S4262

An Act concerning certain funds held in escrow and supplementing Title 52 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Notwithstanding the provisions of section 1 of P.L.1956, c.174 (C.52:18-16.1) or any rule, regulation, or order to the contrary, when the Attorney General, by and through the Office of the Attorney General or other counsel retained by the Attorney General, represents the State, any political subdivision of the State, or any agency thereof, in any litigation which results in the receipt of money damages, civil fines, monetary restitution, settlement funds, or other proceeds relating to the litigation, the Attorney General, in consultation with the State Treasurer, shall provide for the deposit of at least 50 percent of such funds in a financial institution that meets the requirements of subsections a. through e. of this section. The financial institution shall:

a. Maintain at least 15 percent of its total deposits in the State, as set forth in the most recent Deposit Market Share Report published on the website of the Federal Deposit Insurance Corporation;

b. Be licensed or otherwise authorized to do business in this State by the Department of Banking and Insurance (the department) and listed by the department as an approved financial institution;

c. Provide escrow, trust, or custody services in the usual course of business and have appropriate expertise, as determined by the department, to open and operate an account holding proceeds of litigation as described in this act;

d. Not accept for deposit any proceeds of litigation as described in this act that constitutes more than 10 percent of the financial institution’s total deposits; and

e. Maintain total deposits of at least $1 billion.

2. In multi-jurisdictional, class action, or mass tort litigation involving the Attorney General, the provisions of this act shall apply only to such proceeds recoverable by the Attorney General, without prejudice to the rights of any other party.

3. The Department of Banking and Insurance shall maintain a directory of New Jersey financial institutions approved by the department for the purposes of this act. Any financial institution approved by the Supreme Court of New Jersey to serve as a repository for an attorney trust account shall be presumptively approved by the department for the purposes of this act.

4. This act shall take effect immediately.

STATEMENT

This bill requires that funds received by the State or other government entity from lawsuits in which the Attorney General participated would be required to be held in escrow in certain financial institutions.

The bill applies to money damages, civil fines, monetary restitution, settlement funds, or other proceeds relating to the litigation. The Department of Banking and Insurance (the department) would maintain a directory of financial institutions in New Jersey approved by the department for this purpose.

Under the bill, the Attorney General, in consultation with the State Treasurer, would provide that at least 50 percent of such funds be deposited in a financial institution that meets certain requirements. The financial institution is required to:

a. Maintain at least 15 percent of its total deposits in the State as set forth in the most recent Deposit Market Share Report published on the website of the Federal Deposit Insurance Corporation;

b. Be licensed or otherwise authorized to do business in this State by the department and listed by the department as an approved financial institution;

d. Not accept for deposit any proceeds of such litigation that constitute more than 10 percent of the financial institution’s total deposits; and

e. Maintain total deposits of at least $1 billion.

Under the bill, any financial institution approved by the Supreme Court of New Jersey to hold attorney trust accounts would be presumptively approved by the department to also hold the funds regulated under the bill. Currently, under the Rules of Court, every attorney who practices in the State must keep an attorney trust account in a financial institution in the State. The sponsor wishes to note that although the Rules of Court require attorney trust accounts to be held in New Jersey banks, the State itself is not required to comply with this rule. In the interests of comity with the Rules of Court, the Legislature is imposing a similar requirement for litigation where the State is a party.