Update (September 29, 2014): Plaintiffs in the putative class action described below signed a contract promising to bring any lawsuit under the contract in Illinois state court (Cook County). Then they filed their lawsuit against Oasis Legal Finance in Minnesota. Can plaintiffs get away with that? I expect they can’t but we’ll see. (Plaintiffs’ argument is that the contracts are “void ab initio,” (Complaint, Para. 70), and therefore Minnesota courts should set aside the contract in its entirety, including its forum selection clause.)
I recommend you read the linked Oasis Legal Finance “purchase agreement,” which OLF included in its papers in support of its motion to dismiss. I also think you might enjoy OLF’s “letter of direction” between the “Legal Claim Seller” and her lawyer, also linked.
“I will pay you $620 today. You pay me nothing if you lose your lawsuit. You pay me a maximum of $2,260″ if you recover money in excess of that amount ($2,260) in more than 2 years from now….” That appears to be the deal, roughly, in a nutshell. Does this violate Minnesota law? Why?
(Incidentally, I theorized in the original post that maybe contingent fee lawyers would view litigation financiers as competitors. On further thought, I am now thinking they might be collaborators and facilitators, not competitors, to personal injury lawyers. If this is the case, is McSweeney Langevin biting the hand that feeds? Or helping out an Oasis competitor?)
Original Post (September 19, 2014): Imagine a business model where someone bets with you on whether or not you will be physically injured over a certain period of time and, if you are seriously injured during that time, then you “win” the bet and the other bettor has to pay you up to a certain limit. If you are not injured during that time period, then the counter-party “wins” and you do not get your money back.
This, of course, is the essence of insurance. We do not think of this as gambling. We do not think of this as immoral. We do not think of this as “mere speculation in the troubles of others.”
Imagine that you have bought insurance, you are injured, your insurer foots the bill per the insurance agreement, and then the insurer sues a third-party tortfeasor to recover damages the insurer paid out for your injury. We generally do not think of this as gambling and we do not generally think of this as immoral. It’s very common. It is not a prohibited “agreement between a stranger to a lawsuit and a litigant by which the stranger pursues the litigant’s claims as consideration for receiving part of any judgment proceeds.”
Now, how about this: you are injured and you carry no insurance. (Maybe you are injured in such a way for which there is no insurance available.) And a “legal finance” company proposes to finance a lawsuit, agrees to give you money up front in exchange for a share of any recovery in a lawsuit against a third-party tortfeasor. You might call this “after-the-accident insurance” in a way, right? Or you might call it “litigation insurance.” Does this scenario somehow convert the circumstances to gambling? To something immoral? To something illegal? To something that courts and legislators should make illegal as socially harmful?
The irony about Johnson v. Wright, a 2004 Minnesota Court of Appeals case that addresses these issues, is that the underlying case was against Mystic Lake Casino. In that case, the Court of Appeals struck down a “litigation finance” agreement as “champertous.” Holding: Gambling’s ok, except when it is not ok.
According to the “Fountain Complaint,” here is how the OLF system works: OLF pays injured people an estimated portion of the value of injured persons’ lawsuits. If the injured persons make a recovery in their lawsuits, OLF gets a cut of the recovery. If the injured person gets no recovery, OLF gets nothing.
Does that sound familiar? Have you ever wondered how personal injury lawyers, like McSweeney Langevin, come to think of it, structure their agreements with their clients?
Of course, personal injury lawyers “speculate in the troubles of others.” Personal injury lawyers “enter into agreements whereby they pursue the litigants’ claims as consideration for receiving part of any judgment proceeds.”
Could it be that the problem with OLF “profiting from the injuries of strangers” is not that doing so is inherently immoral? Could it legal to do so? Maybe the problem is that OLF and similar businesses mean competition for lawyers? Come to think of it, what could be more immoral or illegal than that?