An Examination of Lawsuit Funding from a Litigation Attorney Oakland Law Firm
Litigation financing can be a hugely helpful asset for startups and small companies that may not be able to afford to hire a litigation or contracts attorney to bring a lawsuit against a third party for wrongdoing.
If your judgment debtor is offering to pay you a fee to forbear collection of your judgment, rest assured the forbearance agreement is not usurious.
In the recently-decided case, Bisno v. Kahn, 14 C.D.O.S. 4439 (April 25, 2014), the Court made clear that a forbearance agreement is a separate contract, wholly separate from a judgment and the sums owed under a judgment.
In Bisno, a judgment debtor offered to pay to the judgment creditors a fee in exchange for the judgment creditors’ agreement to forbear from enforcing the judgment while the judgment debtor closed an unrelated real estate transaction. After the judgment was fully satisfied, that same judgment creditor sought to recover the forbearance fees he paid to the judgment creditors, claiming the payment of the forbearance fees was a violation of California’s usury laws.
Following a thorough summary of the legislative history of California’s usury laws and the intent behind those laws, the Court held that the usury laws do not prohibit a judgment creditor from receiving forbearance fees in addition to statutory post-judgment interest. The Court further held that while a forbearance fee does not constitute a recoverable cost under the Enforcement Of Judgments Law (see Code of Civil Procedure section 685.040, which allows a judgment creditor to recover “the reasonable and necessary costs of enforcing a judgment”), there is no provision in the Enforcement Of Judgments Law that prohibits parties from entering into private agreements to forbear collection of a judgment.
Note: “Forebearance” is defined in legal terms as “the action of refraining from exercising a legal right, especially enforcing the payment of a debt.”