NC COMMERCE PROTECTION ACT OF 2014 (NEW).

View NCGA Bill Details2013-2014 Session
Senate Bill 648 (Public) Filed Tuesday, April 2, 2013
A BILL TO BE ENTITLED AN ACT TO CREATE TRANSPARENCY IN CONTRACTS BETWEEN THE ATTORNEY GENERAL AND PRIVATE ATTORNEYS, TO PREVENT THE ABUSE OF PATENTS, TO ALLOW FOR SHAREHOLDER ASSENT TO EXCLUSIVE FORUM, AND TO LIMIT ASBESTOS-RELATED LIABILITIES FOR CERTAIN SUCCESSOR CORPORATIONS.
Intro. by Jackson, Meredith, J. Davis.

Status: Ch. SL 2014-110 (Senate Action) (Aug 6 2014)

SOG comments (5):

Long title change

The Senate committee substitute to the 1st edition amends the act's long title. The original long title was: A BILL TO BE ENTITLED AN ACT TO CREATE THE CRIMINAL OFFENSE OF EMPLOYMENT FRAUD, TO PROHIBIT PREDATORY THIRD-PARTY FINANCING OF LITIGATION BY ASSIGNMENT OF PLAINTIFF'S RIGHT TO RECEIVE PROCEEDS, AND TO CREATE TRANSPARENCY IN CONTRACTS THE ATTORNEY GENERAL ENTERS INTO WITH PRIVATE ATTORNEYS TO REPRESENT THE STATE.

Long title change

Committee substitute to the 2d edition changed the long title. Previous long title was A BILL TO BE ENTITLED AN ACT TO CREATE THE CRIMINAL OFFENSE OF EMPLOYMENT FRAUD, TO CLARIFY THE CALCULATION OF INTEREST FOR ACTIONS FOR PERSONAL INJURY OR WRONGFUL DEATH, TO PROHIBIT PREDATORY THIRD-PARTY FINANCING OF LITIGATION BY ASSIGNMENT OF PLAINTIFF'S RIGHT TO RECEIVE PROCEEDS, AND TO CREATE TRANSPARENCY IN CONTRACTS THE ATTORNEY GENERAL ENTERS INTO WITH PRIVATE ATTORNEYS TO REPRESENT THE STATE.

Long title change

Amendments to the 3d edition changed the long title. Previous title was AN ACT TO CREATE TRANSPARENCY IN CONTRACTS BETWEEN THE ATTORNEY GENERAL AND PRIVATE ATTORNEYS, TO PREVENT THE ABUSE OF PATENTS, TO ALLOW FOR SHAREHOLDER ASSENT TO EXCLUSIVE FORUM, AND TO CREATE A THREE‑JUDGE PANEL TO RULE ON CLAIMS THAT AN ACT OF THE GENERAL ASSEMBLY IS FACIALLY INVALID BASED UPON THE NORTH CAROLINA OR UNITED STATES CONSTITUTIONS.

Long Title Change

House committee substitute to the 4th edition changes the long title. The original title is as follows:

AN ACT TO CREATE TRANSPARENCY IN CONTRACTS BETWEEN THE ATTORNEY GENERAL AND PRIVATE ATTORNEYS, TO AMEND THE LAWS GOVERNING PRODUCTS LIABILITY ACTIONS, TO PREVENT THE ABUSE OF PATENTS, TO ALLOW FOR SHAREHOLDER ASSENT TO EXCLUSIVE FORUM, TO CREATE A THREE‑JUDGE PANEL TO RULE ON CLAIMS THAT AN ACT OF THE GENERAL ASSEMBLY IS FACIALLY INVALID BASED UPON THE NORTH CAROLINA OR UNITED STATES CONSTITUTIONS, AND TO LIMIT ASBESTOS-RELATED LIABILITIES FOR CERTAIN SUCCESSOR CORPORATIONS.

Long title change.

Conference report changes the long title. The previous title is found below:

AN ACT TO CREATE TRANSPARENCY IN CONTRACTS BETWEEN THE ATTORNEY GENERAL AND PRIVATE ATTORNEYS.

Bill History:

S 648/S.L. 2014-110

Bill Summaries:

  • Summary date: Aug 14 2014 - More information

    AN ACT TO CREATE TRANSPARENCY IN CONTRACTS BETWEEN THE ATTORNEY GENERAL AND PRIVATE ATTORNEYS, TO PREVENT THE ABUSE OF PATENTS, TO ALLOW FOR SHAREHOLDER ASSENT TO EXCLUSIVE FORUM, AND TO LIMIT ASBESTOS-RELATED LIABILITIES FOR CERTAIN SUCCESSOR CORPORATIONS. Enacted August 6, 2014. Effective August 6, 2014, except as otherwise provided.

     

  • Summary date: Jul 31 2014 - More information

    Conference report makes the following changes to the 6th edition:

    Changes the long title.

    Adds Part titles to the bill.

    Amends proposed GS 114-9.7, concerning oversight of third-party contracting by the Attorney General, to provide clarifying language that the report due by February 1 is only due following a year in which a state agency has entered into a contingency fee contract with a private attorney.

    Provides an effective date for proposed GS Chapter 114, Article 2A, and for clarifying language adding to GS 114-2.3, concerning limited use of private counsel, providing that the sections are effective when they become law, applying to any contract to retain private counsel authorized by the Attorney General entered into on or after that date.

    Amends GS 75-137 and GS 75-138, concerning patent abuse assertions, making clarifying changes. 

    Amends GS 75-141, concerning enforcement, remedies, and damages for patent abuse assertions, providing that persons who have caused another to deliver or send a demand to a target in North Carolina is subject to suit in North Carolina.

    Enacts new GS 55-7-50, Exclusive forum or venue provisions valid, providing that a provision in the articles of incorporation or bylaws of a corporation that specifies a forum/venue in North Carolina as the exclusive forum/venue for litigation concerning the internal affairs of the corporation are valid and enforceable. 

    Amends GS Chapter 99E by adding new Article 5, Successor Asbestos-Related Liability.

    Adds new GS 99E-40 (Definitions), providing the terms and definitions to be used in this Article, including asbestos claimcorporationsuccessor, successor asbestos-related liability, transferor.

    Creates new GS 99E-42 (Limitation on successor asbestos-related liability), providing that, except as further limited in the statute, the cumulative successor asbestos-related liabilities of a successor corporation are limited to the fair market value of the total gross assets of the transferor, determined at the time of the merger/consolidation. No successor or asbestos-related liabilities are available in excess of this limitation. If a transferor assumes or incurs successor asbestos-related liabilities in connection with a prior merger/consolidation with a prior transferor, the fair market value of the total assets of the prior transferor determined at the time of the earlier merger or consolidation will be substituted for the limitation described above for purposes of determining the limitation of liability of a successor corporation.

    Creates new GS 99E-41 (Applicability), establishing that the limitations in GS 99E-42 apply to any successor except for (1)  certain workers' compensation benefits, (2) claims against a corporation that are not considered a successor asbestos-related liability, (3) any obligation under 29 USC 151 or under any collective bargaining agreement, (4) certain successors that continued in the business of mining asbestos or in named related asbestos businesses.

    Creates new GS 99E-43 (Establishing fair market value of total gross assets). Allows a successor corporation to establish fair market value of total gross assets for the purpose of limitations under GS 99E-35 through any one of the following methods: (1) by reference to the going concern value of the assets or to the purchase price attributable to or paid for the assets in an arms-length transaction or (2) in the absence of other readily available information from which the fair market value can be determined, by reference to the value of the assets recorded on a balance sheet.

    Provides that total gross assets include intangible assets. Sets other conditions to the extent that total gross assets include any liability insurance that was issued to the transferor whose assets are being valued for purposes of this section, no insurance or other obligations will be affected.

    Creates new GS 99E-44 (Adjustment), providing that the fair market value of total gross assets at the time of the merger/consolidation will increase annually at a rate equal to the sum of (1) the prime rate as listed in the Wall Street Journal for each calendar year since the merger/consolidation and (2) 1 percent.

    The above calculation is subject to the following limitations: (1) the rate defined above cannot be compounded, (2) the adjustment of the fair market value of total gross assets will continue as provided above until the adjusted value is first exceeded by the cumulative amounts of successor asbestos-related liabilities paid or committed to be paid, and (3) no adjustment can be applied to any liability insurance that may be included in the definition of total gross assets in GS 99E-43.

    Creates new GS 99E-45 (Scope of Article; application), providing that the article will be liberally construed with regard to successors and it will apply to all asbestos claims filed against a successor on or after the effective date of this act. 

    Provides an effective date of January 1, 2015, for the above asbestos related provisions.


  • Summary date: Jun 25 2014 - More information

    House committee substitute deletes all provisions from the 4th edition except retains Section 1, which enacted new Article 2A, Transparency in Third-Party Contracting by Attorney General,in GS Chapter 114.

    Makes the following changes to Section 1. Prohibits the Attorney General from giving permission under GS 114-2.3 for a state agency to enter into a contingency fee contract that allows the private attorney to receive an aggregate contingency fee, exclusive of reasonable costs and expenses, in excess of prescribed percentages linked to the amount of damages. Deletes the delineated record keeping requirements for any private attorney under contract to provide services to a state agency on a contingency fee basis and instead requires the private attorney under contract to a state agency on a contingency fee basis to maintain all records related to that contract in accordance with the Revised North Carolina Rules of Professional Conduct. Amends the long title of this act to conform with the bill content.


  • Summary date: Jun 25 2014 - More information

    The House amendment to the 5th edition makes the following changes. Adds the following:

    Enacts new GS Chapter 75, Article 8, Abusive Patent Assertions, with the purpose of curbing bad-faith assertions of patent infringement.  Provides nine findings regarding patents in North Carolina, including that abusive patent litigation and bad-faith infringement claims can harm NC companies and that North Carolina has a strong interest in protecting its citizens and businesses against abusive patent assertions. Provides that the General Assembly seeks to strike a balance between (1) the interest of efficient and prompt resolution of patent infringement claims, the protection of NC businesses from abusive and bad-faith assertions of patent infringement, and building the NC economy and (2) the intent to respect federal law and not interfere with legitimate patent enforcement claims. Provides that nothing in the act is intended to alter current law concerning personal liability of principals in business entities.

    Sets out definitions to be used in this Article, including affiliate, demand, institution of higher education, target, interested party, and operating entity.

    Sets out twelve factors that the court can consider as evidence that a person has made a bad-faith assertion of patent infringement, including the person demands payment of a license fee or response within an unreasonably short period of time, the person making the claim or assertion sent the same demand to multiple recipients, as well as any other factors the court finds relevant.

    Also sets out seven factors the court can consider as evidence that a person has not made a bad-faith assertion of patent infringement, including that the person engages in a good-faith effort to establish that the target has infringed the patent and to negotiate an appropriate remedy, the person has demonstrated good-faith business practices in previous efforts to enforce the patent, as well as any other factors the court finds relevant.  

    Provides that activities relating to advising others of ownership or right of license, communicating that the patent is available for license or sale, notifying others of the infringement of the patent, or seeking compensation on account for past or present infringement/license to a patent will not be deemed unlawful for any person who has the right to license or enforce a patent to do these activities, when not carried out in bad faith.

    Requires a bond to be posted in an amount equal to a good-faith estimate of the target’s fees and costs to litigate the claim and reasonable recoverable amounts when the court has found a reasonable likelihood that a person has made a bad-faith assertion of patent infringement.  A hearing on the bond requirement can be requested by either party.  No bond issued can exceed $500,000.  Court is authorized to waive the bond requirement upon a finding that the person has available assets equal to the proposed bond amount or waive it for any other good cause.

    Sets out regulations for enforcement, remedies, and damages, providing that the Attorney General has the same authority to make rules, conduct investigations, and bring civil actions under these new provisions as provided in the Article.  Provides that a target or person aggrieved by a violation of these regulations can bring an action in Superior Court. Remedies include equitable relief, damages, costs, and fees (including reasonable attorneys' fees), and exemplary damages in an amount of $50,000 or three times the total of damages, costs, and fees, whichever is greater. Allows the court to award a prevailing defendant costs and fees, if the action was not well grounded in fact and warranted by existing law or was interposed for any improper purpose.

    Provides for  joinder of interested parties as well as establishing that any person making demands on a target has purposefully availed themselves of doing business in North Carolina and thus is subject to suit and jurisdiction in North Carolina, regardless of other business conducted in the state.  Provides that interested parties that joined the action through the joinder clause can be held jointly and severally liable for any amount awarded.  States that the rights or authority of North Carolina or the Attorney General are not limited in regards to conduct involving assertions of patent infringement.

    All of the above is effective when bill becomes law, applying to actions commenced on or after that date and demands made on or after that date.


  • Summary date: Jun 11 2014 - More information

    Senate committee substitute makes the following changes to the 2nd edition.

    Deletes proposed GS 66-67.6 regarding the offense of employment fraud.

    Deletes proposed changes to GS 24-5.

    Deletes proposed Article 8 in GS Chapter 75, Predatory Third-Party Financing of Litigation Actand instead enacts new Article 8,Abusive Patent Assertions, in GS Chapter 75. Makes bad faith assertions of patent infringement an unfair and deceptive trade practice. Defines the following terms as they are used in this Article: (1) affiliate, (2) demand, (3) institution of higher education, (4) interested party, (5) operating entity, and (6) target. Provides non-exclusive factors that the court can weigh in determining whether actions are taken in good or bad faith. Declares that patent litigation can be a significant burden on companies. Provides criteria for the court to set a bond of up to $500,000 upon a finding that a target has established a reasonable likelihood that a person has made a bad-faith assertion of patent infringement in violation of this Chapter. Includes specifications regarding enforcement under this Article, remedies, and damages. Provides that a court may award costs and fees, including reasonable attorneys' fees, to a defendant who prevails in an action brought under this section.

    Amends Article 26A of GS Chapter 1. Rewrites the title of Article 26A asThree-Judge Panel for Redistricting Challenges and for Certain Challenges to State Laws(was, Three-Judge Panel for Redistricting Challenges).

    Adds new subsections to GS 1-267.1 to provide that except as provided in subsection (a) of this section any challenge to the validity on its face of an act of the General Assembly must be transferred under GS 1A-1, Rule 42(b)(4), to Wake County Superior Court (Court) to be heard and determined by a three-judge panel of the Court, organized as prescribed by subsection (b2) of this section. Requires the Chief Justice of the Supreme Court to appoint three resident superior court judges to a three-judge panel of the Superior Court of Wake County to hear challenges to the validity of acts of the General Assembly on its face. Specifies the organizational structure of the three-judge panel, including the requirement for representation of different regions of the state and replacing members as necessary. Prohibits entering an order or judgment based on a finding that an act of the General Assembly is facially invalid based upon either the North Carolina or United States Constitution except by this three-judge panel. Provides that this section applies only to civil proceedings, and nothing in this section is to be construed as applying to a defendant in a criminal proceeding or to proceedings in which GS Chapter 15A is applicable.

    Amends GS 1-81.1 to provide that in an action seeking injunctive relief to stay enforcement, operation, or execution of an act of the General Assembly based on an allegation that the act is unconstitutional on its face under the US or NC constitution, venue lies exclusively with the Wake County Superior Court. Makes conforming changes to GS 1A-1, Rule 42, Consolidation; separate trials.

    Amends GS 1A-1, Rule 62,adding a new subsection (h)to clarify that where a trial court grants injunctive or declaratory relief restraining the enforcement or execution of an act of the General Assembly against a party in a civil action, the trial court shall stay the relief granted pending appeal. Provides that this subsection only applies when the state or a political subdivision of the state is a party in the civil action. Declares that this subsection does not apply to facial challenges heard by a three-judge panel under GS 1-267.1.

    Amends GS 7A-27 to provide that an appeal lies of right directly to the Supreme Court from any order or judgment of a court, either final or interlocutory, that holds that an act of the General Assembly based on the US or NC constitution is unconstitutional on its face. Makes a conforming change to GS 7A-27.

    The provisions on the 3-judge panel are effective on July 1, 2014, and apply to any claim filed on or after that date.

    Adds a Part VI, which establishes the ten-member Joint Select Committee to Study the Need for Reform in the Laws Governing Apportionment of Tort Liability (Committee). Calls for five members of the Senate appointed by the President Pro Tempore of the Senate and five members of the House of Representatives appointed by the Speaker of the House of Representatives. Provides that vacancies are to be filled by the appointing authority. Makes provisions for staffing, determining a quorum, designating co-chairs, and the general operations of the Committee. Directs the Committee to study issues related to the need for reform of the laws governing apportionment of tort liability and successor liability, including adoption of comparative negligence and the abrogation of joint and several liability, and any other issues related to tort liability. Provides that the Committee may make a final report, including any proposed legislation to the 2015 General Assembly upon its convening. Directs the Committee to terminate upon the filing of its final report or the convening of the 2015 General Assembly, whichever comes first.

    Amends new Article 2A,Transparency in Third-Party Contracting by Attorney General. Deletes provision requiring the posting of the request for proposals from private attorneys on the Attorney General's website. Provides that the executed contingency fee contract and the Attorney General's written determination are not considered public records until the conclusion of the legal proceedings or other matters for which the services of the private attorney were retained. Requires attorneys submitting a proposal to pay a $50 fee. Deletes the staggered contingency fee scale which was calculated based on the amount of any damages in the action for which the private attorney was contracted and instead limits the contingency fee, exclusive of reasonable costs and expenses, to no more than 22.5 percent. Authorizes the court to reduce the private attorney's fee after the state agency has reached a settlement or obtained an award, at the court's discretion. Requires that all records maintained in this section be made available to the state auditor for oversight purposes.Effective when the act becomes law (was, October 1, 2013).

    Enacts new GS 55-7-50 to provide that inclusion in a corporation's articles of incorporation of a provision declaring that the state courts of North Carolina are the exclusive forum for a derivative shareholder lawsuit is effective and enforceable against any shareholder who voted in favor of an amendment to include the provision and any shareholder who purchased shares after the provision was adopted. Applies to all articles of incorporation and amendments to those articles adopted on or after the effective date.

    Adds a severability clause providing that if any section or provision of this act is declared unconstitutional or invalid by the courts, it does not affect the validity of the rest of this act in whole or part.

    Except as otherwise indicated, this act is effective when it becomes law.


  • Summary date: Jun 11 2014 - More information

    Senate amendments to the 3rd edition make the following changes.

    Amendment #1 

    Amends proposed GS 114-9.5 to provide that the Attorney General may give permission for a state agency to enter into a contingency fee contract that provides for the private attorney to receive an aggregate contingency fee in excess of specified percentages, depending on the amount of damages (was, may not give permission for a state agency to enter into a contingency fee contract that provides for the private attorney to receive a contingency fee in excess of 22.5 percent). Caps the aggregate contingency fee at $50 million. 

    Amendment #2 

    Adds a new part to the bill as follows. Enacts new GS 99B-13, creating a rebuttable presumption that the manufacturer did not fail to provide an adequate warning when, in a product liability action against a drug manufacturer, the drug that is alleged to cause harm was approved by the US Food and Drug Administration and the drug and its labeling were in compliance with the US Food and Drug Administration's approval at the time the drug left the manufacturers's control. The presumption may be rebutted by a preponderance of the evidence. Provides that the section does not apply if the claimant proves that the manufacturer, at any time before the event that allegedly caused the harm, did any of three specified activities. The section applies only to product liability claims alleging that a drug manufacturer failed to provide an adequate warning.

    Applies to actions commenced on or after October 1, 2014. 

    Amendment #3

    Amends GS Chapter 99E by adding new Article 5, Successor Asbestos-Related Liability.

    Adds new GS 99E-40 (Definitions), providing the terms and definitions to be used in this Article, including asbestos claimcorporationsuccessorsuccessor asbestos-related liability, and transferor.

    Creates new GS 99E-42 (Limitation on successor asbestos-related liability), providing that, except as further limited in the statute, the cumulative successor asbestos-related liabilities of a successor corporation are limited to the fair market value of the total gross assets of the transferor, determined at the time of the merger/consolidation. No successor or asbestos-related liabilities are available in excess of this limitation. If a transferor assumes or incurs successor asbestos-related liabilities in connection with a prior merger/consolidation with a prior transferor, the fair market value of the total assets of the prior transferor determined at the time of the earlier merger or consolidation will be substituted for the limitation described above for purposes of determining the limitation of liability of a successor corporation.

    Creates new GS 99E-41 (Applicability), establishing that the limitations in GS 99E-42 apply to any successor except for (1)  certain workers' compensation benefits, (2) claims against a corporation that are not considered a successor asbestos-related liability, (3) any obligation under 29 USC 151 or under any collective bargaining agreement, (4) certain successors that continued in the business of mining asbestos or in named related asbestos businesses.

    Creates new GS 99E-43 (Establishing fair market value of total gross assets). Allows a successor corporation to establish fair market value of total gross assets for the purpose of limitations under GS 99E-35 through any one of the following methods: (1) by reference to the going concern value of the assets or to the purchase price attributable to or paid for the assets in an arms-length transaction or (2) in the absence of other readily available information from which the fair market value can be determined by reference to the value of the assets recorded on a balance sheet.

    Provides that total gross assets include intangible assets. Sets other conditions to the extent that total gross assets include any liability insurance that was issued to the transferor whose assets are being valued for purposes of this section, no insurance or other obligations will be affected.

    Creates new GS 99E-44 (Adjustment), providing that the fair market value of total gross assets at the time of the merger/consolidation will increase annually at a rate equal to the sum of (1) the prime rate as listed in the Wall Street Journal for each calendar year since the merger/consolidation and (2) one percent.

    The above calculation is subject to the following limitations: (1) the rate defined above cannot be compounded, (2) the adjustment of the fair market value of total gross assets will continue as provided above until the adjusted value is first exceeded by the cumulative amounts of successor asbestos-related liabilities paid or committed to be paid, and (3) no adjustment can be applied to any liability insurance that may be included in the definition of total gross assets in GS 99E-43.

    Creates new GS 99E-45 (Scope of Article; application), providing that the article will be liberally construed with regard to successors and it will apply to all asbestos claims filed against a successor on or after the effective date of this act. 

    Effective January 1, 2015.

    Makes conforming changes to the act's title.


  • Summary date: May 7 2013 - More information

    Senate committee substitute makes the following changes to the 1st edition.

    Changes long title.

    Changes the section number of proposed GS 14-105.1, Employment Fraud, to GS 66-67.6, and makes the following proposed changes. Provides that, for the criminal penalties provided for in GS 66-67.6, first convictions that previously resulted in a Class 1 misdemeanor will now result in a civil penalty of $10,000. Also provides that second or subsequent convictions under this section which previously resulted in a Class I felony will now result in a civil penalty of $50,000. Provides that confidential information or any other information from recordings turned over to law enforcement, pursuant to subsection (c), will not be admissible in any criminal proceedings for an offense based on any violation of this section, nor can it be used to initiate or facilitate prosecution of an offense under this section.  Also provides that information obtained from a recording produced, procured, or otherwise made in violation of this section is not considered a waiver of proprietary trade secrets or any legal privileges held by the employer.

    Amends GS 24-5, Interest on judgments, creating new GS 25-5(a2), which provides that in actions brought to recover damages for personal injury or wrongful death, the amount of the judgment designated as compensatory damages for past economic damages bears interest starting 90 days after the action is commenced, until the judgment is satisfied, at a per annum rate of 5%. No other portions of a monetary judgment in an action for personal injury or wrongful death will bear interest.  Makes conforming changes.

    Amends GS 114-9.3, Definitions, providing the following new terms and definitions, contingency fee contract and state agency. Amends the definition of a government attorney, defining it as an attorney employed by the state as a staff attorney in a state agency.

    Amends GS 114-9.4, Procurement, providing that a state agency (was, Attorney General) cannot enter into a contingency fee contract with a private attorney unless the Attorney General makes a written determination prior to the contract that provides contingency fee representation is cost-effective and in the public's best interest.

    Amends GS 114-9.5, Contingency fees, providing that the Attorney General cannot give permission under GS 114-2.3 for a state agency to enter into a contingency fee contract that exceeds specified fee benchmarks.

    Amends GS 114-9.6, Control, providing that the Attorney General cannot give permission under GS 114-2.3 for a state agency to enter into a contingency fee contract unless six specified requirements are met throughout the contract period, including but not limited to, the government attorney retaining the full authority to reject any decisions made by the private attorney. Makes clarifying changes.

    Amends GS 114-9.7, Oversight, making a technical and conforming change.

     

     


  • Summary date: Apr 3 2013 - More information

    Enacts new section GS 14-105.1 (Employment fraud), making it illegal to make false statements or representations or fail to disclose requested information as part of an employment application  that the person knows to be false or incomplete, so that the person can gain access to the employer's facilities in order to (1) create or produce a record that reproduces an image or sound occurring in the employer's facility (i.e., photo, video, or audio medium record) or (2) capture or remove data, paper, records, or other documents through duplication, downloading, image capture, electronic mail, or other means. Committing such an offense will result in a Class 1 misdemeanor for the first conviction and a Class I felony for a second or subsequent conviction. Also requires any recording or information obtained to be turned over to local law enforcement within 24 hours of recording or procurement. Failure to do so will result in a Class 1 misdemeanor for the first conviction and a Class I felony for a second or subsequent conviction. Effective December 1, 2013.

    Amends GS Chapter 75 by creating a new Article 8, Predatory Third Party Financing of Litigation Act. Creates GS 75-140 (Definitions), which provides the terms and definitions to be used in the Article, including consumer, lawsuit loan, lawsuit loan company, lawsuit loan contract, legal action, and proceeds. Creates GS 75-142, (Lawsuit loan contracts prohibited), to prohibit lawsuit loan companies from entering into a lawsuit loan with a consumer regarding a legal action in which the consumer is a party. Renders all lawsuit loan contracts void and unenforceable. Creates GS 75-144 (Penalty), to provide that a violation of GS 75-142 is an unfair trade practice, pursuant to GS 75-1.1.  Effective October 1, 2013.

    Amends GS Chapter 114 by creating a new Article 2A, Transparency in Third-Party Contracting by Attorney General (AG). Creates GS 114-9.3 (Definitions), providing the terms and definitions to be used in this Article, including government attorney, private attorney, and State. Creates GS 114-9.4 (Procurement), providing that the AG may not enter into a contingency fee contract with a private attorney unless the AG makes a prior written determination that such an arrangement is both cost effective and in the public's best interest. Provides that the written determination must include four factors, including, but not limited to, the geographic areas where the attorney services are to be provided and whether there are sufficient and appropriate legal and financial resources in the AG's office to handle the matter. If such a determination is made, the AG will request proposals from private attorneys to represent the State on a contingency fee basis. Creates GS 114-9.5 (Contingency Fees), establishing the fee schedule caps for the private contract attorneys. In no event will an aggregate contingency fee exceed $50 million, exclusive of reasonable costs and expenses and regardless of the number of lawsuits filed or number of private attorneys retained. Additionally, no contingency fee will be based on penalties or civil fines awarded or any amounts attributable to penalties or civil fines. Creates GS 114-9.6 (Control), establishing that the AG will not enter into a contract for contingency fee attorney services unless certain specified requirements are met throughout the contract period or extensions of the contract period, including, but not limited to, a government attorney retaining complete control over the course and conduct of the case and a government attorney with supervisory authority is personally involved in overseeing the litigation. Creates GS 114-9.7 (Oversight), providing for copies of the contracts and the contingency fees paid to be publicly available on the AG website for the duration of the contract, with the amount of fees paid to be available within 15 days of payment and to remain posted on the website for at least 365 days. Requires private attorneys under contract to retain and maintain detailed current records of the financial transactions of the contract for at least four years after the contract expires. Such records will also be available for inspection and copying in accordance with GS 132-6. Requires that the AG submit a report by February 1 of each year to the President Pro Tempore of the Senate and the Speaker of the House of Representatives, describing the use of contingency fee contracts. Requires the report to include, at a minimum, seven different items of information, including the names of the parties to each legal matter, and the amount of any contingency fee paid. Creates GS 114-9.8 (No expansion of authority), providing that this Article cannot be construed to expand the authority of any state agency or officer or employee of North Carolina to enter into contracts for legal representation where no authority previously existed. Effective October 1, 2013.

    Amends GS 114-2.3 (Use of private counsel limited), providing that Article 2A of this Chapter applies to any contract to retain private counsel authorized by the AG under this section. Effective October 1, 2013.


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