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
