Court Opinion

ID: 4127327
Source: CourtListenerOpinion
Date Created: 2017-02-17 23:08:27.475157+00
Date Added: 2024-06-11T07:45:58.456884
License: Public Domain

STATE OF MINNESOTA
                                 IN COURT OF APPEALS
                                       A16-0770

                                      Pamela Maslowski,
                                         Respondent,

                                               vs.

                               Prospect Funding Partners LLC,
                                         Defendant,

                               Prospect Funding Holdings LLC,
                                          Appellant.

                                   Filed February 13, 2017
                                          Affirmed
                                        Larkin, Judge

                                Hennepin County District Court
                                  File No. 27-CV-15-15143

James R. Schwebel, James S. Ballentine, Matthew J. Barber, Schwebel, Goetz & Sieben,
P.A., Minneapolis, Minnesota (for respondent)

Daniel A. Beckman, Abigail A. Pettit, Gislason & Hunter LLP, Minneapolis, Minnesota
(for appellant)

         Considered and decided by Hooten, Presiding Judge; Peterson, Judge; and Larkin,

Judge.

                                       SYLLABUS

         A district court does not abuse its discretion by refusing to enforce a forum-selection

clause that is inconsistent with Minnesota’s local interest against champerty.
                                       OPINION

LARKIN, Judge

       This appeal stems from an agreement in which appellant purchased an interest in

respondent’s Minnesota personal-injury lawsuit. Appellant sued respondent in New York,

seeking to enforce the agreement. Respondent sued appellant in Minnesota, seeking a

declaration that the agreement violates Minnesota’s policy against champerty and is

unenforceable. Appellant challenges the district court’s refusal to enforce a forum-

selection clause in the agreement, which requires the parties to bring any action relating to

the agreement in New York. Appellant also challenges the district court’s issuance of an

anti-suit injunction enjoining appellant from prosecuting its New York action. Because the

district court did not abuse its discretion by refusing to enforce the forum-selection clause

or by issuing the anti-suit injunction, we affirm.

                                          FACTS

       In March 2012, respondent Pamela Maslowski, a Minnesota resident, was injured

in a motor-vehicle accident. Maslowski sued to recover damages for the personal injuries

she sustained in the accident. While Maslowski’s personal-injury suit was pending, she

needed money for living expenses. In May 2014, Maslowski entered into an agreement

with appellant Prospect Funding Holdings LLC (Prospect), through its manager at its office

in Minnetonka,1 under which Prospect would provide Maslowski with $6,000 in exchange

1
  Maslowski’s complaint alleges that Prospect is a Florida limited liability company with
its principal place of business in Florida. In its answer, Prospect claimed that it is a New
York limited liability company with its principal place of business in Minnesota. In later
filings, Prospect claimed that it is a New York entity with a New York office.

                                              2
for an interest in her personal-injury action. The agreement provides that if Maslowski

recovers in the personal-injury action, Prospect is entitled to recover $6,000, a $1,425

processing fee, and 60% annual interest. The agreement further provides that if Maslowski

does not recover in the personal-injury suit, Prospect will recover nothing.

       Under the agreement, the transaction is to be treated as a sale of Maslowski’s interest

in the personal-injury suit and not as a loan, Maslowski is prohibited from assigning any

other interest in the personal-injury action or the proceeds thereof without Prospect’s prior

written consent, and Maslowski is not permitted to hire a new attorney unless she first

notifies Prospect in writing and requires the new attorney to execute an “Attorney

Acknowledgement of the Irrevocable Letter of Direction.” The agreement defines breach

to include Maslowski’s termination of her attorney’s representation without notice to

Prospect, termination followed by a replacement attorney’s failure to execute an “Attorney

Acknowledgement of the Irrevocable Letter of Direction,” or Maslowski’s receipt of

additional advances without Prospect’s consent. In the event of a breach, Maslowski must

pay Prospect twice the purchase amount. All notices required under the agreement are to

be sent to Prospect’s Minnesota address.

       The agreement includes a choice-of-law clause designating New York law as the

applicable law. The agreement also includes the following forum-selection clause:

                   THE PARTIES IRREVOCABLY AGREE THAT ALL
              ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER
              OR RESPECT, ARISING OUT OF OR RELATED TO THIS
              AGREEMENT SHALL BE LITIGATED ONLY IN COURTS
              HAVING SITUS IN NEW YORK COUNTY, NEW YORK.
              EACH PARTY CONSENTS AND SUBMITS TO
              PERSONAL JURISDICTION IN THE STATE OF NEW

                                              3
                YORK AND WAIVES ANY RIGHT SUCH PARTY MAY
                HAVE TO TRANSFER THE VENUE OF ANY SUCH
                ACTION OR PROCEEDING.

         Maslowski’s complaint in the underlying action seeks a declaration that

Maslowski’s agreement with Prospect is void because it is champertous,2 “against

Minnesota policy,” “intended to evade Minnesota law,” and unconscionable.             The

complaint lists Prospect and Prospect Funding Partners LLC, an entity which “originates,

services, administers and monitors claims” on behalf of Prospect, as defendants.3 On July

7, 2015, Maslowski unsuccessfully attempted to serve the complaint on Prospect at its

Minnesota office.

         On July 10, Prospect filed a complaint in New York against Maslowski,

Maslowski’s Minnesota counsel, and counsel’s law firm, claiming breach of contract,

unjust enrichment, promissory estoppel, breach of the duty of good faith and fair dealing,

negligent misrepresentation, money had and received, and anticipatory breach. Prospect’s

complaint included the following allegations: (1) Maslowski’s personal-injury case was

going to settle; (2) Prospect notified Maslowski that $14,108 was due to Prospect if the

case settled and payment was made on or before September 22, 2015; (3) Maslowski’s

attorney informed Prospect that the funding agreement is unenforceable; (4) Maslowski

failed to remit any payment in accordance with the agreement; and (5) Maslowski and her

attorney indicated they would not comply with the terms of the agreement.

2
    “Champerty” is defined on page nine of this opinion.
3
    Prospect Funding Partners LLC is not a party to this appeal.

                                              4
       On August 6, Maslowski served her complaint in the Minnesota action against

Prospect on Prospect through the Minnesota Secretary of State. On August 26, Prospect

moved the Minnesota district court to dismiss Maslowski’s action, asserting that she

brought her action “in an improper jurisdiction in violation of a mandatory forum[-]

selection clause in the agreement,” that “a case based on the same dispute was already

pending in New York when the complaint in the present case was served,” and that under

“the principles of comity, in particular the ‘first to file’ rule, New York is the proper forum

to adjudicate this dispute.”

       In September, Maslowski, her Minnesota counsel, and counsel’s law firm moved to

dismiss Prospect’s New York action on forum non conveniens grounds and because the

New York court lacked personal jurisdiction over Maslowski’s lawyer and his law firm.

The New York Supreme Court, New York County, granted the motion to dismiss as to

Maslowski’s lawyer and his law firm, but the court denied the motion to dismiss as to

Maslowski, reasoning that Maslowski is contractually bound to have her dispute with

Prospect decided in a New York forum.             On November 19, Maslowski moved the

Minnesota district court to enjoin Prospect from prosecuting its New York action until final

judgment is entered in the Minnesota action.

       On December 21, the Minnesota district court denied Prospect’s motion to dismiss

the Minnesota action. The district court reasoned that “Minnesota courts have stated and

reaffirmed that they will not enforce champertous agreements” and that another district

court recently held a “contract that is substantially identical to the Agreement in this case,

having been drafted by [Prospect], to be unenforceable.” The district court noted, “When

                                              5
Maslowski entered into the agreement that underlies this lawsuit with [Prospect] . . .

[Prospect] had changed the forum-selection and choice-of-law clauses in their form

agreement from Minnesota to New York.” The district court reasoned that Prospect “chose

a sort of ‘end-around’ play, by using the same contract form as before, but stating that it

would be governed by New York law, and subject to suit only in the New York court

system.”

       The district court explained:

                     If this court were to enforce the forum selection clause
              as [Prospect] request[s], and if thereafter a New York court,
              applying New York law, were to decide that champertous
              contracts are permissible and enforceable in Minnesota, that
              would effectively reverse a line of precedent that has been
              established in Minnesota ever since 1897, and reaffirmed by
              Minnesota’s appellate court as recently as 2003, without any
              Minnesota court having any say in the matter. If the Minnesota
              Supreme Court’s ruling that champertous contracts are
              unenforceable in this state is to be reversed, it should be by an
              affirmative decision of the Minnesota Supreme Court, and not
              by a corporate decision to select a different state’s law to
              govern such contracts in this state.

       The district court concluded that “the outcome of the dispute between the parties in

this case will be felt within this State, and not anywhere in New York” and that enforcing

the forum-selection clause “would result in the contravention of a strong Minnesota public

policy that its courts should decide whether champertous agreements may be enforced

within this state.” Prospect requested reconsideration.

       On January 14, 2016, Maslowski moved for judgment on the pleadings in her

Minnesota action. On the same day, Prospect moved the New York Supreme Court to

enjoin Maslowski from prosecuting her Minnesota action. On January 27, the New York

                                             6
Supreme Court granted Prospect’s motion to enjoin Maslowski, based on its earlier ruling

that Maslowski is bound by the forum-selection clause, but the New York Supreme Court

did not order Maslowski to withdraw motions pending before the Minnesota district court.

       On March 4, the Minnesota district court denied Prospect’s request for

reconsideration, denied Maslowski’s motion for judgment on the pleadings, and granted

Maslowski’s motion to enjoin Prospect from prosecuting its New York action. As to the

injunction, the district court found that the Minnesota and New York actions involve

similar parties and similar issues, that resolution of the Minnesota action would dispose of

the New York action, and that “principles of comity and equity favor [the Minnesota]

forum, and not New York.” Prospect appeals.4

                                          ISSUES

       I.     Did the district court abuse its discretion by refusing to enforce the forum-

selection clause in the parties’ agreement?

       II.    Did the district court abuse its discretion by issuing an anti-suit injunction?

4
  Following oral argument in this case, the New York Supreme Court, Appellate Division,
reversed the New York Supreme Court’s denial of Maslowski’s motion to dismiss the New
York action and its order enjoining Maslowski from prosecuting the Minnesota action.
Prospect Funding Holdings LLC v. Maslowski, No. 2747-2748-2748A-2748B, 2017 WL
113078 (N.Y. App. Div. Jan. 12, 2017). The New York Supreme Court, Appellate
Division, found that “Maslowski demonstrated that the choice of forum provision in the
parties’ agreement is unreasonable and should not be enforced,” noting that “[e]very aspect
of the transaction at issue occurred in Minnesota, the parties, documents, and witnesses are
located in Minnesota, and defending this action in New York would be a substantial
hardship to Ms. Maslowski.” Id. Prospect moved for an order granting reargument of that
appeal or leave to appeal to the New York Court of Appeals. Prospect’s motion for
reargument or appeal to the New York Court of Appeals is currently pending.

                                              7
                                          ANALYSIS

                                                I.
       Prospect contends that the district court erred by failing to enforce the forum-

selection clause in the parties’ agreement. Whether to enforce a forum-selection clause is

within the discretion of the district court, and this court will affirm the district court’s ruling

unless it clearly abused its discretion. Personalized Mktg. Serv., Inc. v. Stotler & Co., 447

N.W.2d 447, 450 (Minn. App. 1989), review denied (Minn. Jan. 12, 1990). A district court

abuses its discretion when it misapplies the law. Minneapolis Grand, LLC v. Galt Funding

LLC, 791 N.W.2d 549, 556 (Minn. App. 2010).

       In Hauenstein & Bermeister, Inc. v. Met-Fab Indus., Inc., the Minnesota Supreme

Court followed the United States Supreme Court’s approach and adopted the rule that

forum-selection clauses are “not per se invalid, but enforceable in the discretion of the court

if not unreasonable.” 320 N.W.2d 886, 888-90 (Minn. 1982). The supreme court held that

“when the parties to a contract agree that actions arising from that contract will be brought

in a particular forum, that agreement should be given effect unless it is shown by the party

seeking to avoid the agreement that to do so would be unfair or unreasonable.” Id. at 890.

The relevant issue is “whether a court should refrain from exercising the jurisdiction that

it admittedly possesses to give effect to the parties’ intentions as expressed in a forum

selection clause.” Id. at 889.

       The supreme court explained that this approach “accords with ancient concepts of

freedom of contract and reflects an appreciation of the expanding horizons of American

business”; it also provides “a degree of certainty to business contracts by obviating

                                                8
jurisdictional struggles and by allowing parties to tailor the dispute resolution mechanism

to their particular situation.” Id. (quotation omitted).

       A forum-selection clause is unreasonable, and therefore unenforceable, if “(1) the

chosen forum is a seriously inconvenient place for trial; (2) the choice of forum agreement

is one of adhesion; and (3) the agreement is otherwise unreasonable.” Id. at 890. A forum-

selection clause is otherwise unreasonable if “enforcement of the forum selection clause

‘would contravene a strong public policy of the forum in which suit is brought, whether

declared by statute or by judicial decision.’” Id. at 891 (quoting M/S Bremen v. Zapata

Off-Shore Co., 407 U.S. 1, 15, 92 S. Ct. 1907, 1916 (1972)).

       The district court determined that New York is not a seriously inconvenient place

for trial and that fact issues preclude a determination regarding whether the parties’ forum-

selection agreement is one of adhesion. But the district court refused to enforce the forum-

selection clause based on Minnesota’s strong public policy against champerty.

       Minnesota follows the common-law rule prohibiting contracts for champerty.

Huber v. Johnson, 68 Minn. 74, 77-78, 70 N.W. 806, 807 (1897). This court has defined

champerty as “‘[a]n agreement between a stranger to a lawsuit and a litigant by which the

stranger pursues the litigant[’s] claims as consideration for receiving part of any judgment

proceeds.’” Johnson v. Wright, 682 N.W.2d 671, 675 (Minn. App. 2004) (first alteration

in original) (quoting Black’s Law Dictionary 224 (7th ed. 1999)), review granted (Minn.

Oct. 19, 2004) and appeal dismissed (Minn. Jan. 10, 2005). This court has defined

maintenance, a similar concept, as “‘[a]ssistance in prosecuting or defending a lawsuit

given to a litigant by someone who has no bona fide interest in the case; meddling in

                                              9
someone else’s litigation.’” Id. (alteration in original) (quoting Black’s Law Dictionary

965 (7th ed. 1999)).

       “The general purpose of the law against champerty and maintenance” is to “prevent

officious intermeddlers from stirring up strife and contention by vexatious or speculative

litigation which would disturb the peace of society, lead to corrupt practices, and pervert

the remedial process of the law.” Huber, 68 Minn. at 78, 70 N.W. at 807. In other words,

the prohibition on champerty and maintenance is aimed at discouraging “intrusion for the

purpose of mere speculation in the troubles of others.” Hackett v. Hammel, 185 Minn. 387,

388, 241 N.W. 68, 69 (1932). In Johnson, this court was asked to re-evaluate Minnesota’s

position against champerty and maintenance. 682 N.W.2d at 679. We recognized that a

few states have abandoned or modified the champerty doctrine, but we refused to do so,

noting “the potential ill effects that a champertous agreement can have on the legal system.”

Id. at 679-80.

       The district court reasoned that the agreement in this case could implicate the

concerns underlying Minnesota’s prohibition on champerty as follows: “a litigant with no

obligation to pay advances back has no incentive to settle, unless the amount recovered

would exceed her attorney’s fees plus the amount she would owe to the litigation funding

company” and the “rapid escalation of amounts owed to the litigation funding company

would lead to an equally rapid decline in the litigant’s willingness to consider settling for

anything less than a maximum recovery.” The district court further reasoned that “[t]he

outcome of the dispute between the parties in this case will be felt within this State, and

not anywhere in New York.” The district court concluded that upholding the forum-

                                             10
selection clause “would result in the contravention of a strong Minnesota public policy that

its courts should decide whether champertous agreements may be enforced within this

state.”

          Prospect argues that the district court abused its discretion primarily because

“[t]here is no case law outlining such a public policy in Minnesota, nor did the district court

rely on any in making this pronouncement.” Prospect further argues that “the types of

public policy in which courts have found forum[-]selection clauses to be unreasonable have

been limited to claims of” judicial economy and the prevention of multiple actions on

similar issues. See Interfund Corp. v. O’Byrne, 462 N.W.2d 86, 89 (Minn. App. 1990)

(“Judicial economy and the prevention of multiple actions on similar issues are policies

which can render a forum[-]selection clause patently unreasonable.”).

          Whether the district court’s reasoning is a valid basis to refuse to enforce the parties’

forum-selection clause is an issue of first impression.           Minnesota caselaw does not

expressly endorse the reasoning. However, in adopting the current rule on forum-selection

clauses in Hauenstein, the Minnesota Supreme Court did not suggest that the “otherwise

unreasonable” category of forum-selection clauses is as narrow as Prospect contends. In

setting forth three ways that forum-selection clauses may be unreasonable, the Minnesota

Supreme Court said, “[o]ther indications of unreasonableness in forum selection

agreements are sure to arise where for reasons other than those enumerated above, to

enforce the agreement would be unfair or unreasonable.” Hauenstein, 320 N.W.2d at 891.

The supreme court provided the following example from M/S Bremen v. Zapata Off-Shore

Co: where enforcement “‘would contravene a strong public policy of the forum in which

                                                 11
suit is brought, whether declared by statute or by judicial decision.’” Id. (quoting Bremen,

407 U.S. at 15, 92 S. Ct. at 1916).

       Bremen involved a forum-selection clause that designated the London Court of

Justice as the forum for any disputes arising under an international-towage contract. 407

U.S. at 2, 92 S. Ct. at 1909. The Supreme Court considered whether enforcement of the

forum-selection clause would contravene the public policy established in Bisso v. Inland

Waterways Corp., 349 U.S. 85, 75 S. Ct. 629 (1955). Id. at 15, 92 S. Ct. at 1916. Bisso

established a “judicial rule, based on public policy, invalidating contracts releasing towers

from all liability for their negligence.” 349 U.S. at 90, 75 S. Ct. at 632.

       Bremen rejected the Bisso public-policy argument against enforcement of the

forum-selection clause. 407 U.S. at 15-16, 92 S. Ct. at 1916. However, it did so solely

because the Bisso policy was inapplicable to the facts in Bremen.        The Supreme Court

explained that, “whatever the proper scope of the policy expressed in Bisso, it does not

reach this case. Bisso rested on considerations with respect to the towage business strictly

in American waters, and those considerations are not controlling in an international

commercial agreement.” Id. (footnote omitted). Moreover, the Supreme Court went on to

explain:

              [The] selection of a remote forum to apply differing foreign
              law to an essentially American controversy might contravene
              an important public policy of the forum. For example, so long
              as Bisso governs American courts with respect to the towage
              business in American waters, it would quite arguably be
              improper to permit an American tower to avoid that policy by
              providing a foreign forum for resolution of his disputes with an
              American towee.

                                             12
Id. at 17, 92 S. Ct. at 1917.

       The preceding example suggests that use of a forum-selection clause to avoid a

forum’s established substantive policy may render the clause unreasonable. Such is likely

the case here. It appears that the forum-selection clause in this case, in conjunction with

the choice-of-law provision, is an attempt to avoid Minnesota’s long-established policy

that agreements for champerty are unenforceable. The district court recognized that reality

in declining to enforce the forum-selection clause. The district court’s reasoning finds

support in Bremen and Hauenstein.

       We now turn to a case that is factually similar to the case before us: Fountain v.

Oasis Legal Fin., LLC, 86 F. Supp. 3d 1037 (D. Minn. 2015).5 In Fountain, consumers

brought a putative class action in Minnesota state court against Oasis, alleging that Oasis

was an Illinois company that purchased legal-funding interests through purchase

agreements with Minnesota consumers who had personal-injury lawsuits pending in state

or federal court. 86 F. Supp. 3d at 1040-41. The consumers further alleged that the

purchase agreements constituted champerty and sought a declaration that the agreements

violated Minnesota public policy and were void and unenforceable. Id. at 1041. Oasis

removed the case to federal court and moved to dismiss based on a forum-selection clause

in the purchase agreements requiring any lawsuit stemming from the agreements to be

5
 Although the case is not precedential, it is persuasive. See Sonenstahl v. L.E.L.S., Inc.,
372 N.W.2d 1, 4 (Minn. App. 1985) (noting that federal decisions may be persuasive where
Minnesota courts have not addressed a subject).

                                            13
brought in state court in Cook County, Illinois. Id. at 1040-41. The agreements also

contained a choice-of-law provision selecting Minnesota law. Id. at 1040.

       In determining whether to enforce the forum-selection clause, the Fountain court

noted that the Supreme Court had recently addressed the proper procedure for enforcing a

forum-selection clause in Atl. Marine Constr. Co. v. U.S. Dist. Court for W. Dist. of Tex.,

134 S. Ct. 568 (2013). Id. at 1043. The Fountain court noted that in Atl. Marine, the

Supreme Court affirmatively endorsed the forum non conveniens doctrine as a vehicle to

enforce a forum-selection clause that chooses a nonfederal forum and therefore applied that

doctrine. Id. at 1044.6

       The Fountain court first considered whether the forum-selection clause was

enforceable and concluded that it was. Id. at 1044-45. The federal court rejected the

consumers’ argument that enforcing the forum-selection clause would contravene

Minnesota’s public policy against champerty. Id. at 1044. The federal court reasoned that

“what matters is not whether the contract as a whole violates public policy, but whether the

forum-selection clause itself violates public policy. Courts in this District have repeatedly

held that enforcement of a forum-selection clause does not violate Minnesota public

policy.” Id.7 Given the Minnesota Supreme Court’s recognition that “[o]ther indications

6
  Because the issue is not briefed in this appeal, we do not consider whether Minnesota
should follow the federal approach in Atl. Marine.
7
  The Supreme Court of Alabama recently cited this text from Fountain and concluded that
in Bremen, “the [Supreme] Court was saying that enforcement of the forum-selection
clause must contravene a state’s public policy, not that the clause should be held
unenforceable if enforcement of the contract that contains the clause would contravene a
state’s public policy.” Ex parte PT Sols. Holdings, LLC, No. 1150687, 2016 WL 6900685,
at *5 (Ala. Nov. 23, 2016).

                                             14
of unreasonableness in forum[-]selection agreements are sure to arise,” Hauenstein, 320

N.W.2d at 891, and the United States Supreme Court’s recognition that “it would quite

arguably be improper” to permit a party to use a forum-selection clause to avoid a forum’s

judicial policy, Bremen, 407 U.S. at 17, 92 S. Ct. at 1917, we disagree with the federal

court’s conclusion that the only relevant public policy is the forum’s policy regarding

forum-selection clauses.

       After concluding that the forum-selection clause was enforceable, the Fountain

court next considered whether it should be enforced, using a modified forum non

conveniens analysis set forth in Atl. Marine. Id. at 1046. In conducting that analysis, “the

plaintiff’s choice of forum merits no weight” and the court “should not consider arguments

about the parties’ private interests.” Atl. Marine, 134 S. Ct. at 581-82. The court may

consider only public-interest factors, which “may include ‘the administrative difficulties

flowing from court congestion; the local interest in having localized controversies decided

at home; [and] the interest in having the trial of a diversity case in a forum that is at home

with the law.’” Id. at 581 & n.6 (alteration in original) (quoting Piper Aircraft Co. v. Reyno,

454 U.S. 235, 241 n.6, 102 S. Ct. 252, 258 n.6 (1981)).

       The parties in Fountain framed the relevant public-interest factor as follows:

“whether a Court in Minnesota has a localized interest in applying Minnesota’s prohibition

against champerty to the purchase agreements at issue here.” 86 F. Supp. 3d at 1046. The

consumers “contend[ed] that approximately 2,000 consumers in the putative class are

located in Minnesota and deserve[d] a chance to vindicate their rights in Minnesota based

on Minnesota law.” Id. Oasis countered that “the purchase agreements contain[ed] a

                                              15
choice-of-law provision that require[ed] the application of Minnesota law and its strong

interest in prohibiting champerty, regardless of which court decide[d] the case.” Id.

       The Fountain court concluded that the local public-interest factor did not weigh

against enforcing the forum-selection clause, given the parties’ choice of Minnesota law.

Id. The federal court reasoned that “[i]n the end, it [was] likely that an Illinois court

applying Illinois choice-of-law principles would enforce the choice-of-law provision and

analyze [the] claims under Minnesota law” and that “[e]nforcement of the forum-selection

clause would therefore not thwart Minnesota public policy against champerty, diminishing

any benefit to the public in keeping this case in this District.” Id.

       The parties’ framing of the public-interest factor in Fountain is similar to the district

court’s reasoning here: Minnesota has a local interest in deciding whether the parties’

agreement is void under Minnesota’s policy against champerty.                 But unlike the

circumstances in Fountain, the choice-of-law provision in this case does not select

Minnesota law; it requires application of New York law. Although a New York statute

prohibits champerty, its prohibition is narrower than Minnesota’s common-law approach.

See N.Y. Jud. Law § 489 (McKinney 2016) (providing that no corporation or association

“shall solicit, buy or take an assignment of, or be in any manner interested in buying or

taking an assignment of a bond, promissory note, bill of exchange, book debt, or other thing

in action, or any claim or demand, with the intent and for the purpose of bringing an action

or proceeding thereon”); Maya Steinitz, Whose Claim is this Anyway? Third-Party

Litigation Funding, 95 Minn. L. Rev. 1268, 1289-90 (2011) (noting that Minnesota

represents those states that continue to “rigorously apply” champerty restrictions, whereas

                                              16
New York represents those states that, while not abandoning the champerty doctrine, “have

taken a cautious approach to its application”).

       Prospect notes that “both lower courts have declined to determine choice of law at

this time” and that Maslowski has the right to “argue for the application of Minnesota law

in [the New York] forum.” Prospect argues that the “record does not contain any evidence

that the New York court will improperly interpret Minnesota law should it determine that

Minnesota law applies, nor is it appropriate for the Minnesota court to make any such

assumption.” However, Prospect also argues, “When read together, the choice of law

clause and the choice of forum clause make clear that respondent agreed to submit to the

New York courts and New York Law.” Given the choice-of-law provision in this case—

and Prospect’s intent to enforce it—enforcement of the forum-selection clause could be the

first step in thwarting Minnesota’s policy against champerty. Unlike the circumstances in

Fountain, there is, therefore, a benefit to the public in keeping this case in Minnesota.

       We recognize that the current rule favors enforcement of forum-selection clauses

and that there are important reasons to honor such agreements. See Hauenstein, 320

N.W.2d at 889. But in this particular case, the decision whether the parties’ agreement

violates Minnesota’s policy against champerty has the potential to expose personal-injury

actions in Minnesota to the negative effects of champerty. Given that potential, Minnesota

has a strong local interest in applying its prohibition against champerty in this case.

       In sum, the district court did not abuse its discretion by refusing to enforce the

forum-selection clause in the parties’ agreement based on Minnesota’s local interest against

champerty. The district court’s decision finds support in United States Supreme Court and

                                             17
Minnesota Supreme Court precedent. We therefore affirm the district court’s refusal to

enforce the forum-selection clause.

                                              II.

       Prospect contends that the district court abused its discretion by enjoining it from

prosecuting its New York action. “It has long been the law in Minnesota that a court may

enjoin a party over whom it has in personam jurisdiction from pursuing similar litigation

in another court.” First State Ins. Co. v. Minn. Mining & Mfg. Co., 535 N.W.2d 684, 687

(Minn. App. 1995), review denied (Minn. Oct. 13, 1995); see Hawkins v. Ireland, 64 Minn.

339, 344, 67 N.W. 73, 75 (1896) (stating that Minnesota courts may restrain its citizens

from pursuing actions in other state courts “whenever the facts of the case make such

restraint necessary to enable the court to do justice, and prevent one citizen from obtaining

an inequitable advantage over other citizens”); Freick v. Hinkly, 122 Minn. 24, 26, 141

N.W. 1096, 1096 (1913).

       Historically, Minnesota courts considered principles of comity and equity when

determining whether to issue an anti-suit injunction. See, e.g., Doerr v. Warner, 247 Minn.

98, 109-10, 76 N.W.2d 505, 514 (1956) (upholding anti-suit injunction partly because

trustee acted in “calculated and systematic” manner to deprive Minnesota court of

jurisdiction and because Minnesota court was first to acquire jurisdiction). Currently, this

court applies a three-part substantial-similarity test that assesses (1) the similarity of the

parties; (2) the similarity of the issues; and (3) the capacity of one action to dispose of the

action to be enjoined. First State, 535 N.W.2d at 687. The decision whether to grant such

                                              18
an injunction is left to the district court’s discretion and will be upheld absent a clear abuse

of that discretion. Id.

       The district court concluded that the New York and Minnesota actions involve

similar parties. Prospect concedes that this part of the test is satisfied. As to the similarity

of the issues, the district court acknowledged that Prospect made additional claims against

Maslowski in the New York action that are not included in the Minnesota action. Despite

these additional claims, the district court determined that because the “‘paramount and

threshold’ issue in both actions is the enforceability of the subject agreement” and Prospect

can raise all of its claims against Maslowski in Minnesota in subsequent pleadings, the

issues in both cases are substantially similar. Based on the similar parties and the

paramount and threshold enforceability issue, the district court concluded that resolution

of this action would dispose of the New York action and that “an injunction is necessary

to protect the jurisdiction of the Minnesota courts to decide whether agreements like the

subject agreement are champertous and unenforceable in Minnesota.”

       Prospect argues that the district court erred by finding that the two actions involve

similar issues because the “claims in the New York Action are distinct, and include not

only additional contract claims, but quasi contract claims and tort claims.” This court has

previously upheld a district court’s finding of an identity of issues where two actions shared

a “‘paramount and threshold’ issue of insurance coverage” and additional tort claims

“stem[med] from the central contract action and could still be raised in Minnesota in

subsequent pleadings.” Id. at 687, 689. Because the paramount and threshold issue in both

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actions here is the enforceability of the funding agreement, the district court did not err by

determining that the two actions involve similar issues.

       Prospect further argues that because “there are many additional elements raised in

the New York Action which have no bearing on the Minnesota Action,” resolution of the

Minnesota action would not dispose of the New York action. But all of Prospect’s New

York claims are directly related to enforceability of the funding agreement. And, as the

district court noted, Prospect can raise claims related to that central issue in subsequent

pleadings in the Minnesota action. The district court therefore did not err by concluding

that the third part of the substantial-similarity test is satisfied.

       In addition to arguing that the district court erred in its application of the substantial-

similarity test, Prospect argues that “[c]omity and equity support deference to the New

York court, and the district court abused its discretion by refusing to defer to the first-filed

action.” As to comity, Prospect relies on the “first-filed rule,” which provides:

                       Where two actions between the same parties, on the
               same subject, and to test the same rights, are brought in
               different courts having concurrent jurisdiction, the court which
               first acquires jurisdiction, its power being adequate to the
               administration of complete justice, retains its jurisdiction and
               may dispose of the whole controversy, and no court of
               coordinate power is at liberty to interfere with its action. This
               rule rests upon comity and the necessity of avoiding conflict in
               the execution of judgments by independent courts . . . .

State ex rel. Minn. Nat’l Bank of Duluth v. Dist. Ct., 195 Minn. 169, 173, 262 N.W. 155,

157 (1935) (quotation omitted).

       However, this general rule does not apply when the same cause of action is pending

before courts which do not share concurrent jurisdiction, such as courts of different states.

                                                20
St. Paul Surplus Lines Ins. Co. v. Mentor Corp., 503 N.W.2d 511, 515 (Minn. App. 1993).

In such circumstances, the actions may proceed independently of each other and the rules

of res judicata will generally be applied with regard to the first suit to be concluded. Id.

Because the Minnesota and New York courts do not have concurrent jurisdiction, the

district court did not abuse its discretion by refusing to defer to the New York action under

the first-filed rule.

       As to comity and equity in general, the district court noted that it fundamentally

disagrees with the New York Supreme Court regarding the enforceability of the forum-

selection clause.8 The district court also noted that Maslowski is a Minnesota resident, the

underlying personal-injury claim arose in Minnesota and is venued in a Minnesota court,

the case “raises significant issues regarding whether Minnesota’s long-standing prohibition

against champerty and maintenance is violated by the terms of the subject agreement,” and,

if the funding agreement is champertous and enforced by a New York court, the effects of

its enforcement will be felt within Minnesota’s legal system. The district court explained:

               Enforcement of this agreement by a non-Minnesota court
               would encourage [Prospect] and other companies that sell pre-
               settlement funding products to take pains to avoid any
               possibility of review by Minnesota courts, while continuing to
               sell such products in Minnesota, thus depriving the Minnesota
               courts of their authority to determine what constitutes
               champerty for purposes of such agreements as they affect
               Minnesota lawsuits.

8
 As we noted above, the New York Supreme Court, Appellate Division, reversed the New
York Supreme Court’s ruling that the forum-selection clause is enforceable.

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When weighing the equities, the district court found that Prospect “acted ‘in a calculated

and systematic manner’ to deprive the Minnesota courts of their jurisdiction to determine

whether pre-settlement funding contracts affecting Minnesota lawsuits are champertous.”

       Prospect assigns error to the district court’s findings regarding its actions and

motivation. However, Prospect cannot dispute—and indeed argues—that the purpose of

its forum-selection clause and choice-of-law provision is to ensure application of New

York law instead of Minnesota law. One of Minnesota’s earliest cases regarding anti-suit

injunctions states:

              [T]o justify enjoining the prosecution of a foreign suit begun
              before any proceedings were taken in the home courts, it must
              appear that the foreign suit will result in evading the effect of
              some local law, or in securing some other inequitable
              advantage, or in imposing some inequitable disadvantage.

Freick, 122 Minn. at 24, 141 N.W. at 1096 (emphasis added).

       Because equity supports an anti-suit injunction when a party attempts to evade the

effects of Minnesota law and Prospect admittedly attempts to avoid Minnesota’s law

against champerty, we need not determine whether the district court erred in finding that

Prospect otherwise acted in bad faith. The district court’s well-reasoned analysis assures

us that the district court did not err in concluding that equitable principles favor maintaining

the suit in Minnesota.

                                       DECISION

       The district court did not abuse its discretion by refusing to enforce the forum-

selection clause in the parties’ agreement based on Minnesota’s local interest against

champerty. In addition, the district court properly applied the substantial-similarity test, as

                                              22
well as principles of comity and equity, and did not abuse its discretion by issuing an anti-

suit injunction enjoining Prospect from prosecuting its New York action against

Maslowski.

       Affirmed.

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