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Legal Asset Funding, LLC v. Cousins

Superior Court of New Jersey, Appellate Division

May 23, 2013

LEGAL ASSET FUNDING, LLC, Plaintiff-Appellant,
v.
NORMAN L. COUSINS, KEVIN VENESKI, McMAHON, MARTINE & GALLAGHER, ESQS., MMIA INSURANCE COMPANY, LAWRENCE SOKOLSKY, M.D., and CAMBRIDGE MANAGEMENT GROUP, LLC, [1] Defendants, and PLAINTIFF FUNDING CORPORATION, d/b/a LAW CASH, Defendant-Respondent.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 1, 2012

On appeal from Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. C-0001-04.

Michael R. Perle argued the cause for appellant (Mr. Perle and DeClemente & Associates, attorneys; Mr. Perle, on the brief).

Robert M. Rich argued the cause for respondent.

Before Judges Graves and Espinosa.

PER CURIAM

Plaintiff Legal Asset Funding, LLC (LAF) appeals from an order that granted summary judgment to defendant Plaintiff Funding Corporation, d/b/a Law Cash (Law Cash). We affirm.

Both LAF and Law Cash are litigation-funding companies in the business of lending money to plaintiffs and plaintiffs' attorneys in exchange for assignments of their expected proceeds from lawsuits. This matter arises from loans that each extended to Norman L. Cousins, a disbarred attorney who was admitted to practice in New York and specialized in medical malpractice litigation. In January 2000, Cousins was representing the plaintiff in Veneski v. Queens-Long Island Med. Grp., P.C., et al., (Sup. Ct., N.Y. Cnty., Index No 100011/98) (the Veneski case), a matter for which funding was required.

LAF advanced Cousins a total of $340, 000 pursuant to three separate agreements. In the first agreement, in January 2000, LAF "purchased" a portion of Cousins's expected legal fees from the Veneski case by advancing $125, 000 to Cousins. LAF advanced an additional $125, 000 to Cousins pursuant to a second agreement, with the same terms, in February 2000.

In early 2001, after the first two agreements with LAF, Cousins approached Law Cash for money. At that time, unlike LAF, Law Cash provided litigation funding only to plaintiffs and not to attorneys. Cousins had a relationship with Law Cash based upon his referral of clients to Law Cash to seek funding for their lawsuits.

Harvey Hirschfeld, President of Law Cash, testified at his deposition that Cousins's request "was not like anything [Law Cash] normally would do. He was looking for money for himself. It wasn't for his client." Hirschfeld described Cousins's request and Law Cash's decision to make the loan as follows:

He just came to us. He said, Listen, I need some short-term cash. And at that stage in our career at Law Cash, he was an attorney that we thought could bring us additional other business. And we made him an advance. Basically, an unsecured loan in this case.

Law Cash issued two checks of $25, 000 each to Cousins. The first was dated April 5, 2001. Cousins obtained a verdict of $4, 215, 300 in Veneski's favor, which was overturned on appeal in July 2001. Law Cash's second check to Cousins was dated August 27, 2001.

Hirschfeld characterized the payments to Cousins as personal loans. Hirschfeld certified that Law Cash did not obtain a security interest in any of Cousins's expected proceeds. Rather, Law Cash merely

asked [Cousins] how he was going to pay us back. He mentioned he was working on some cases he thought would settle soon. . . . And he just said, I'll pay you from those.

Cousins provided Law Cash with the names of a few of the cases that he was working on and Law Cash's "attorneys look[ed], generally, to see what they [were, ]" but did not "buy" Cousins's expected proceeds from these cases. According to Hirschfeld, because Law Cash "[was] not purchasing assets[, ]" it did not make any Uniform Commercial Code (U.C.C.) filings, nor did it conduct a lien search. In fact, it was not Law Cash's business practice to conduct lien searches or make U.C.C. filings at that time. Hirschfeld testified that Cousins represented there were no liens, and stated, "We took him at his word, basically, on the fact that we knew him, and we were making this unsecured loan to him."

In the final agreement between LAF and Cousins dated November 10, 2001 (the Agreement), Cousins represented that he had an interest in the overturned Veneski verdict that would have resulted in a legal fee of "at least $1, 200, 000.00 plus $95, 000.00 in expenses[.]" Cousins further represented that "a Judgment in the sum of at least $3, 200, 000 is expected to be obtained" in the retrial. The Agreement stated that Cousins had provided LAF with "additional information regarding the anticipated Judgment amount and [his] interest therein[, ]" as well as information regarding anticipated judgments and Cousins's interest in a number of other identified contingency fee matters. At this time, Cousins sought additional funding to assist him to "effectively prosecute the retrial" of the Veneski case.

In the Agreement, Cousins stated:

I wish to pledge these matters in order to receive an additional sum of money, to wit: $100, 000.00 to be paid in $10, 000.00 installments every two weeks from the date of the complete execution of this contract so as to effectively prosecute the retrial of [the Veneski case]. . . . I acknowledge that you have advanced on the Veneski case the sum of $270, 000.00 towards fees, expenses and costs and I reaffirm all of my commitments in the previously executed contacts [sic] and addendums in the Veneski litigation as to payment of the sums to you for your investment subject to the provisions of § 2 below. I hereby sell and assign to you my right, title and interest to the properties above mentioned, so as to receive additional funding to allow my clients (Kevin and Juanita Veneski) and I to go forward with the aforementioned Veneski litigation.

Cousins represented that he was entitled to recover legal fees on the identified cases upon ...


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