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
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
Later, the special master who had been
to investigate misconduct in the administration and settlement of the
Deepwater Horizon claims, Louis Freeh, found that Burrle's claims
Freeh sought to have Burrle and others,
including Woodbridge Baric, make restitution. The district court
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
"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,"
"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."