Prospect Funding Holdings, LLC v. Saulter
102 N.E.3d 741
Ill. App. Ct.2018Background
- Attorney Keenan Saulter represented Angela Wright-Housen in a wrongful-death suit and arranged a $25,000 nonrecourse loan from Prospect Funding in exchange for a percentage of any recovery plus fees and 4% monthly compounded return.
- Prospect and Wright-Housen executed a purchase agreement governed by Minnesota law with a Minnesota forum-selection clause; the agreement included a certification signed by Saulter about disbursing proceeds through his trust account.
- Wright-Housen signed an irrevocable letter of direction directing Saulter to pay Prospect from settlement proceeds before disbursing to her; Saulter signed an attorney acknowledgement to honor that letter.
- After the case settled, Saulter disbursed proceeds without paying Prospect; Prospect sued Wright-Housen and Saulter in Minnesota. Minnesota dismissed Saulter for lack of personal jurisdiction and entered default judgment against Wright-Housen.
- Prospect then sued Saulter in Illinois for breach of contract, fiduciary duty, professional negligence, promissory estoppel, and conversion. The Illinois trial court dismissed under section 2-619, finding the purchase agreement champertous and unenforceable under Minnesota law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Full faith and credit: Is the Illinois court bound by Minnesota’s default judgment on the purchase agreement? | Prospect: Minnesota default judgment construed the agreement as enforceable; Illinois must give full faith and credit. | Saulter: He was not a party to that judgment; the default judgment did not decide champerty on the merits. | Court: No; full faith and credit does not bind Illinois here because Saulter wasn’t a party and Minnesota did not decide champerty on the merits. |
| Choice of law and champerty: Is the purchase agreement enforceable or void as champertous? | Prospect: Letter of direction should be governed by Illinois law; not champertous. | Saulter: Agreement governed by Minnesota law and is champertous/usurious, thus unenforceable. | Court: Minnesota law applies to the purchase agreement; under Minnesota precedent the agreement is champertous/usurious and unenforceable. |
| Third‑party beneficiary / letter of direction: Can Prospect enforce the letter of direction against Saulter though Saulter wasn’t party to purchase agreement? | Prospect: Saulter is not a party to the purchase agreement so champerty defense cannot be asserted against enforcement. | Saulter: Prospect is a third‑party beneficiary of the letter, but its rights depend on validity of the purchase agreement; defenses to the agreement apply. | Court: Saulter may assert champerty/illegality defenses because Prospect’s third‑party rights are subject to the same defenses; dismissal affirmed. |
| Professional rules: Does violation of Illinois Rules of Professional Conduct give Prospect a private cause of action? | Prospect: Saulter breached Rule 1.15(e) by not holding disputed funds in trust, giving rise to liability. | Saulter: Professional rules do not create private causes of action. | Court: Rules do not create private causes of action; disciplinary remedies lie with the ARDC; opinion referred to ARDC. |
Key Cases Cited
- Lutkauskas v. Ricker, 2015 IL 117090 (Illinois Supreme Court) (standard of review for 2-615/2-619 motions and de novo review)
- First Wisconsin Nat’l Bank v. Kramer, 202 Ill. App. 3d 1043 (Illinois Appellate Court) (full faith and credit principles)
- Ace Metal Fabricating Co. v. Arvid C. Walberg & Co., 135 Ill. App. 3d 452 (Illinois Appellate Court) (interstate enforcement of judgments)
- Maslowski v. Prospect Funding Partners LLC, 890 N.W.2d 756 (Minn. Ct. App.) (Minnesota’s common‑law prohibition on champerty and concerns about third‑party litigation funding)
- Owens v. McDermott, Will & Emery, 316 Ill. App. 3d 340 (Illinois Appellate Court) (professional rules may inform malpractice standard but do not create independent civil causes of action)