United States District Court, D. New Jersey
PROSPECT FUNDING HOLDINGS, LCC, on assignment of CAMBRIDGE MANAGEMENT GROUP, LLC, Plaintiff,
MICHAEL BREEN, ESQ. and MIKE BREEN ATTORNEY AT LAW, P.S.C., Defendants.
MCNULTY, UNITED STATES DISTRICT JUDGE
Prospect Funding Holdings, LLC ("Prospect"), as
successor in interest, seeks to enforce agreements it
purchased from Cambridge Management Group, LLC
("Cambridge"). Those agreements have already been
the subject of much litigation, including a Western District
of Kentucky case where the court found (1) that Kentucky law
applied to the agreements and (2) that the agreements
violated Kentucky law and public policy. On May 10, 2017,
Prospect initiated this new action in the District of New
Jersey. Now before the court is defendants' motion to
dismiss for lack of personal jurisdiction. (ECF No. 10).
Sua sponte, I requested that the parties submit
supplemental briefing on the applicability of issue
preclusion. For the following reasons, I dismiss this
case on the grounds of issue preclusion.
Before the Purchase Agreements
is a litigation-funding business incorporated in Delaware
with its sole office in New Jersey. (Compl. ¶¶ 9,
17-20). Cambridge signs "purchase agreements" with
plaintiffs involved in pending personal injury or related
litigations. (Compl. ¶ 17). Cambridge then advances
money to plaintiffs. (Compl. ¶ 17). If the plaintiff
recovers, Cambridge receives a portion of the proceeds.
(Compl. ¶¶ 18-20). If the plaintiff does not
recover, the plaintiff generally does not owe Cambridge
money. (Compl. ¶ 19).
has had a longstanding business relationship with defendant
Michael Breen and his law firm, Mike Breen Attorney at Law,
P.S.C. ("the Breen Law Firm"), which is based in
Bowling Green, Kentucky. (Compl. ¶¶ 11, 21-23).
(Herein, except when it is necessary to distinguish between
them explicitly, "Breen" refers to both
defendants.) Breen has referred clients to Cambridge for
potential agreements. (Compl. ¶ 21).
represented Christopher and Holly Boling in a personal injury
case against Blitz USA, Inc. ("the Boling
Litigation"). (Compl. ¶ 24). (Herein,
"Boling" refers to both Christopher and Holly
Boling.) Breen, along with co-counsel Kirk Morgan,
represented Boling. (Compl. ¶ 29).
The Purchase Agreements
October 23, 2009, Breen and Boling signed documents to create
a third-party funding agreement regarding the Boling
litigation. (Compl. ¶¶ 24-30). As to this October
2009 agreement, there are three relevant documents.
first document is the October 2009 Plaintiffs Agreement,
which was signed by Boling. It contains the following
Plaintiff acknowledges and agrees that any and all disputes
that arise concerning the terms, conditions, interpretation
or enforcement of this Agreement shall be determined through
arbitration pursuant to the Rules and methods outlined by the
American Arbitration Association in New Jersey, or in a Court
of competent jurisdiction, at the election of [Cambridge] or
Plaintiff. Plaintiff agrees that the laws of the State of New
Jersey shall control the interpretation of this Agreement.
(Oct. 2009 Plaintiffs Agreement).
second document was the October 2009 Plaintiffs Irrevocable
Grant, also signed by Boling. The following provision
addresses the process for satisfying Cambridge's
4. The Payment amount due [Cambridge] shall be withheld from
any settlements), judgments), verdict(s) or award(s) I
receive, if any, as a result of my injury and claim. The
Payment is to be paid immediately after attorney's fees
and case preparation cost, but prior to final distribution to
me [Boling] of any settlement, judgment or verdict proceeds
in accordance with the Agreements....
6. In the event of a dispute between [Cambridge] and the
undersigned [Boling], I instruct my attorneys to disburse no
proceeds, except for attorney's fees, disbursement and
recognized liens, until the matter is resolved, and that all
proceeds shall remain in my attorney's escrow account.
(Oct. 2009 Plaintiffs Irrevocable Grant); (Compl. ¶ 32).
third document is the October 2009 Attorney Acknowledgment,
which was signed by Michael Breen. It was addressed to
Michael Breen and co-counsel Morgan. (Compl. ¶¶ 31,
36). The document provides, in relevant part:
Attorney represents and warrants the Plaintiffs proceeds will
flow through the Attorney's Trust/Escrow account and be
distributed by the Attorney to Plaintiff only after first
satisfying [Cambridge]'s lien.
(Oct. 2009 Att'y Ack.); (Compl. ¶ 34).
these documents were signed, around October 23, 2009,
Cambridge sent funds to Breen. (Compl. ¶¶ 30, 38).
March 2010, Breen, Boling, and Cambridge entered into a
second agreement with similar documents, instructions, and
provisions. (Compl. ¶¶ 39-43); (ECF No. 10-1 (Exh.
B)). Prospect also entered into two agreements directly with
Boling which are not at issue in this case. See Boling v.
Prospect Funding Holdings, LLC, No.
1:14-CV-00081-GNS-HBB, 2015 WL 5680418, at *1 n.3 (W.D. Ky.
Sept. 25, 2015).
Attempts to Enforce the Purchase Agreements
August 2013, Cambridge assigned its right, title, and
interest in the agreements to Prospect (plaintiff here), a
New York-based litigation-funding group. (ECF No. 10-1 (Exh.
CJ); (Compl. ¶¶ 10, 44). The Boling litigation
resolved in favor of Boling around May 2014. (Compl. ¶
44). Prospect then sought its share of the proceeds from the
litigation, pursuant to the agreements Prospect had bought
from Cambridge. (Compl. ¶¶ 46-47). (For
convenience, I will generally ignore Cambridge and speak of
the party to the agreements as Prospect.)
gave Prospect multiple assurances that the proceeds from the
Boling litigation would be put into the Breen Law Firm's
client trust account and then disbursed to Prospect. (Compl.
¶¶ 46-48). However, Breen did not hold the money in
the trust account and did not disburse money to Prospect.
(Compl. ¶ 49). Rather, the litigation proceeds were sent
to the Attorney's Trust/Escrow Account of Breen's
co-counsel, Morgan. (Compl. ¶ 49). Breen continues to
withhold from Prospect the full amount due. (Compl. ¶
51). Additionally, the amount reserved in the Trust/Escrow
Account of co-counsel Morgan does not suffice to cover the
full amount due under the agreement. (Compl. ¶ 54).
the Boling litigation was resolved, Prospect's interest
in these funding agreements has been the subject of much
litigation in several courts.
on June 19, 2014, Boling filed a lawsuit against Prospect
seeking a declaratory judgment that the loan agreements are
to be interpreted by and deemed unenforceable under Kentucky
law. Boling v. Prospect Funding Holdings, LLC, No.
1:14-CV-00081-GNS-HBB, 2015 WL 5680418, at *1 (W.D. Ky. Sept.
25, 2015) (the "Kentucky DJ Action").
on September 4, 2014, Prospect filed suit against Boling in
the Superior Court of New Jersey seeking to compel
arbitration. See Prospect Funding Holdings, LLC v.
Boling, No. 2:14-cv-6169, 2015 WL 5095155, at *1 (D.N.J.
Aug. 26, 2015). On October 3, 2014, Boling removed that
action to the U.S. District Court for the District of New
Jersey. Id. On May 11, 2015, Judge Steve Mannion of
the District of New Jersey transferred that case to the U.S.
District Court for the Western District of Kentucky based on
the first-to-file rule. Id. at *2. Judge Mannion
denied Prospect's motion for reconsideration of the
transfer order. Id. at *2-3.
the Kentucky DJ Action continued in the Western District of
Kentucky. Boling sought summary judgment regarding the
forum-selection clause and the choice of law.
Boling, 2015 WL 5680418, at *5. The court granted
both motions. Id. at *5-8. First, the court held
that Boling was within his contractual rights to select the
Western District of Kentucky. Id. at *6-7. The
Western District of Kentucky thus retained jurisdiction over
the loan agreements. Id. Second, using the most
"significant relationship test, " the court held
that Kentucky law applied to the enforceability of these
agreements. Id. at *7-8. The court denied
Prospect's motion for reconsideration of those rulings.
Boling v. Prospect Funding Holdings, LLC,
1:14-CV-00081-GNS-HBB, 2016 WL 1611383 (W.D. Ky. Apr. 21,
the Western District of Kentucky held that Kentucky law
applied, Boling and Prospect cross-moved in the Kentucky DJ
Action for summary judgment on Boling's claims.
Boling v. Prospect Funding Holdings, LLC,
1:14-CV-00081-GNS-HBB, 2017 WL 1193064, at*l (W.D. Ky. Mar.
30, 2017). Boling argued that (1) the agreements violated
Kentucky's public policy against third-party litigation
financing with a profit motive and (2) the high interest
rates violated Kentucky's usury laws. Id. at
*2. The court agreed with Boling on both issues and granted
the motion for partial summary judgment on March 30, 2017.
Id. at *2-7.
Kentucky DJ Action, Prospect had filed with its answer
counterclaims for unjust enrichment, promissory estoppel,
breach of the duty of good faith and fair dealing, negligent
misrepresentation, and conversion. After the court granted
summary judgment on Boling's claims, Prospect's
counterclaims remained pending. Id. at *8.
September 9, 2015, while the Kentucky DJ Action was ongoing,
Prospect filed another action against Breen in the Superior
Court of New Jersey. On November 6, 2015, Breen removed that
case to the U.S. District Court for the District of New
Jersey based on diversity jurisdiction. Prospect Funding
Holdings, LLC v. Breen, No. 2:15-cv-7945-SDW-LDW
(D.N.J.) (2:15-cv- 7945 ECF No. 1). Breen filed
counterclaims. Prospect moved to dismiss those counterclaims
and Breen moved to transfer venue to the Western District of
Kentucky. (2:15-cv-7945 ECF Nos. 6, 16). On April 18, 2016,
Judge Wettre issued an order to show cause why the case
should not be remanded to the Superior Court of New Jersey.