Minnesota Turned a Status Question Into a Contract Question. Almost No Funding Agreement Has Been Read That Way Since.

For six centuries the law asked one question about outside money in a lawsuit: may this person be here at all? Champerty was a status doctrine. It looked at who the funder was — a stranger to the claim — and stopped there.

Minnesota stopped asking that question in 2020. Then, in 2023, it stopped asking the other status question — whether the deal is really a loan subject to the usury cap. Both gates are open.

What is left is a single question about the document: is this particular agreement unconscionable? That is not a smaller protection. It is a completely different one, and it is answered by reading the contract rather than by classifying the parties. Very few of the agreements circulating in Minnesota have been drafted, reviewed, or challenged with that in mind.

What Maslowski I actually held

The syllabus is one line: “Minnesota’s common law prohibition against champerty is abolished.” Maslowski v. Prospect Funding Partners LLC (Maslowski I), 944 N.W.2d 235 (Minn. 2020).

Read the opinion and the holding is narrower and more interesting than the headline. The Court agreed the agreement was champertous. Prospect had advanced Pamela Maslowski $6,000 against the proceeds of her personal injury case; under the fee schedule the amount owed increased by 30 percent every six months. The Court wrote that “[t]he lower courts … did not err in determining that, under our prior decisions, the contract was unenforceable.” Id. at 238.

It then declined to apply those prior decisions:

We decline, however, to hold that the contract between Maslowski and Prospect is void as against public policy as we understand it today. Champerty is a common law doctrine, and the development of the common law is “determined by the social needs of the community which it governs.” … Our review of changes in the legal profession and in society convinces us that the ancient prohibition against champerty is no longer necessary.

Id. at 238 (citations omitted).

And it named the replacement. In the closing passage, the Court said that “district courts may still scrutinize litigation financing agreements to determine whether equity allows their enforcement,” that “[p]arties like Maslowski retain the common law defense of unconscionability,” and that “[c]ourts should carefully review uncounseled agreements, particularly between parties of unequal bargaining power or agreements involving an unsophisticated party.” Id. at 241.

One sentence in that passage is the most useful thing in the opinion, and it is almost never quoted. The Court warned that courts and attorneys “should likewise be careful to ensure that litigation financiers do not attempt to control the course of the underlying litigation,” citing its own 1897 decision for the proposition that “it is difficult to conceive of any stipulation more against public policy” than a contract term requiring the financier’s permission to settle. Id. (citing Huber v. Johnson, 70 N.W. 806, 808 (Minn. 1897)).

That is a control provision being described, by the Minnesota Supreme Court, as the paradigm of an unenforceable term. It is also a provision that appears — in softened, indirect, “consultation” and “cooperation” form — in a great many funding agreements.

What the Court expressly did not decide. Review was granted “only on the question of whether the agreement violates Minnesota’s prohibition against champerty.” Usury was not before it. And on legislative regulation, the Court said only that there was “the possibility of further regulation by the Legislature,” which was “an issue beyond the scope of our review.” Id. at 241.

We covered the abolition itself here. What follows is what the earlier piece does not reach.

Maslowski II: the second gate closed in 2023

The case came back. On remand, Maslowski argued the 60 percent annual repurchase rate was unconscionable and, alternatively, usurious under Minn. Stat. § 334.01, which caps interest at “$8 on $100 for one year.” The district court and the court of appeals agreed it was usurious and reduced the rate to 8 percent.

The Supreme Court reversed. Maslowski v. Prospect Funding Partners LLC (Maslowski II), No. A21-1338 (Minn. Aug. 23, 2023). Its first syllabus point:

A repurchase rate in a litigation financing agreement is not subject to Minnesota’s usury law, Minn. Stat. § 334.01 (2022), when repayment of the purchase price is contingent upon a recovery in the underlying litigation.

The reasoning turns on one element. Minnesota requires four things to establish usury, including “an agreement between the parties that the principal shall be repayable absolutely.” Miller v. Colortyme, Inc., 518 N.W.2d 544, 549 (Minn. 1994), as quoted in Maslowski II. The lower courts had reasoned that Prospect’s underwriting made recovery so likely that the obligation was effectively absolute. The Supreme Court rejected the inference:

But something being extremely likely to happen necessarily accepts the possibility, however small, that it may not happen. It simply cannot be said that Prospect’s ability to recover the money given to Maslowski is absolute.

Two limits in the same opinion are worth more to a plaintiff than the holding costs. The Court distinguished two out-of-state cases in which usury did apply — one involving a strict liability claim, where recovery was “virtually certain,” and one where the plaintiff had already won a substantial verdict and faced only challenges to the amount. Those circumstances, the Court said, “do not exist here.” A funding agreement written against a judgment already entered, or a liability already conceded, is a different case on the face of Maslowski II.

And the Court twice pointed at the Legislature, saying that “the question of whether usury limits should apply to litigation financing agreements is likely a question best left to the Legislature.” As of this writing, the Legislature has not answered.

Two more things Maslowski II decided that matter in practice. First, it remanded the unconscionability question, because the courts below had resolved everything on usury grounds and never reached the argument Maslowski actually led with — that the 60 percent rate was “unconscionable on its face.” So the central question in this area is, in the leading Minnesota case, still undecided.

Second, it rejected the argument that the repurchase rate began to run only when champerty was abolished. Because the agreement was valid when signed, the rate accrues “in accordance with the schedule the parties agreed to when they signed the valid and enforceable Agreement” — that is, from 2014, not from the date of Maslowski I. A funder’s clock runs from signature.

What this actually changed

Before 2020, a plaintiff’s lawyer facing a funding agreement had a threshold argument that required no factual development: champerty. It was a status defense. You won or lost it on the identity of the parties.

Today the same lawyer has no threshold argument at all. Not champerty — abolished. Not usury — not applicable where repayment is genuinely contingent. What remains is unconscionability, which is:

• Fact-intensive. Procedural unconscionability looks at how the deal was presented, to whom, under what pressure, with what alternatives, and whether the party had counsel. Substantive unconscionability looks at the terms themselves.
• Documented, or lost. The evidence is the signing circumstances, the disclosures, the plaintiff’s financial situation, the alternatives offered, and the arithmetic of what the plaintiff will actually keep.
• Term-by-term, not all-or-nothing. In Maslowski the district court found the contract “not unconscionable as a whole, but … unconscionable as to its penalty clauses, interest rate, and restrictions on the relationship between Maslowski and her counsel.” The Supreme Court noted in a footnote that the penalty-clause and counsel-restriction determinations were “not before us” — so those unconscionability rulings stood while the interest-rate ruling was reversed.

That last point is the practical center of gravity. The parts of the agreement most vulnerable in Minnesota are not the price. They are the clauses that reach into the lawsuit — settlement consent, cooperation obligations, communications with counsel, and anything that gives the funder leverage over litigation decisions. Maslowski I told you why: the Court called control of the underlying litigation the paradigm public-policy violation.

What else Minnesota lets you sell

Assignment is where the Maslowski line points, and Minnesota’s rules are older, scattered, and more restrictive than the funding cases suggest.

The general rule is permissive. “The law of this state is that an assignment of a chose in action is valid and complete in itself upon the mutual assent of the assignor and assignee without notice to the debtor.” Leuthold v. Redwood County, 288 N.W. 165, 167 (Minn. 1939), quoted in Maslowski I, 944 N.W.2d 235 (Minn. 2020).

The test for whether a claim may be assigned at all has two prongs. The Court of Appeals stated it this way: “In Minnesota, any cause of action is assignable if it survives the death of the holder and does not arise out of personal injury.” Wagener v. McDonald, 509 N.W.2d 188, 190 (Minn. App. 1993) (citing Minn. Stat. §§ 573.01–.02 (1992)).

Note the date on that statutory citation. Section 573.01 read, in 1992 and for decades after, that “[a] cause of action arising out of an injury to the person dies with the person of the party in whose favor it exists, except as provided in section 573.02.” It now reads that such a cause of action “survives the death of any party in accordance with section 573.02.” (2023 c 52 art 19 s 32.) The survival prong of the Wagener formulation therefore runs through a statute the Legislature rewrote in 2023. The second prong — that the claim must not arise out of personal injury — is stated independently and is untouched on its face. We have not found a Minnesota appellate decision revisiting assignability in light of the amendment. Anyone relying on the first prong should treat it as an open question rather than settled law.

And some claims are off the table entirely on public-policy grounds. Wagener held that “the assignment of a legal malpractice claim is contrary to Minnesota’s public policy,” reasoning that assignment is incompatible with the attorney’s duties of loyalty and confidentiality and with the nature of the attorney-client relationship. 509 N.W.2d at 193.

Future wages are capped by statute. Minn. Stat. § 181.06, subd. 1, makes “absolutely void” every assignment, sale, or transfer of “wages or salary to be earned or to become due, in whole or in part, more than 60 days from and after the date of making such transfer” — with a carve-out for the portion above the first $1,500 per month where the assignment runs less than five years.

The comparison that should be embarrassing

Minnesota does regulate the purchase of a personal injury victim’s money. It regulates it thoroughly. It just does not regulate the version with the risk in it.

The Legislature rebuilt the structured settlement statute in 2022 — repealing §§ 549.31 through 549.34 and enacting the current registration, bond, disclosure, and approval scheme. That was two years after Maslowski I invited it to consider funding agreements. It has done the harder-to-justify half and left the easier half alone.

What to do

If you are a plaintiff considering an advance:

1. Read the control provisions first, not the price. Settlement consent, cooperation duties, “best efforts to prosecute,” and any right the funder has to talk to your lawyer. That is where Minnesota law is most favorable to you, and where the agreement is most likely to be unenforceable in part.
2. Get the dollar figure at 12, 24, and 36 months, and the cap. In Maslowski the schedule increased the repurchase amount by 30 percent every six months, capped after roughly three and a half years.
3. Understand that the rate is not capped. After Maslowski II, the 8 percent usury ceiling in § 334.01 does not apply where repayment genuinely depends on recovery.
4. Preserve the record of how you signed it. Who explained it, what you were told, what alternatives you had, and what your circumstances were. Procedural unconscionability is proven with those facts or not at all.
5. Have counsel other than your litigation counsel look at it. Maslowski I singles out “uncounseled agreements” for careful review — which is a reason to be counseled, not a reason to stay uncounseled.

If you are a defendant facing a funded plaintiff:

1. Do not assume funding is a defense. It is not, in Minnesota, and arguing otherwise wastes credibility.
2. The funder’s leverage is a settlement fact, not a liability fact. A plaintiff with a large accrued repurchase obligation has a different reservation price than one without.
3. Discovery of funding documents is contested and forum-dependent. Treat it as a question to be briefed, not assumed.

If you are the assignee of any claim:

1. Confirm the claim is assignable before you pay for it — the Wagener prongs, plus the categorical bar on legal malpractice claims.
2. Confirm the limitations period. An assignee inherits the assignor’s clock, not a new one. See our Minnesota limitations overview.
3. Check for an anti-assignment clause in the underlying contract before, not after.

The observation

Abolishing a status doctrine does not reduce regulation. It relocates it.

Champerty was crude and over-inclusive: it voided good transactions along with bad ones because it never looked past the identity of the funder. Unconscionability is precise and under-enforced: it can reach exactly the term that is unfair and leave the rest standing, but only if someone puts it in front of a judge with a record.

The whole burden of that relocation has fallen on the document and on whoever reads it. In 2020 the Minnesota Supreme Court told courts to scrutinize these agreements and told parties they retained the defense of unconscionability. In 2023 it removed the alternative, remanded the unconscionability question — and, six years after the invitation, no Minnesota appellate decision has yet said what an unconscionable litigation funding term looks like.

Until one does, the answer to “what protects a funded plaintiff in Minnesota” is the same as the answer to “what protects any party to any contract”: the words on the page, and whether anyone read them before signing.

Madgett Law, LLC reviews litigation funding and claim-purchase agreements for Minnesota plaintiffs, businesses, and law firms — the control provisions, the arithmetic, and the assignability of the underlying claim. If an agreement is in front of you or being enforced against you, send us a message or call 612-470-6529.

Sources: Maslowski v. Prospect Funding Partners LLC, 944 N.W.2d 235 (Minn. 2020) (No. A18-1906, filed June 3, 2020) (official opinion, Minnesota State Law Library / Minnesota Judicial Branch), including the syllabus (champerty abolished) and, at 237 (definition of champerty), 238 (lower courts not in error under prior decisions; declining to hold the contract void as against public policy), 238–41 (abolition), and 241 (courts may still scrutinize litigation financing agreements; common-law defense of unconscionability retained; careful review of uncounseled agreements and agreements between parties of unequal bargaining power; caution against financier control of the underlying litigation, citing Huber v. Johnson, 70 N.W. 806, 808 (Minn. 1897); possibility of further legislative regulation beyond the scope of review) — pin cites as given by the Minnesota Supreme Court’s own citations to that opinion in the second appeal. Maslowski v. Prospect Funding Partners LLC, No. A21-1338 (Minn. Aug. 23, 2023) (official opinion, Minnesota State Law Library) (syllabus points 1–3; the four common-law elements of usury as stated in Miller v. Colortyme, Inc., 518 N.W.2d 544, 549 (Minn. 1994); Ordway v. Price, 194 N.W. 321, 322 (Minn. 1923); the absence of an absolute repayment obligation; distinguishing strict liability and post-verdict circumstances; the accrual date; remand of the unconscionability question). Leuthold v. Redwood County, 288 N.W. 165, 167 (Minn. 1939), as quoted in Maslowski I. Wagener v. McDonald, 509 N.W.2d 188, 190, 193 (Minn. App. 1993) (Caselaw Access Project). Minn. Stat. § 334.01 (rate of interest); § 573.01 (survival of causes; current text and the 2022 text, as amended by 2023 c 52 art 19 s 32); § 181.06, subd. 1 (assignment of wages); §§ 549.30–.41 (structured settlements, including § 549.35 registration and surety bond, § 549.37 required disclosures, § 549.38 conditions and court approval, and § 549.405 appointment of attorney adviser; former §§ 549.31–.34 repealed by 2022 c 62 s 32) (Minnesota Office of the Revisor of Statutes, 2025 Minnesota Statutes). Chapters 334, 549, and 573 and § 181.06 were not amended in the 2025 or 2026 legislative sessions except § 334.01, subd. 2 (1Sp2025 c 4 art 2 s 10), which is not relied on here (Revisor Table 2, Statutes Changed).

This article is general legal information about Minnesota law, not legal advice, and reading it does not create an attorney–client relationship. Nothing here is a recommendation to enter into or decline any funding or assignment transaction. Whether a particular agreement or term is enforceable depends on its language and the circumstances of the transaction. No outcome is promised or implied.