Champerty
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Champerty is the practice of a third party participating in a lawsuit in order to share in the proceeds. Among laypersons, this is known as "buying into someone else's lawsuit."
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[edit] Discussion
At common law, champerty is a type of maintenance in which a non-party promises to help a litigant by participating in a lawsuit in exchange for a part of the outcome of the case. Maintenance is defined as providing help to a litigant who does not have a bona-fide interest in the case.
The prime example of an unlawful champertous contract at common law is a contingent fee agreement between an attorney and a client. Another example is when a plaintiff would assign his rights in a lawsuit to someone with no connection to the case.
Some jurisdictions abolished the action for champerty, while other jurisdictions lost the tort to the cavernous expanses of time and moldy case books. Champerty became a non-issue, a bizarre and quirky ancient tort that had no place in modern law, since the majority of champertors were attorneys who became increasingly regulated in the mid to late 19th century by binding ethical codes and canons promulgated by the courts.
However, the practice of champerty by non-attorneys came back in vogue in the early 1990s. Accident victims were lured by television and radio commercials promising them that they would have their case evaluated by an expert and receive risk-free money before trial. The finance companies also promised that if the case was lost, the victim would not owe them any money. Typically, the amount of money advanced to the accident victim was a fraction of the total judgment granted by the court.
Champerty has been described as vile and odious.[citation needed] It has also been described as being manifestly against the public interest and as an offense to public justice.[citation needed] Champerty has also been blamed for fostering frivolous lawsuits and perverting the purposes of providing remedies to wronged parties.[citation needed]
On the other hand, champerty has been championed as a creative and positive economic tool that allows worthwhile cases to come to trial.[citation needed] Champerty allows indigent plaintiffs access to expensive and expansive legal services they might not otherwise be able to afford.
[edit] Current State of Law
The current state of the law of champerty is in flux. The practice is prohibited in some jurisdictions; in others, there is no recent case law and judges have to re-analyse old cases. In most jurisdictions, judges have the responsibility for policing contracts which would run afoul of ethical guidelines or would cause the manifest injustice that enforcing a champertous contract would ential. A small minority of jurisdictions have legalized champertous contracts.
It is also useful to note that what may generally be categorized as champerty may not be so clear. At one end of the spectrum would be the assignment of a cause of action relating to a personal tort. The accident example above arguably only narrowly avoids being clearly champertous in that an evaluation "service" is being performed.
On the other end, the assignment of a cause of action which is subsidiary, yet integrally related to a bona fide transfer of a property or other right should not be champertous. As an example, the assignment of a patent may include the transfer of a right to sue for past damages. In this case, certain jurisdictions recognize that the assignment of all rights associated with a species of intellectual property may for practical purposes include the right to sue. Therefore, these transactions will not constitute champerty.
[edit] See also
- Barratry
- Maintenance
- Restitution Transfer and Recoupment
[edit] For Further Reading
Rancman v. Interim Settlement Funding Corp., 99 Ohio St.3d 121 (2003) http://pdfserver.amlaw.com/nlj/072803financing-decision.pdf
"VENTURE CAPITALISM FOR LAWSUITS? Why It Doesn't Exist, And What Alternatives For Financing Exist Instead" http://writ.news.findlaw.com/sebok/20010212.html
"The Continuing Struggle Over Litigation Funding"
http://writ.news.findlaw.com/sebok/20030616.html
"Defense of champerty no longer valid in South Carolina" http://www.findarticles.com/p/articles/mi_qa3898/is_200010/ai_n8910306
"Ethics of Law Loans in the Post-Rancman Era" http://www.findarticles.com/p/articles/mi_qa3975/is_200407/ai_n9454343
"Broad prohibition, thin rationale: The "'acquisition of an interest and financial assistance in litigation' rules" http://www.findarticles.com/p/articles/mi_qa3975/is_200301/ai_n9193351
" Selling Your Torts:Creating a Market for Tort Claims and Liability" 33 Hofstra L. Rev. 1543 http://www.hofstra.edu/PDF/law_lawrev_marcushamer_vol33no4.pdf
