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The Alliance for Responsible Consumer Legal Funding (ARC) Statement Regarding the Minnesota Supreme Court Decision Maslowski v. Prospect Funding Partners, LLC, et al. v. James Schwebel, Esq., et al.

August 25, 2023

The Alliance for Responsible Consumer Legal Funding (ARC) Statement Regarding the Minnesota Supreme Court Decision Maslowski v. Prospect Funding Partners, LLC, et al. v. James Schwebel, Esq., et al.

A21-1338        Pamela Maslowski, Respondent, vs. Prospect Funding Partners LLC, et al., Appellants, vs. James Schwebel, Esq, et al., Respondents. Court of Appeals: 1.         A repurchase rate in a litigation financing agreement is not subject to Minnesota’s usury law, Minn. Stat. § 334.01 (2022), when repayment of the purchase price is contingent upon a recovery in the underlying litigation. 2.         Remand to the district court is appropriate to address plaintiff’s challenge to the repurchase rate under the common-law doctrine of unconscionability. 3.         The repurchase rate specified in the litigation financing agreement began to accrue after the agreement was signed, not after our abolition of the former common-law prohibition on champerty. Reversed and remanded. Justice Anne. K. McKeig. Concurring, Justice Gordon L. Moore, III, Justice Natalie E. Hudson, and Justice Margaret H. Chutich.

“We are very pleased that the Minnesota Supreme Court took its time in rendering a thoughtful decision in this matter and, once again, held that the consumer legal funding contract at issue was enforceable. The decision is consistent with what courts and legislatures have said across the country, that this product is not a loan and should not be treated as such,” stated Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding.

“Following the Court’s logic in its June 2020 opinion that the transaction did not violate the common law prohibition on champerty, the Court today correctly recognized that, “A repurchase rate in a litigation financing agreement is not subject to Minnesota’s usury law” This well-reasoned decision joins others across the country in the growing consensus that consumer legal funding transactions are not loans and should not be treated like loans.”

About ARC 

The Alliance for Responsible Consumer Legal Funding (ARC) is a coalition established to preserve legal funding as a choice for the many Americans who have suffered an unexpected economic loss due to an accident and have a pending legal claim. Legal funding can help families pay for immediate personal needs such as rent, mortgages, car repairs, utilities and groceries while they wait for their claims to settle fairly. ARC trade association promotes practices and regulations that lead to informed decisions between individuals and their attorneys, so families have more options—not fewer.

Eric Schuller

President

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Consumer

Legal Bay Provides 2026 Mass Tort Litigation Update on Talc, Depo-Provera, and Cartiva Claims

By John Freund |

Pre-settlement funding provider Legal Bay LLC has released its 2026 outlook on three major mass tort cases it continues to monitor and fund, covering talc ovarian cancer litigation, Depo-Provera brain tumor claims, and the emerging Cartiva toe implant lawsuits.

As reported by PR Newswire, Legal Bay CEO Chris Janish said talc litigation against Johnson & Johnson has "clearly reached a mature phase," with multiple bankruptcy attempts dismissed and cases returned to traditional proceedings. The company believes 2026 may finally bring a meaningful global resolution, noting that J&J's stock price has nearly doubled from litigation-driven lows.

The Depo-Provera docket, which alleges the injectable contraceptive caused meningioma brain tumors, is moving into a bellwether testing phase. Courts are increasingly scrutinizing litigation funding agreements in these cases for disclosure. Janish acknowledged that "disclosure requirements are becoming a larger part of complex litigation."

The third area of focus — Cartiva synthetic cartilage toe implants — represents an early-stage medical device docket involving reported implant failures and revision surgeries. Legal Bay noted growing plaintiff interest in this emerging litigation.

The company emphasized that its non-recourse funding agreements do not interfere with attorney-client relationships or settlement authority, and that clients owe nothing if they do not secure a recovery.

Consumer

New York Law Journal Breaks Down the Consumer Litigation Funding Act Ahead of June Effective Date

By John Freund |

New York's Consumer Litigation Funding Act is set to reshape how pre-settlement funding operates in the state when it takes effect on June 17, 2026. A new analysis examines the law's key provisions and their implications for funders, plaintiffs, and the broader litigation finance market.

As reported by the New York Law Journal, the law — signed by Governor Kathy Hochul in December 2025 — introduces sweeping requirements for consumer litigation funding companies doing business in New York. Among the most significant provisions is a cap limiting a funder's total recovery to 25% of the gross recovery of the litigation, a measure designed to curb excessive costs to plaintiffs and reduce friction in settlement negotiations.

The act also requires all consumer litigation funding companies to register with the state, undergo character and fitness evaluations, and post a bond, creating a public registry of authorized funders. Funding agreements must be written in plain language and include detailed payment schedules listing the funded amount and charges due at 180-day intervals.

Plaintiffs will gain a 10-day rescission period to cancel agreements, and funders are expressly prohibited from influencing settlement decisions, legal strategy, or the timing of case disposition. The law also bars funders from referring clients to specific attorneys or medical providers and restricts misleading advertising to prospective plaintiffs.

The legislation does not apply to agreements executed before the June 17 effective date. New York is the first major state to enact such a comprehensive regulatory framework for consumer litigation funding, and its approach is being closely watched as other states consider similar measures.

Consumer

Arizona Personal Injury Firm Separates Back Office for $125 Million Outside Investment

By John Freund |

Rafi Law Group, an Arizona-based personal injury firm, is carving out its back-office operations into a management service organization to accept $125 million from an undisclosed outside investor.

As reported by Bloomberg Law, the firm founded by Brandon Rafi in 2015 has represented approximately 100,000 clients in car and truck accident cases. The deal involves separating the firm's non-legal business functions into a standalone entity that will receive a minority stake from what is described as "a US-based investment manager that has experience with legal investment."

The move follows a growing trend of law firms exploring alternative business structures to attract outside capital. The article references similar transactions involving firms like Rimon PC, which sold its back-office operations to AlpineX (now Briefly) in 2019, and McDermott Will & Emery's preliminary discussions about outside investment. Major litigation funders including Certum Group and Fortress Investment Group have been active participants in this evolving space.

Rafi envisions the MSO eventually servicing up to a thousand law firms, using the capital infusion to fund national expansion, invest in technology, and build partnerships with other personal injury practices. The deal underscores how management service organizations are becoming an increasingly popular vehicle for outside investors seeking exposure to the legal industry without running afoul of bar rules that restrict non-lawyer ownership of law firms.