More often than not, litigation funders manage to case aside the usury argument with their adept deal making and contract structuring. Their unique deal-making processes allow them to provide funds to law firms without tying themselves down to conventional “loans”. This often means a win-win situation for funders, given that evidence has proven that judges and arbitrators are persuaded by the unique nature of these deals and therefore do not subject them to legal limits on interest rates.
However, a recent legal fiasco in a Colorado conservatorship involving the Denver Probate Court Judge Elizabeth Leith saw the usury argument triumphing in a funding dispute.
In 2020, the court termed a $500,000 litigation finance deal as “illegal”, as it required a repayment ten times the principal. Even after three years, a Hong Kong based litigation finance company has not been able to collect the $8 million it claims it is owed, despite an arbitrator ruling in its favor. This week, the US Court of Appeals for the Eleventh Circuit announced its decision to adhere to the probate court’s rulings.
The court came across this case as a result of the deal between Paul Horn and Hong Kong’s Noble Prestige Ltd in 2011. In lieu of $500,000, Noble Prestige was promised $5 million or 5% of Horn’s awards, whichever was greater. Despite the steep price,
no one batted an eyelid as this type of deal is common in the world of litigation funding. But, matters took a turn when Horn’s estate was put into a conservatorship in Colorado in 2017 due to his mental health condition. With all decisions regarding Horn’s estate in the hands of Judge Leith, Noble Prestige’s arbitration award was held up as she condemned the terms of their deal as usurious.
Resultantly, Judge Leith has now put a hold on the payment of an international arbitration award – something that federal courts tend to avoid. The resultant tussle now involves Noble Prestige attempting to navigate through the intricacies of Judge Leith’s court to secure their award while balancing the legal decisions from Florida federal court litigation. Edward Lenci, a Hinshaw & Culbertson partner who represents Noble Prestige, said he’s confident his client will prevail in confirming and collecting the arbitration award. However, achieving this is bound to be a significant challenge, given that it would involve changing Judge Leith’s perception of the contract – something that they’ve not yet managed to do.
Meanwhile, the Denver Probate Court’s decision marks an extraordinary instance where the usury argument has succeeded in the realm of litigation funding, potentially challenging the status quo and casting a spotlight on global litigation funding deals.
For more details, please refer to the original article: Unlikely Colorado Court Vexes $8 Million Litigation Finance Win.