Court: Litigation Funder Cannot Re-Litigate Enforceability of Agreements

Court: Litigation Funder Cannot Re-Litigate Enforceability of Agreements

Because a litigation funding company lost on the issue of enforceability of its agreements in a previous legal action against an individual, the company is precluded from re-litigating the issue in a later lawsuit where the company attempted to enforce the same agreements against the individual’s attorney,

That was the ruling in Prospect Funding Holdings, LLC v. Breen, Civ. No. 2:17-cv-3328-KM-MAH, 2018 U.S. Dist. LEXIS 19373 (D.N.J. Feb. 5, 2018),Plaintiff Prospect Funding Holdings, LLC (“Prospect”).  The “agreements have already been the subject of much litigation, including a Western District of Kentucky case where the court found (1) that Kentucky law applied to the agreements and (2) that the agreements violated Kentucky law and public policy.”

This month the federal court for the District of New Jersey dismissed the latest lawsuit, filed in 2017, on the grounds of issue preclusion.

Said the court:

“Both cases involve the same issue.  In the Kentucky DJ Action, Prospect sought to enforce its agreements with Boling.  Boling v. Prospect Funding Holdings, LLC, 1:14-CV- 00081-GNS-HBB, 2017 U.S. Dist. LEXIS 48098, 2017 WL 1193064, at *1 (W.D. Ky. Mar. 30, 2017).  The Western District of Kentucky found that Kentucky law applied to the agreements, Kentucky law prohibits third-party litigation funding with a profit motive, and the interest terms violated Kentucky’s usury statute.  Id. at *2-*6.  That court held that these agreements are void under Kentucky law.  Id.  In this case, Prospect argues that New Jersey, not Kentucky, law applies to the same agreements . . . , and that the agreements are valid, not void. . . .  Prospect argued in the earlier case that these agreements were enforceable against Boling; it argues in this case that they are enforceable against Boling’s lawyer. . . .  The only significant difference between the cases is the identity of Prospect’s opposing party.  The same issue is at the heart of both cases.

Added the court: In the prior litigation, on the issue of the enforceability of the agreements, “Prospect fully briefed the issue and lost.”

The full opinion is available here.

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