United States District Court, D. Minnesota
Brianca Fountain, Willie Loyd, and Todd Gardner, on behalf of themselves and all others similarly situated, Plaintiffs,
Oasis Legal Finance, LLC, Defendant
[Copyrighted Material Omitted]
For Brianca Fountain, on behalf of herself and all others similarly situated, Willie Loyd, on behalf of himself and all others similarly situated, Todd Gardner, on behalf of himself and all others similarly situated, Plaintiffs: David M Langevin, LEAD ATTORNEY, McSweeney / Langevin, Minneapolis, MN; Rhett A McSweeney, LEAD ATTORNEY, McSweeney / Langevin LLC, Minneapolis, MN; Shawn M Raiter, T Joseph Snodgrass, LEAD ATTORNEYS, Larson King, LLP, St Paul, MN.
For Oasis Legal Finance, LLC, Defendant: Erin E Westbrook, LEAD ATTORNEY, Barnes & Thornburg, LLP, Minneapolis, MN; William McErlean, LEAD ATTORNEY, PRO HAC VICE, Felicia J Boyd, Laura N Maupin, Barnes & Thornburg LLP, Chicago, IL.
MEMORANDUM AND ORDER
Paul A. Magnuson, United States District Court Judge.
This matter is before the Court on Oasis's Motion to Dismiss. For the reasons that follow, the Court grants the Motion.
The factual allegations at the core of this case raise a legal doctrine with ancient and medieval roots: champerty. Champerty, and its companion doctrine of maintenance, describe an agreement between a nonparty to a lawsuit and a litigant, under which the nonparty finances the litigant's prosecution of the lawsuit in exchange for a portion of the lawsuit's proceeds if the litigant is successful. Johnson v. Wright, 682 N.W.2d 671, 675 (Minn.App. 2004). Because champertous contracts encourage vexatious and speculative litigation and discourage the settlement of pending litigation, they have been void as against public policy in Minnesota for more than a century and are therefore unenforceable. Id.; Huber v. Johnson, 68 Minn. 74, 70 N.W. 806, 807-08 (Minn. 1897).
According to Plaintiffs, Oasis Legal Finance, LLC is an Illinois company that buys legal-funding interests in personal-injury lawsuits through non-recourse " purchase agreements" with Minnesota consumers who have suffered injuries and have brought suit in state or federal court. (Am. Compl. (Docket No. 15) ¶ 28.) If the consumer succeeds in prosecuting the lawsuit (by either prevailing or settling), he or she pays Oasis the purchase price, which is based on the lawsuit's estimated value, plus a substantial premium and servicing fees. (Id. ¶ ¶ 29, 32-33.) But if the consumer does not succeed, he or she pays Oasis nothing. (Id. ¶ ¶ 30-31.) Oasis advertises the purchase agreements throughout Minnesota. (Id. ¶ 33.)
Oasis entered into purchase agreements with Brianca Fountain and Willie Loyd. Under the terms of the agreement with Fountain, the purchase price for her lawsuit was $620. (Id. ¶ 38.) The applicable premium then depends on the length of time Fountain continues to litigate: if she settles her lawsuit within days of signing the agreement, she would have to pay Oasis $930 (a 50% increase from the purchase price); if she settles her lawsuit in one year, Oasis would claim a total $1,395 (a 225% increase); and if she settles her lawsuit in two years, she would have to pay Oasis $2,015 (a 325% increase). (Id. ¶ ¶ 39-41.) The agreement also tacks on fees, including a case-servicing fee of $35 every six months. (Id. ¶ 42.) Fountain has not yet settled or otherwise resolved her lawsuit. (Id. ¶ 44.) The terms of the two agreements with Loyd, one having a purchase price of $3,184 and the other of $594, are similar. (Id. ¶ ¶ 45-56.) Loyd settled his lawsuit and paid Oasis $6,393.70 (a 60% increase) as a result. (Id. ¶ ¶ 57-58.)
In addition to those substantive terms, the purchase agreements contain two provisions relevant here. The agreements include a forum-selection clause that requires any lawsuit to be brought in state court in Cook County, Illinois:
The Parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the Circuit Court of Cook County, Illinois for any disputes, claims or other proceedings arising out of or relating to this Purchase Agreement, or the relationships that result from this Purchase Agreement, and agree not to commence any such lawsuit, dispute, claim or other proceeding except in the Circuit Court of Cook County, Illinois. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any lawsuit, dispute, claim or other proceeding arising out of or relating to this Purchase Agreement, or the relationships that result from this Purchase
Agreement, in the Circuit Court of Cook County, Illinois, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in the Circuit Court of Cook County, Illinois that any such lawsuit, dispute, claim or other proceeding brought in the Circuit Court of Cook County, Illinois has been brought in an inconvenient forum.
Lawler Decl. (Docket No. 21) Exs. 1-2, ¶ 8.6.) And the agreements have a choice-of-law provision that selects Minnesota law. (Am. Compl. ¶ 43.)
Along with the purchase agreements, Oasis has the consumer's initial and substitute lawyers sign an " attorney acknowledgment" attached to an " irrevocable letter of direction." (Id. ¶ 113.) The attorney acknowledgment purportedly limits and influences the lawyers' representation and directs how to handle requests for payment of their clients' money from Oasis. (Id.) Todd Gardner is one such lawyer, and he represents Fountain in her lawsuit. (Id. ¶ 16.)
Fountain and Loyd initially brought a putative class action in Minnesota state court, alleging that the purchase agreements constitute champerty. (Compl. (Docket No. 1, Ex. 1).) The proposed class encompasses Minnesota consumers who have entered into purchase agreements with Oasis. (Id. ¶ 72.) Fountain and Loyd asserted claims for a declaratory judgment that the agreements violate Minnesota public policy, are void, and cannot be enforced; unjust enrichment and constructive trust; violation of Minnesota's usury laws; illegal commitments for gambling; and violation of Minnesota's Deceptive Trade Practices Act. (Id. ¶ ¶ 85-136.) They sought repayment of all principal, ...