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ALFA Applauds Minnesota Supreme Court’s Ruling Affirming Consumer Legal Funding

June 11, 2020

ALFA Applauds Minnesota Supreme Court’s Ruling Affirming Consumer Legal Funding

June 11, 2010 – Last week, the Minnesota Supreme Court affirmed consumer litigation funding in Minnesota, finding that champerty, the English common law doctrine prohibiting disinterested third parties from providing money to plaintiffs in exchange for an interest in their case no longer applies.
“The American Legal Finance Association (ALFA) applauds the Minnesota Supreme Court’s decision to eliminate the application of this outdated doctrine to consumer legal funding. Minnesota is joining the ranks of states that understand the important role of consumer legal funding in helping victims access justice.” said Kelly Gilroy, Executive Director of ALFA.
Despite a lower court decision voiding a funding contract, the Minnesota Supreme Court wrote in their decision “We decline, however, to hold that the contract between Maslowski and Prospect is void as against public policy as we understand it today.” The court’s decision in Pamela Maslowski vs. Prospect Funding Partners LLC et al resolves the question in Minnesota that the doctrine of champerty does not prohibit consumer litigation funding and ensures that victims in Minnesota will continue to safely access this crucial financial resource. The court remanded the case to the district court for final disposition.
Consumer legal funding helps level the playing field for victims pursuing justice through the courts. A pre-settlement advance offers immediate financial relief to victims for use on non-legal expenses — including groceries, medical bills, student loans, and rent. For victims facing powerful defendants with the ability to slow-walk a case, legal funding helps relieve financial pressure and prevent the premature abandonment of the case.
ALFA supports common-sense regulation that provides oversight, accountability, and transparency in the industry and protects access to this critical resource for consumers.

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Legal Bay Provides Update on Catholic Church Bankruptcy Abuse Settlements as Cases Near Payout Phase

By John Freund |

Pre-settlement funding provider Legal Bay has released an update on several major Catholic Church diocese bankruptcy settlements that are approaching the payout phase after years of delays in bankruptcy courts.

As reported by PR Newswire, the firm is tracking six diocesan bankruptcies where survivors of clergy abuse are awaiting resolution. Among the cases closest to distributing funds are the Diocese of Rockville Centre in New York with a $323 million court-approved settlement, the Diocese of Rochester with a $246–$256 million approved settlement, and the Diocese of Syracuse with a $176 million approved settlement.

Three additional cases remain pending court approval: the Diocese of Camden, New Jersey at $180 million, the Archdiocese of New Orleans at $230 million, and the Diocese of Buffalo with a proposed settlement ranging from $150 million to $274 million.

Legal Bay CEO Chris Janish said the company receives daily requests from clients seeking updates and "felt it was important to provide a clear snapshot of which cases are closest to reaching the payout stage." The firm provides settlement funding and lawsuit loans to abuse survivors facing financial hardship during the prolonged litigation process.

The update underscores the continued role of pre-settlement funding in mass tort cases where claimants often wait years for bankruptcy proceedings to conclude before receiving compensation.

Consumer

Legal Bay Highlights Uber’s “Woman Driver Only” Option as Rideshare Sexual Assault Litigation Grows

By John Freund |

Legal Bay LLC, a national provider of pre-settlement funding and lawsuit loans, is highlighting Uber's introduction of a "Woman Driver Only" option as rideshare sexual assault litigation continues to expand across the country.

According to PR Newswire, the policy change comes as more than 3,000 sexual assault lawsuits against Uber move through federal court as part of a multidistrict litigation. A federal jury in Arizona recently awarded $8.5 million to a passenger in what is considered the first major bellwether verdict in the MDL.

Legal analysts estimate that individual settlements in rideshare sexual assault cases may range from approximately $50,000 to over $1 million, depending on severity and evidence. CEO Chris Janish described rideshare litigation as "one of the fastest-growing areas of sexual assault litigation and mass tort law."

Legal Bay provides non-recourse pre-settlement advances to plaintiffs in active lawsuits, meaning repayment is only required if a case results in a successful outcome. The company's announcement underscores the growing intersection of consumer legal funding and mass tort litigation, as plaintiffs navigating lengthy MDL timelines increasingly seek financial support while their cases proceed.

Consumer

New York Consumer Litigation Funding Act Called a First Step in Combatting Predatory Lending

By John Freund |

New York's Consumer Litigation Funding Act, set to take effect June 17, represents a significant regulatory intervention in an industry that has operated largely without oversight — but advocates say it does not go far enough.

As reported by Bloomberg Law, Rachel McCarthy and Tabitha Woodruff of the Milestone Foundation argue that while the new law establishes important baseline protections, it leaves critical gaps that could continue to harm vulnerable plaintiffs. The authors point to annual percentage rates in the consumer legal funding industry ranging from 30 to 124 percent, substantially higher than typical credit card rates. In one illustrative scenario, a family borrowing $10,000 at 50 percent monthly compounded interest could owe approximately $43,475 after three years.

The law caps a litigation funder's recovery at 25 percent of the gross settlement or judgment, requires plain-language contracts, mandates a 10-day rescission period, establishes state registration requirements, and prohibits interference with settlement decisions and misleading advertising.

However, the authors note that the legislation does not cap the interest rates funders can charge, nor does it impose rules or restrictions on the types of fees that may be assessed. They argue that these omissions leave room for the most predatory practices to continue even under the new regulatory framework.

The piece frames the New York law as an important first step while calling for additional reforms targeting interest rate caps and fee structures to fully protect consumers who turn to litigation funding while awaiting resolution of their cases.