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Keywords

lawsuittortplaintifflitigation

lawsuittortplaintifflitigationappeal

Related Cases

Oasis Legal Finance Group, LLC v. Coffman, 361 P.3d 400, 2015 CO 63

Facts

The case involved national litigation finance companies that provided funds to tort plaintiffs for personal expenses while their lawsuits were pending. In exchange, plaintiffs agreed to pay back the amount advanced plus additional fees from their future litigation proceeds. The companies argued that these transactions were asset purchases, while the state regulatory body classified them as loans subject to the UCCC. The litigation finance companies had previously ceased operations in Colorado after a regulatory opinion deemed their transactions as loans.

Petitioners are national litigation finance companies. They buy interests in the potential proceeds of personal injury cases by executing agreements with tort plaintiffs to whom the companies provide money while the cases are pending (typically, less than $1,500).

Issue

Whether the litigation financing transactions in this case are subject to the requirements of the Uniform Consumer Credit Code (UCCC).

Whether the court of appeals erred when it held that the litigation financing transactions in this case are subject to the requirements of the Uniform Consumer Credit Code (UCCC).

Rule

The UCCC defines a loan as the creation of debt by the lender's payment of or agreement to pay money to the consumer, and does not require an unconditional obligation to repay for a transaction to be classified as a loan.

The Administrator concludes that a lender who engages in such transactions, variously called 'litigation', 'lawsuit', or 'legal' 'funding', 'financing', or 'advances', with Colorado consumers must comply fully with Colorado's Uniform Consumer Credit Code.

Analysis

The court analyzed the nature of the transactions and determined that they created an obligation to repay, thus constituting debt. The court emphasized that the UCCC's broad definition of 'loan' includes transactions that create contingent debt, and that the repayment obligations established at the outset of the agreements were sufficient to classify them as loans. The court also noted that the agreements did not transfer ownership rights, further supporting the classification as loans rather than sales or assignments.

We conclude that a litigation finance transaction of the type before us creates 'debt' because it creates an obligation to repay.

Conclusion

The Supreme Court affirmed the lower court's ruling, concluding that the agreements created debt and were loans subject to the UCCC, rejecting the companies' argument that they were merely sales or assignments.

We hold that litigation finance companies that agree to advance money to tort plaintiffs in exchange for future litigation proceeds are making 'loans' subject to Colorado's UCCC even if the plaintiffs do not have an obligation to repay any deficiency if the litigation proceeds are ultimately less than the amount due.

Who won?

The State prevailed in the case, as the court affirmed that the funding agreements constituted loans under the UCCC, thereby supporting the regulatory body's classification.

The State filed counterclaims seeking to enjoin Oasis and LawCash from making or collecting on such loans without being properly licensed.

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