EtymologyFrom champartie, from etyl frm champart
- investing money into an individual's law suit.
In common law jurisdictions, maintenance is the intermeddling of an uninterested party to encourage a lawsuit. It is "A taking in hand, a bearing up or upholding of quarrels or sides, to the disturbance of the common right."
Champerty is the maintenance of a person in a lawsuit on condition that the subject matter of the action is to be shared with the maintainer. Among laypersons, this is known as "buying into someone else's lawsuit."
At common law, maintenance and champerty were both crimes and torts, as was barratry, the bringing of vexatious litigation. This is generally no longer so as during the nineteenth century, the development of legal ethics tended to obviate the risks to the public, particularly after the scandal of the Swynfen will case (1856-1864). However, the prinicples are relevant to modern contingent fee agreements between a lawyer and a client and to the assignment by a plaintiff of his rights in a lawsuit to someone with no connection to the case. Champertous contracts can still, depending on jurisdiction, be void for public policy or attract liability for costs.
England and WalesMaintenance and champerty have not been crimes or torts since 1967. However, there are circumstances where a non-party who funds litigation can be liable for costs should the action fail.
United StatesThe 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.
Proponents contend that champerty allows indigent plaintiffs access to expensive and expansive legal services they might not otherwise be able to afford. Opponents note that the ubiquity of attorneys willing to take cases "on contingency" obviates the need for champerty by non-attorneys. The opponents further note that the ethical codes which limit the percentage of recovery which an attorney may charge on contingency are not applicable to non-attorneys, thereby exposing litigants to potentially predatory practices.
Current state of lawThe 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 entail. A small minority of jurisdictions such as New Jersey, do not consider champertous contracts illegal.
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.
- Rancman v. Interim Settlement Funding Corp., 99 Ohio St.3d 121 (2003)
- "VENTURE CAPITALISM FOR LAWSUITS? Why It Doesn't Exist, And What Alternatives For Financing Exist Instead"
- "The Continuing Struggle Over Litigation Funding"
- "Defense of champerty no longer valid in South Carolina"
- "Ethics of Law Loans in the Post-Rancman Era"
- "Broad prohibition, thin rationale: The "'acquisition of an interest and financial assistance in litigation' rules"
- " Selling Your Torts:Creating a Market for Tort Claims and Liability" 33 Hofstra L. Rev. 1543