11th Circuit Urged to Reject Challenge to Lawsuit Lending

ATLANTA (CN) — An attorney for a legal financing company asked an 11th Circuit panel Wednesday to throw out a class action claiming agreements it reached with consumers violate Georgia’s Payday Lending Act by assessing high interest rates. 

The six named plaintiffs leading the proposed class all accepted money from Oasis Legal Finance to fund personal-injury lawsuits. Under the financing agreements, which are known as non-recourse agreements, they only have to repay the funds if they win their lawsuit.

(AP Photo/Sid Hastings, File)

The plaintiffs allege the agreements violate the Georgia Payday Lending Act and the Georgia Industrial Loan Act by lending money at unreasonably high interest rates.

Illinois-based Oasis asked a federal judge in the Southern District of Georgia to dismiss the complaint, arguing the plaintiffs breached a forum-selection clause contained in the financing agreements by filing their action in Georgia federal court rather than Illinois state court. The company also claimed they did not abide by a class-action waiver allegedly included in the contracts.

In a November 2017 opinion, U.S. District Judge Dudley H. Bowen ruled that forum-selection clauses in payday loan contracts “contravene an expressly stated public policy against their use” and rejected the forum clause in the Oasis contracts as unenforceable under the Payday Lending Act.

Judge Bowen also refused to strike down the plaintiffs’ class allegations, finding the class-action waivers contained in Oasis’ contracts are unlawful.

“The Georgia Legislature did not expressly create the class action remedy so that predatory lenders could effectively wipe away this consumer protection with a waiver in a single paragraph of a six-page, single-spaced agreement,” the judge wrote.

However, Bowen certified Oasis’ motion to dismiss for interlocutory appeal to the 11th Circuit, noting that the Atlanta-based appeals court has “held that class action waivers in arbitration agreements in the consumer lending context are not unconscionable.”

On Wednesday, an attorney representing Oasis urged a three-judge 11th Circuit panel to reverse the district court’s decision or certify the case to the Georgia Supreme Court for review.

The judges began oral arguments by asking attorney Christine Skoczylas of Barnes & Thornburg to definitively state whether Oasis’ legal financing, non-recourse agreements qualify as payday loans.

“No, it’s not a loan. If the plaintiffs had not succeeded in their personal injury cases they wouldn’t have owed Oasis anything,” Skoczylas told the panel.

“We’re not lenders and these products aren’t loans,” she stated firmly before assuring the panel that it is “perfectly capable” of finding that the district court “misconstrued” the Payday Lending Act.

“But the district court did not recognize an argument by Oasis that it’s not a payday loan. Why should we entertain that argument?” U.S. Circuit Judge Adalberto Jordan asked.

“In this case, the court is bound to apply the Georgia Supreme Court’s findings in Ruth v. Cherokee Funding. As of right now, Ruth v. Cherokee Funding is law and the Georgia Supreme Court says non-recourse agreements are not payday loans,” Skoczylas responded.

In its October 2018 Ruth v. Cherokee decision, the Georgia Supreme Court ruled that Georgia’s Industrial Loan Act and Payday Lending Act do not apply to financing agreements in which a company provides money to a plaintiff in a pending personal-injury lawsuit with the understanding that the person must repay the money with interest only if they win the lawsuit.

“In this case, there’s no dispute that Oasis’ agreement is a non-recourse agreement. Even if the payday lending law did apply, we argue that the forum-selection clause still applies,” Skoczylas continued.

Kurt Kastorf, a Summerville Firm attorney representing the plaintiffs, asked the panel to uphold the district court’s decision.

Kastorf argued that the district court correctly determined that the Payday Lending Act bars Oasis from enforcing the class-action waiver contained in its financing agreements with the plaintiffs.

He told the panel that the Payday Lending Act was “meant to limit clever artifices” like forum-selection clauses and class-action waivers in contracts.

Jordan was joined on the panel by U.S. Circuit Judge Gerald Tjoflat and Senior U.S. District Judge Harvey Schlesinger, sitting by designation from the Middle District of Florida.

The panel did not indicate when it will issue a decision in the case.

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