Bill Description: House Bill 646 would regulate and restrict what it defines as third-party litigation financing, effectively limiting the right of contract for both litigants and litigation financiers.
Rating: -5
Does it create, expand, or enlarge any agency, board, program, function, or activity of government? Conversely, does it eliminate or curtail the size or scope of government?
House Bill 646 would create Chapter 21, Title 48, Idaho Code, titled the “Litigation Financing Transparency, National Security, and Consumer Protection Act.” This act would regulate and restrict what it defines as third-party litigation financing, effectively limiting the right of contract for both litigants and litigation financiers.
The act would expand government by requiring the Secretary of State to manage registrations for litigation financiers, including collecting detailed information on owners and controllers. It also creates new regulations and related oversight obligations for the state, which would likely require additional resources.
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Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?
The act creates new regulatory authority over what is currently a largely unregulated market segment. It would empower government via the Secretary of State to regulate the litigation financing industry, including mandating registration, enforcing disclosures and discovery of contracts, prohibiting funding from foreign adversaries, restricting proprietary information disclosure, and overseeing foreign litigation funding.
The act would explicitly limit the interest rates a litigation financier may charge to no greater than 15% or 6% above the prime rate, whichever is greater. It would also limit overall compensation to no more than 25% of the amount of any judgment, award, settlement, verdict, or other form of monetary relief obtained in the legal claim that is the subject of the litigation contract.
The act would also prohibit paying or offering commissions, referral fees, rebates, or other forms of consideration to any person in exchange for referring a consumer or a consumer's legal representative to a litigation financier.
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Does it increase barriers to entry into the market? Examples include occupational licensure, the minimum wage, and restrictions on home businesses. Conversely, does it remove barriers to entry into the market?
The act would limit who can participate in the litigation financing market and require registration and extensive disclosures from those who do.
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Does it directly or indirectly create or increase penalties for victimless crimes or non-restorative penalties for non-violent crimes? Conversely, does it eliminate or decrease penalties for victimless crimes or non-restorative penalties for non-violent crimes?
Among other enforcement provisions, the act would stipulate that “if a litigation financier charges a rate of interest that exceeds the rate of interest allowed pursuant to section 48-2104(1)(c), Idaho Code, the litigation financier shall be subject to a penalty for usury and an action to recover excessive interest.”
Charging a rate of interest that is specified in a contract and voluntarily agreed to by all parties cannot rationally be defined as usury.
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Does it violate the spirit or the letter of either the United States Constitution or the Idaho Constitution? Examples include restrictions on speech, public assembly, the press, privacy, private property, or firearms. Conversely, does it restore or uphold the protections guaranteed in the US Constitution or the Idaho Constitution?
The act flagrantly disallows voluntary contracts between litigants and litigation financiers. It says, “Any violation of this chapter by a litigation financier shall render the litigation financing contract unenforceable by the litigation financier or any successor-in-interest to the litigation financing contract.”
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