Like most states, Texas once prohibited third-party financing of lawsuits. Fronting the money for someone else’s litigation in exchange for a share of the anticipated settlement constituted the crime of champerty. It still does in states that have not abandoned this sensible safeguard.
Criminalization of champerty discourages frivolous lawsuits, preserves the integrity of our courts, and protects potential plaintiffs from the lures of loan-shark lenders.
But champerty had its champions, particularly among lawyers and lenders looking to profit from it, and beginning in the late 1990s they recast this age-old vice as a newly-minted virtue and succeeded in having laws against it overturned in many states, including Texas.
One Texas attorney taking advantage of this fool’s-golden opportunity was Tammy Tran, who relied on lawsuit lending from Spark Funding to finance her quest for riches via mass-tort litigation.
Now Tran is suing Spark in Harris County District Court for $10 million in damages, alleging that the company charged her hidden interest on her loans.
“Spark, and many merchant cash advance companies, are actually loan sharks charging interest under hidden calculation devices, at over hundreds of percent per year, with the Cognovit Judgments used as their lethal weapons,” Tran’s suit asserts.
Spark had a cognovit judgment entered against Tran last month. Of course, for that to happen, Tran would have had to sign a cognovit note authorizing the company to seek judgment against her – in essence, confessing her guilt in advance – if she failed to repay her loan in a timely fashion.
Like champerty, cognovit notes are outlawed in many states.
Tran claims she paid Spark on time for years before realizing she was being charged “hidden exorbitant interest at over 100% per year.”
Tran charges that Spark also slandered her as an “unqualified, substandard, no good lawyer,” a description that seems to fit an attorney relying on lawsuit lending to press her cases and not bothering to read the fine print of the contracts she signs.
If Spark is a loan shark, what kind of predator is Tran?