Today, a Colorado appeals court heard arguments in an important case testing whether Colorado law places any limits on out-of-control lawsuit lenders. Colorado courts are among the first in the country to decide whether consumer lending laws apply equally to lawsuit lenders, or if – as the lawsuit loan sharks have argued – they have unfettered freedom to exploit borrowers with interest rates as high as 100% or more. The case is Oasis Legal Finance Group, et al. v. Suthers.
As the U.S. Chamber’s Institute for Legal Reform has highlighted, the controversial practice of “lawsuit lending,” where a lender offers money to an individual plaintiff cover living expenses at sky-high interest rates to be repaid from the winnings, has met increasing resistance at the state level. The meteoric rise in the practice is raising new and serious concerns about lending abuse.
Take for instance Brooklyn resident Elwin Frances who borrowed $27,000 from lenders Case Cash and Law Bucks in connection with a trip-and-fall case. After settling his case for $150,000, the lenders took almost two thirds, and after lawyers’ fees he was left with a paltry $111. Frances sued his lawyers for failing to warn him that the loan would consume most of his award, and lost.
Or ask Oklahoma native Jeff Hall, who suffered extensive injuries after falling off a truck onto a fork lift and filing a workers’ comp claim. After taking out two loans from Oasis Legal Finance for a combined $6,600 during the litigation, he ultimately had to repay roughly $13,500, which he did in spite of declaring bankruptcy and losing his home.
Today’s court argument arises out of a preemptive lawsuit brought by Oasis Legal and LawCash, two of the country’s biggest lawsuit lenders, to attempt to block the Colorado Attorney General from regulating the company under the state’s consumer lending laws, known as the “Uniform Consumer Credit Code” (UCCC). A state judge ruled against the lawsuit lenders, who appealed. The U.S. Chamber’s litigation arm, the National Chamber Litigation Center, filed a “friend-of-the-court” brief in support of Colorado’s attorney general.
The Litigation Center’s brief dissects the lawsuit lenders’ bogus claim that they’re not really “loaning” money to would-be plaintiffs, and therefore the companies should get a pass on regulation under consumer lending laws. Despite the lawsuit lenders’ creative labeling for their transactions – like “nonrecourse purchase of litigation proceeds” – at the end of the day, they are loaning money at exorbitant interest rates. Lawsuit lenders’ practice of disguising exorbitant interest rates is precisely the type of conduct the UCCC is designed to prevent. As the New York Times recently explained, that’s why consumer rights groups also oppose lawsuit lending.
Regulating lawsuit lenders under Colorado consumer lending laws is not only the right legal conclusion; it is also the right policy. Regulation of this industry under the UCCC will help to curb the myriad ills caused by lawsuit lending, and will bring the practice into conformity with other regulated consumer lending activity.
Cross-posted from FacesofLawsuitAbuse.org
Question: How much does it cost a grocery store to install 69 cameras and six DVRs?
Answer: About $250,000.
Question: How much does it cost to maintain the store’s recording system?
Answer: About $100,000.
Rafael Cuellar, the owner of a grocery store in Passaic, NJ, estimates he has spent around $350,000 to install and maintain his store’s camera and recording devices. Doesn’t that seem like an awful lot of money to spend to repel or catch shop lifters?
Yes, it is. Which is why preventing shop lifting wasn’t the reason Mr. Cuellar invested in his security network in the first place. The cameras and recording devices are in place to monitor every inch of his store to protect Mr. Cuellar from frivolous lawsuits.
“Yesterday alone we had a consumer who came back in [the store] and claimed she fell,” Mr. Cuellar recounts in the video, Supermarket Swindle. “Once the loss-prevention director said, ‘Let’s pull it up on the camera,’ she goes, ‘No, I just twisted my ankle.’ And the story changed all of the sudden.”
Indeed, Mr. Cuellar said that one-third to half of all the lawsuits filed against his company every year are fictitious or overblown. Fictitious or not, however, all those lawsuits raise Mr. Cuellar’s insurance premiums, which are his second largest expense behind payroll.
In other words, spending nearly half a million dollars on cameras and DVRs is a drop in the bucket compared to what Mr. Cuellar would spend on a reward settlement, which could be in the millions.
Just one such reward settlement has the power to wipe out Mr. Cuellar’s small business.
But it’s not just store owners who suffer the expenses of frivolous lawsuits. Consumers pay as well. The Food Institute estimates that feeding a family of four will cost $4.16 per week more this year than last. That’s an extra $200 a family must spend this year.
Rising food prices are just one consequence of frivolous lawsuits. Mr. Cuellar notes that he could have invested a lot of the money he spent on cameras to hire more employees or cut prices. But the danger is too great.
“Being an entrepreneur, you always want to continue to grow,” Mr. Cuellar says. “But I do think twice about it, because of the things I can’t control.”
Unless we enact measures to combat lawsuit abuse, small business owners like Mr. Cuellar will continue to funnel their hard-earned money into protecting what they have, not building what they want.
You can learn more about Rafael's story here.
Business Coalition Letter to the Japanese Consumer Affairs Agency Regarding Expansion of Class Actions
Urgent Proposition on the Japanese Class Action System (Shudan Sosho Seido)
Keidanren, Japan Chamber of Commerce and Industry (JCCI), Keizai Doyukai, American Chamber of Commerce in Japan (ACCJ), U.S. Chamber Institute for Legal Reform (ILR), European Business Council in Japan (EBC), and BUSINESSEUROPE are comprised of member companies and management executives committed to producing quality products and services for consumers in Japan.
We support legal systems that offer remedies for consumer damages, including appropriate activities by consumer consultation centers or consumer organizations, Alternative Dispute Resolution (ADR) and legitimate claims filed in civil litigation.
Currently, the Consumer Affairs Agency is preparing to propose for adoption the "Draft Bill for Establishing a Special Exception to the Civil Litigation Process for Recovery of Monetary Consumer Damages as a Class" (the "Proposal") at the current ordinary Diet session.
However, once introduced, the proposal could have considerable negative impacts on Prime Minster Abe's economic revitalization program which was beginning to show signs of acceleration. In addition, there are problems in the proposal, including the possibility that litigation for small amounts of damages will be filed by plaintiff organizations without authorization by numerous consumers. Furthermore, the proposal should not be applied retroactively, since it is possible that such impacts will be exacerbated if the proposal applies to any damages which arose under contracts executed before the proposal's enactment. Therefore, we believe that it would be unreasonable to hastily adopt legislation based on the proposal without providing adequate opportunity for review and an economic impact study.
To realize effective remedies for consumers, and to establish a system consistent with the government's Economic Revitalization Program, which includes job creation, wage increases, innovation and economic growth, more careful consideration is necessary.
We respectfully urge the government to avoid the negative impacts resulting from a hasty enactment, and to support businesses and consumers in developing a win-win relationship by reconsidering its policy of submitting the bill in the ordinary Diet session.
- Japan Chamber of Commerce and Industry
- Keizai Doyukai
- The American Chamber of Commerce in Japan
- U.S. Chamber Institute for Legal Reform
- European Business Council in Japan
Unanimous Ruling Preserves Key Provision of Class Action Fairness Act
WASHINGTON, D.C. – The U.S. Chamber of Commerce today praised a decision by the U.S. Supreme Court that preserves a key provision of the landmark Class Action Fairness Act (CAFA).
In its ruling today in the case of Standard Fire Insurance Company vs. Knowles (available here), the Court unanimously rejected a scheme by plaintiffs' lawyers to circumvent CAFA's $5 million amount-in-controversy requirement and prevent major class actions from being tried in federal court. The purpose of CAFA was to ensure that major class actions are tried in neutral federal courts rather than certain plaintiff-friendly state courts.
"Since its passage eight years ago, the Class Action Fairness Act has done much to curb class action abuses, such as forum shopping," said Lisa Rickard, President of the U.S. Chamber Institute for Legal Reform. "The Court's unanimous ruling preserves one of the most crucial provisions of the law and ensures that CAFA's reforms live on."
"Today's unanimous ruling is a victory for everyone supporting fairness and justice in our court system," said Lily Claffee, General Counsel of the U.S. Chamber of Commerce. "We are pleased that the Court listened to the views of America's business community and preserved this important protection against class action abuse."
Enacted in 2005, the Class Action Fairness Act aimed to improve the treatment and scrutiny given to large, interstate class actions. It gave litigants new tools to move such cases to federal courts and required greater scrutiny of class certification and settlement terms. Since the law's passage, the number of class actions filed in plaintiff-friendly jurisdictions like Madison County, Illinois has dropped precipitously.
The U.S. Chamber Institute for Legal Reform campaigned strongly for CAFA's passage. In addition, the Chamber's National Chamber Litigation Center filed amicus curiae briefs, both in support of certiorari and on the merits, in the Knowles case (available here and here).
ILR seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the national, state, and local levels.
NCLC is the public policy law firm of the U.S. Chamber of Commerce that advocates fair treatment of business in the courts and before regulatory agencies.
The U.S. Chamber of Commerce is the world's largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.
Today's Wall Street Journal carried this must-read, front page story that highlights the fraud and abuse surrounding asbestos litigation and the bankruptcy trusts.
This watershed article is the first detailed examination of the trusts in a major media outlet.
As the Journal reports:
"With dozens of asbestos-related manufacturers forced into bankruptcy, a burgeoning swath of the legal action has shifted out of the courtroom and into a nebulous world of trusts that evaluate claims and authorize payouts with little outside scrutiny."
The story underscores the urgent need for greater oversight of the trusts.
On Wednesday, the House Judiciary Committee will hold a hearing on the Furthering Asbestos Claim Transparency (FACT) Act, which would require the trusts to file quarterly reports on claims with the bankruptcy courts.
In addition, several states are considering trust transparency measures similar to the one enacted in Ohio last year.
Eighty-nine percent of voters who cast ballots in Tuesday’s election believe there are too many meritless lawsuits, while eight out of ten want the next Congress to continue reforming the legal system, according to a national survey released by the U.S. Chamber Institute for Legal Reform. You can read a summary memo of the survey here.
Creating jobs to grow the economy was top-of-mind for voters. The results of this poll show that voters understand the high costs of lawsuit abuse and support pro-growth legal reforms.
In addition, the newly released survey found:
- 95% of voters say small business views should be taken into account in Washington, while only 43% believe they are currently taken into account;
- Eight out of ten voters said that Congress should continue to reform the lawsuit system;
- By a 10-point margin, voters believe that trial lawyers have excessive influence in Washington;
- By a more than five-to-one ratio, voters said they would be more likely to reelect their Member of Congress in the future if he or she voted for reforms to end lawsuit abuse by trial lawyers.
The poll was conducted by Public Opinion Strategies for ILR and surveyed a total of 1,600 voters on Election Day. The findings reflect the electorate’s overall concerns about the status of the economy.
According to another survey, released in September, seventy percent of the more than eleven hundred company general counsels and senior attorneys who participated said a state’s lawsuit environment is likely to impact important business decisions at their company, including where to locate or expand their businesses. This number is up thirteen percent from the same survey conducted five years ago, before the recession.
The U.S. Chamber Institute for Legal Reform (ILR) announced the launch of a movie trailer in Tampa and Orlando as part of its nationwide Faces of Lawsuit Abuse public awareness campaign, which aims to show how abusive lawsuits affect small businesses and workers in very real ways.
The most recent Lawsuit Climate poll conducted by ILR ranks Florida as one of the worst states in the nation for the fairness of its litigation environment. ILR President Lisa Rickard said, “We are bringing these stories to the public in Florida, which faces high unemployment and a bad litigation climate, as a reminder that lawsuits can hold back the small businesses that we are relying on to create jobs.”