Oasis Legal Finance Group v. Coffman, Colorado Attorney General
361 P.3d 400
Colo.2015Background
- Oasis and LawCash are national litigation finance companies that advance small sums (typically under $1,500) to personal-injury plaintiffs while cases are pending in exchange for rights to a portion of future settlement or judgment proceeds.
- Agreements were styled as purchases/assignments (not loans), disclaim use of funds for litigation, preserve plaintiff control over prosecution, and sometimes expressly state the transaction is an investment, not a loan.
- Repayment terms call for payoffs that grow with time (multipliers/monthly use fees); plaintiffs owe nothing if the claim yields no proceeds in many contracts (nonrecourse in practice for losses).
- Colorado UCCC Administrator issued an opinion concluding such pre-settlement advances are loans subject to the UCCC; Oasis and LawCash ceased Colorado operations and sued for declaratory relief.
- The trial court and the Colorado Court of Appeals ruled the transactions create "debt" and are loans under the UCCC; the Colorado Supreme Court granted certiorari and affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether litigation-financing advances constitute "loans" under the UCCC | Transactions are sales/assignments or investments, not loans; plaintiffs have no unconditional repayment obligation | Advances create debt because lender pays money to consumer in exchange for an obligation to remit future proceeds; UCCC should apply | The transactions are "loans" under the UCCC |
| Whether an unconditional obligation to repay is required for a transaction to be a UCCC loan | Because plaintiffs are not personally liable for shortfalls or total losses, no debt/loan exists | UCCC does not require unconditional repayment; contingent or nonrecourse repayment obligations can still create debt | Unconditional repayment is not required; contingent/nonrecourse obligations can be "debt" under the UCCC |
| Whether these agreements are properly characterized as sales/assignments rather than loans | Labeling as sale/assignment controls; funds purchased an interest in future proceeds | Contracts leave control of the litigation with plaintiff and in substance function like extensions of credit (finance charge, growing repayment) | Agreements are not true transfers of ownership; they function as loans (finance charge, time-based growth) |
Key Cases Cited
- State ex rel. Salazar v. Cash Now Store, Inc., 31 P.3d 161 (Colo. 2001) (UCCC loan definition held to cover present advances for future tax refunds; repayment need not be unconditional)
- Tulips Invs., LLC v. State ex rel. Suthers, 340 P.3d 1126 (Colo. 2015) (UCCC should be liberally construed to effectuate remedial purposes)
- Allstate Ins. Co. v. Medical Lien Mgmt., 348 P.3d 943 (Colo. 2015) (discussion of assignability of personal-injury claims and proceeds)
- Dikeou v. Dikeou, 928 P.2d 1286 (Colo. 1996) (UCCC designed to protect typically unsophisticated borrowers from sophisticated lenders)
- Wilson v. Frederick R. Ross Inv. Co., 180 P.2d 226 (Colo. 1947) (basic definition of a sale: passing title for a price)