NEW ORLEANS — A lawsuit-lending company that had been ordered to pay back $20,000 in restitution for fees it obtained from a fraudulent Deepwater Horizon claim can keep it.
In an opinion published Jan. 6, the 5th Circuit Court of Appeals reversed a federal court in the Eastern District of Louisiana, which had ordered Woodbridge Baric Pre-Settlement Funding to pay back what it received from claimant Jarrod Burrle.
According to the order, Woodbridge Baric had loaned commercial fisherman Burrle $24,000 in 2012 as an advance on his Deepwater Horizon claim with interest. Their agreement stipulated that Burrle would not have to repay the loan if his claim failed, unless he misrepresented his losses, "in which case Burrle agreed to indemnify Woodbridge Baric and hold it harmless."
Circuit Judge James Dennis authored the opinion with Judges Fortunato Benavides and Leslie Southwick concurring.
The order indicates that Burrle was eventually paid more than $50,000 on one of his claims and Burrle's attorneys then paid Woodbridge Baric $20,000 in partial repayment of the loan.
Later, the special master who had been appointed to investigate misconduct in the administration and settlement of the Deepwater Horizon claims, Louis Freeh, found that Burrle's claims were fraudulent.
Freeh sought to have Burrle and others, including Woodbridge Baric, make restitution. The district court agreed, finding that Woodbridge Baric would have been “unjustly enriched” if it was allowed to keep the $20,000.
Dennis wrote that the district court relied on an exception to the rule that bona fide third-party payees are not liable when it comes to restitution. Under this exception, which is used by some courts, “an attorney who receives a share of a judgment pursuant to a contingency-fee agreement does not take the money as a bona fide payee.”
"Woodbridge Baric's right to Burrle’s repayment of the principal amount of its loan did not depend solely on the success of Burrle’s claims: Woodbridge Baric’s contracts with Burrle expressly required Burrle to indemnify and hold Woodbridge Baric harmless for the loss of the principal amount of the loan if his representations to Woodbridge Baric regarding his claims were not accurate and complete in all respects," Dennis wrote.
"Although Woodbridge Baric assumed some of the risks associated with non-recovery in its contracts with Burrle, it specifically disclaimed the risk that Burrle had asserted fraudulent claims and withheld that information from it. Accordingly, Woodbridge Baric was entitled to Burrle’s full repayment of the principal under their contracts."
Dennis further wrote that since Woodbridge Baric's claim for repayment was not purely contingent on the success of Burrle's claims, the failure of this contingency did not "extinguish" its claim or prevent it “from asserting valid interest in defense of its right to retain the funds as a bona fide payee.”
"While the special master argues that Burrle did not purport to pay Woodbridge Baric under the warranty provisions of their agreements, Burrle nonetheless paid Woodbridge Baric in partial satisfaction of a valid debt," Dennis wrote. "At bottom, Woodbridge Baric was simply not unjustly enriched by its good-faith acceptance of the funds from Burrle in partial repayment of his debt."