Federal judges are rejecting class action lawsuits against a popular lending company that fronts money to people pursuing lawsuits in exchange for a portion of their recovery.
Plaintiffs in a few states have filed suits against Oasis Legal Finance, which is accused of ultimately charging interest rates that exceed state usury laws. In Missouri, Judge Judge Rodney Sippel recently wrote that plaintiffs knew exactly what they were signing up for.
The interest rate of plaintiff Ronald Wright’s loan was clearly printed on the second page of his agreement with Oasis, Sippel ruled.
“Moreover, Wright was represented by counsel when he entered the agreements at issue,” the judge continued. “The same counsel represents Wright in the present case.
“Although Wright may have been faced with a pre-printed contract, his attorney could have advised him on the terms of the contract and whether Wright should seek funds from another source.”
Critics of litigation funding complain about “unconscionable” interest rates. Wright’s agreement stipulated for an annual interest rate of 72%.
But the industry points at the fact that if the client recovers nothing, lenders also recover nothing – making them different than traditional lending institutions and not subject to state usury laws.
In Missouri, Oasis cited the part of the state usury law that limits interest rates to 10% unless the loans are “permitted by other laws of the state.” As a provider of consumer credit loans, Sippel found that to be the case.
That reasoning is similar to what the Georgia Supreme Court ruled years ago in perhaps the biggest win for the industry. That hasn’t stopped a Georgia plaintiff from pursuing a federal lawsuit against Oasis Legal Finance that was first filed in 2017 and recently dismissed.
Judge Dudley Bowen Jr. issued his ruling Jan. 24, rejecting an argument that the contingent nature of the agreements is illusory because there was virtually never a scenario in which Oasis would not be paid.
The plaintiffs even offered testimony from a mathematician who said Oasis’ “risk of losing money on them in the aggregate is infinitesimally small.”
“The problem with Plaintiffs’ aggregation argument is that this court is obligated to evaluate the adequacy of the (Payday Lending Act) claim with respect to each individual plaintiff, that is, on a transaction-by-transaction basis,” Bowen wrote.
“In doing so, the Court cannot conclude, and there are no allegations, that the repayment contingency in an individual agreement is illusory.
“The overall profitability of Oasis’ business notwithstanding, Oasis bore a real risk with regard to each Plaintiff in this case that it would receive nothing if that Plaintiff recovered nothing for the personal injury claim.”
Plaintiffs won’t quit, however, recently appealing Bowen’s ruling to the U.S. Court of Appeals for the 11th Circuit. Elsewhere in the 11th Circuit, a lawsuit against Certified Legal Funding ended in settlement in 2018 after a judge dismissed it with prejudice, ruling the agreements weren’t subject to Florida usury laws.
Not long after the Georgia decision, a federal judge in Kentucky also ruled for Oasis in another class action. This time, the judge decided Jan. 31 that a forum selection clause in the agreement required the plaintiffs to bring their case in Chicago.
From Legal Newsline: Reach editor John O’Brien at john.obrien@therecordinc.com.