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In Dispute Over Litigation Funding Deal, Arizona Appellate Court Rejects Litigation Funder’s Latest Attempt to Vacate Arbitration Award

The Arizona Court of Appeals this week rejected a litigation funding company’s latest attempt, in litigation, to vacate a partial arbitration award in a dispute between the company and a claimant.

In American Legal Funding v. Lopez, No. 1 CA-CV 15-0389, 2016 Ariz. App. Unpub. LEXIS 1174 (Ariz. Ct. App. Sept. 20, 2016), the Arizona appellate court affirmed the decision of an Arizona trial court to dismiss a petition by litigation funder American Legal Funding, LLC (“ALF”), which sought to vacate a partial arbitration award in favor of Eddie Lopez.

In 2007, Lopez and ALF entered into an agreement whereby ALF agreed to advance $35,000 to Lopez in “pre-settlement funding” in exchange for any recovery (up to a specified amount) that Lopez received in a personal injury case that he had filed against a third party.

The lien agreement contained an arbitration provision.  After Lopez settled his case, a dispute arose between Lopez and ALF, and ALF submitted a demand for arbitration to collect under the agreement.  Lopez sued ALF in Illinois, challenging the enforceability of the agreement, and he also moved to stay the arbitration proceeding.  After his motion to stay was denied, Lopez then “filed a counterclaim in the arbitration and alleged that the underlying lien agreement was unenforceable” and “also sought to pursue his claims on behalf of a class, even though the arbitration provision was silent on whether any arbitration could proceed as a class action.”  The arbitrator entered a partial clause construction award “allowing the arbitration to proceed on behalf of a class,” and ALF then filed a petition in Arizona seeking to vacate the award.  After further litigation in multiple proceedings, an Arizona court found that ALF failed to personally serve Lopez with the petition to vacate within the Federal Arbitration Act’s service deadline, and that ALF had not disputed that the deadline applies to the case and rejected the argument that Lopez had waived such FAA service requirements.

The appeals court affirmed, concluding, among other things, that the trial court did not abuse its discretion in refusing to consider ALF’s waiver argument because “simply put, ALF waived too long to raise it.”

The court of appeals also awarded Lopez attorneys’ fees and costs on appeal, contingent with his compliance with Arizona rules of civil appellate procedure for such awards.

The full opinion is available here.