11th Circuit litigation funder immune from prosecution under Georgia’s payday lending law


Litigation finance company is immune to allegations that its business model violates Georgian law by charging interest rates prohibited by state payday loan law, The United States Court of Appeals for the Eleventh Circuit said.

The ruling echoes an order made last year by a federal judge in the Southern District of Georgia who “reluctantly” dismissed a putative class action lawsuit against Oasis Legal Financing filed on behalf of several plaintiffs who had borrowed relatively small sums from $ 3,000 or less and then were hit. with many more claims for reimbursement when their cases were resolved.

Thursday’s unpublished curiam opinion said the Georgia Supreme Court precedent made it clear that such transactions were not governed by usury laws because Oasis was not guaranteed to return on his money unless a borrower takes it away.

The panel consisted of Chief Justice William Pryor and Justices Robert Luck and Ed Carnes.

The plaintiffs had argued that the “extremely high interest rates” charged by Oasis to borrowers essentially guaranteed that they would make a profit, according to the opinion, and that “the eventuality is illusory, therefore the agreements are loans, they are therefore covered by the Georgia PLA. “

But, he said, it “is undisputed that if a particular plaintiff doesn’t win a judgment, get a prize or come to a settlement in their case, the defendants get nothing.”

“[T]bringing the Plaintiffs’ overall view position to its logical conclusion, the only way the defendants could legally enter into this type of agreement is to ensure that they would lose money on the whole, forcing them to shut down their doors. “

“It might appeal to plaintiffs or their lawyers, and it might even be good public policy, but it’s a political decision that will have to be made by the Georgia legislature or the Georgia Supreme Court,” the committee said. ‘call.

The opinion upheld a ruling by Southern District Senior Judge Dudley Bowen, who reached the same conclusion based on a 2018 Georgia Supreme Court ruling in Ruth v. Cherokee Funding LLC, 820 SE2d 704, finding that neither the Payday Loans Act nor the related industrial loan applied to the money advanced by the lenders of the litigation, as their repayment depends on the success of the underlying case .

Bowen’s January 2020 decision made clear his unease with the Supreme Court precedent, writing that the court “may have abdicated [its] responsibility ”to ensure that practices proven to be contrary to public order are not authorized.

The panel refrained from similar criticism, but said the plaintiffs’ claims that the loans violated the PLA and the ILA “are excluded by the decision of the Supreme Court of Georgia” in Ruth.

“These are unquestionably questions of state law, and the law of a state is without a doubt what the state Supreme Court says it is,” the opinion said.

“We are required to follow the decision by Ruth that this type of agreement in which the repayment obligation is limited and conditional is not a loan for the purposes of the PLA or the ILA… The district court did not err in rendering judgment on pleadings in favor of the defendants on these claims. “

The plaintiffs were represented by the principal of Kastorf Law, Kurt Kastorf and the lawyers of Savannah, Robert “Bart” Turner of Savage, Turner, Durham, Pinckney & Savage and Jeremy McKenzie and C. Dorian Britt of Karsman, McKenzie & Hart.

McKenzie said they are still weighing their options.

“We continue to believe that Justice Bowen was right when he said that it seemed the Supreme Court had abdicated its responsibility on this issue. That’s why we appealed, ”he said.

Oasis advice included Abby Vineyard Barnes & Thornburg in Atlanta, and Christine Skoczylas and William McErlean of the firm’s Chicago office. They did not respond to a request for comment.

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