Kentucky District Court Rules Litigation Money Advancement Agreements Violate Kentucky Public Policy

On March 30, 2017, a case from the Western District of Kentucky concluded Kentucky’s highest court would likely hold agreements that assign settlement proceeds from lawsuits are in violation of “Kentucky public policy and the statute proscribing champerty[.]” Boling v. Prospect Funding Holdings, LLC, 2017 U.S. Dist. LEXIS 48098, at *12 (W.D. Ky. March 30, 2017).

Christopher Boling, the Plaintiff in the case who suffered burn injuries from a gas can, sued a manufacturer. Mr. Boling then entered into various agreements with two companies (Prospect Funding Holdings, LLC (“Prospect”) and Cambridge Management Group, LLC) in which, in exchange for the borrowed money, he promised payment to the companies based on a “prospective recovery” from his lawsuit against the manufacturer. Boling later filed suit against Prospect, asking the Court to declare that he was not required by law to repay the monies he borrowed. As noted above, Judge Stivers held the Agreements were void. Judge Stivers also opined the interest charged by Prospect on the money advanced to Mr. Boling violates KRS 360.010(1), Kentucky’s usury law. Mr. Boling was not required to make payment under the Agreements.

You can read Judge Stivers’ opinion addressing the above information as well as other issues here.