of an untitled section before the bill proceed with outlining the specific updates made. While the bill does not provide a header for this information, the information essentially acts and reads in the sense of a “preamble.”

[2] See the West Virginia Legislature’s website.

[3] W.Va. Code § 46a-6N-1(1). The denoted strike-throughs and underlined verbiage taken from the “Committee Substitute” version of S.B. 850 as contained on the West Virginia legislature’s website.

[4] W.Va. Code § 46a-6N-1(3). The denoted strike-throughs and underlined verbiage taken from the “Committee Substitute” version of S.B. 850 as contained on the West Virginia’s legislature’s website.

[5] On this point. S.B. 850 states that the new law is “removing [the] commercial tort claims exclusion from definition of litigation financing.” S.B. 850.

[6] Prior to S.B. 850’s passage, the commercial tort claims exclusion was codified at W.Va. Code § 46a-6n-1(B)(iii).

[7] W.Va. Code § 46a-6N-1(3)(B)(v).

[8] W.Va. Code § 46a-6N-1(3)(B)(iv). The denoted strike-throughs and underlined verbiage taken from the “Committee Substitute” version of S.B. 850 as contained on the West Virginia’s legislature’s website.

[9] This new provision is codified as W.Va. Code § 46a-6N-6(b).

[10] W.Va. Code § 46a-6N-6(a) and (b). The denoted strike-throughs and underlined verbiage taken from the “Committee Substitute” version of S.B. 850 as contained on the West Virginia’s legislature’s website.

[11] On this point, S.B. 850 amends W.Va. Code § 46A-6N-4(a)(9)(A) by adding language to the term “consumer” to reference the term “consumer” as a “natural person.” Specifically, this section, as amended by S.B. 850, now reads, in pertinent part, as follows: “A litigation financier shall not … [a]ssign, 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 §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.” W.Va. Code § 46A-6N-4(a)(9)(A) (author’s emphasis).

[12] As updated by S.B. 850, W.Va. Code § 46A-6N-7(a) now reads as follows: “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.”

[13] W.Va. Code § 46A-6N-9(a). Prior to S.B. 850’s passage, this section read as follows: “A litigation financier may not charge the consumer an annual fee of more than 18 percent of the

[14] See the West Virginia Legislature’s website.

[15] See, Wis. Stat. Ann. § 804.01 (2)(bg), Mont. Code Ann. § 31-4-108, and Indiana Code § 24-12-4-2.

[16] The following provides the bill numbers for those who may be interested: Arizona (HB 2638); Florida (H.B. 1179 and S.B. 1276); Illinois (H.B. 4614 and S.B. 3314); Iowa (H.F. 2348 and S.F. 3150); Kansas (H.B. 2510); Louisiana (S.B. 355);Minnesota (MN S.F. 4967); Mississippi (H.B. 146); and Rhode Island (H.B. 7574).

Governor Justice signs S.B. 850 into law amending West Virginia’s TPLF statutes