Background
On January 4, 2017, Shana Gafner, a New Jersey resident, entered into a “Nonrecourse Purchase Agreement” with Oasis Legal Finance, LLC (a Delaware company with principal offices in Illinois). Under the agreement, Oasis Financial provided funding to Gafner in exchange for a contingent ownership stake in the proceeds of her pending personal injury lawsuit. The agreement was non-recourse—if Gafner recovered nothing on her underlying claim, she owed Oasis Financial nothing. The parties’ contract explicitly stated that all disputes would be governed by New Jersey law and that any litigation must be filed exclusively in the circuit court of Cook County, Illinois.
More than seven years elapsed before Gafner filed a putative class action complaint on April 15, 2024, in Cook County circuit court against Oasis Financial and related entities. Her complaint alleged that the agreement constituted an unlicensed consumer loan transaction in violation of New Jersey law and asserted four counts: (1) declaratory judgment and injunctive relief under the New Jersey Consumer Fraud Act; (2) damages under the Consumer Fraud Act; (3) unjust enrichment; and (4) violations of the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA). Notably, Gafner had initially filed a substantially identical complaint in New Jersey state court on January 4, 2023—exactly six years after entering into the agreement. That case was removed to federal court based on diversity jurisdiction, and the federal district court dismissed it on March 19, 2024, based on the forum selection clause in the parties’ agreement.
The Court’s Holding
The circuit court dismissed Gafner’s amended complaint with prejudice, finding all claims were time-barred. On appeal, the Illinois Appellate Court affirmed. The court held that for Gafner’s claims for declaratory judgment and unjust enrichment (counts I and III), the five-year Illinois statute of limitations applied, having expired on January 4, 2022. For the Consumer Fraud Act and TCCWNA claims (counts II and IV), the six-year New Jersey statute of limitations applied, expiring on January 4, 2023. Although Gafner filed her New Jersey complaint on the final day of the six-year period, the court rejected her argument that the doctrine of equitable tolling should preserve her claims filed in Illinois on April 15, 2024.
The court found that equitable tolling requires one of three circumstances: active misrepresentation by the defendant, extraordinary barriers preventing the plaintiff from asserting rights, or mistaken filing in the wrong forum. Gafner satisfied none of these criteria. The court determined that her decision to file in New Jersey rather than Illinois was deliberate—not a mistake—given the explicit forum selection clause in the agreement. Moreover, even if equitable tolling were available, the court reasoned that when Gafner’s New Jersey action was dismissed on March 19, 2024, the limitations clock resumed running, leaving essentially no remaining time before her claims expired. Because claims filed in the correct forum (Illinois) on April 15, 2024, exceeded the applicable limitations periods, dismissal with prejudice was appropriate. The court did not address the enforceability of the class action waiver given the time-bar ruling.
Key Takeaways
- Nonrecourse litigation financing agreements are valid under New Jersey law and are not automatically treated as unlicensed consumer loans subject to state licensing requirements.
- Forum selection clauses in commercial contracts are binding and courts will enforce them; deliberate disregard of such clauses precludes equitable tolling relief.
- Equitable tolling does not rescue claims filed on the eve of the limitations deadline in the contractually designated forum after an initial filing in a non-designated forum is dismissed.
- When determining the applicable statute of limitations for statutory claims, courts apply the substantive law of the jurisdiction that created the right of action, even where a choice-of-law provision designates another state’s law.
Why It Matters
This decision significantly strengthens the litigation financing industry’s ability to defend against class action challenges. Courts will enforce contractual forum selection clauses and statutes of limitations provisions even where plaintiffs initially file in another jurisdiction and then attempt to cure the defect by re-filing in the correct forum. Critically, the court’s holding on equitable tolling means that a plaintiff who waits until the final day of the limitations period to file in a non-designated forum cannot benefit from equitable tolling once that filing is dismissed—the approach eliminates a potential end-run around contractual forum provisions.
For plaintiffs challenging litigation financing arrangements, the decision underscores the importance of calculating limitations periods carefully and filing in the contractually designated forum on the first attempt. The decision also signals that courts are unlikely to second-guess the characterization of nonrecourse funding arrangements as purchases of contingent rights rather than loans, absent compelling evidence of mischaracterization or fraud. This has significant implications for the industry’s ability to structure such agreements and defend them against state consumer protection statutes.