Three Minnesota Supreme Court Justices Invite Minnesota Legislature to Explore Regulating Litigation-Finance Industry in Minnesota

August 29, 2023

On August 23, 2023, the Minnesota Supreme Court in Pamela Maslowski v. Prospect Funding Partners LLC, et al., No. A21-1338, unanimously held that litigation-finance contracts are not subject to Minnesota usury law. But that’s not the end of the story, for three important reasons. First, the Court remanded for the district court to consider whether the contract’s 60% interest rate is unconscionable. Second, a three-justice concurrence road-mapped an analysis that very well could lead the district court to find the rate unconscionable. That appears to have been the concurring justices’ intent.
Third, the concurring justices invited the Minnesota Legislature to explore much needed regulation of the litigation-finance industry’s practices in Minnesota. In explaining why, the justices explained, among other reasons: “amici participating in this case raise legitimate practical concerns about the effect of unchecked litigation financing agreements on plaintiffs and defendants alike, noting that such agreements may interfere with plaintiffs’ ability to control litigation and settle, leading to prolonged litigation in cases that would have settled but for the financing terms.” Those “amici” were a historic partnership (second time ever) between Minnesota Association for Justice (“MAJ”) (a plaintiffs’ bar association) and the Minnesota Defense Lawyers Association (“MDLA”) (a defense-bar association). Arthur Chapman’s appellate-practice-group co-chairs Jeff Markowitz and Steve Warner wrote for MDLA, along with Harrison Berg.
As the concurring justices acknowledged, the Court’s abolition of Minnesota’s prohibition against champertous agreements three years ago (in its priorMaslowski opinion) opened, “as others might put it, . . . Pandora’s Box.” Their concurrence may prove to be the first step in getting Pandora’s champertous mischief back in her box.
The MAJ-MDLA amicus brief is available upon request. Feel free to reach out to Jeff Markowitz, Steve Warner, or Harrison Berg for a copy. The Court’s opinions are available here.