Update (June 2, 2017): The prohibition of “champerty” — the sale of a share of one’s interest in a lawsuit to “a stranger” — may seem antiquated to many (and bad policy to some) but it is clearly alive and well in Minnesota.
In the post below, we were critical of Minnesota courts’ prohibition of “champerty.” Prospect Funding sought Minnesota Supreme Court review of an adverse decision in which the Court of Appeals identified a “strong public policy” against champerty. Recently, the Minnesota Supreme Court sided with Ms. Maslowski and rejected Prospect Funding’s petition for further review.
Original Post (February 15, 2017): “Champerty” is “an 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.”
Sound familiar? Ever heard of a “contingent fee agreement”?
Contingent fee litigation, in which lawyers recover for their time by taking a percentage of the litigant’s recovery is NOT considered “champerty.” Apparently, lawyers are not considered “strangers” to the lawsuits in which they claim a contingent fee interest. That is convenient. No one questions the legality and propriety of lawyers’ contingent fee agreements.
“The general purpose of the law against champerty…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. 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.”
But wait. Hold on. When a court steps in to void a contract between two sophisticated private parties, who’s the officious intermeddler again? “Stirring up strife”? “Vexatious litigation to disturb the peace”? “Intrusion in the troubles of others”? Give us a break. None of these characterizations correspond, even remotely, to reality.
In reality, the controversy of “litigation funding” is all about money and has nothing to do with trouble-making.