![handle is hein.journals/proflw15 and id is 1 raw text is: the
PR ESS10 LAWYER
..................................... .......................................................................................................... I ......................... ...... .............................................
American Bar Association Center for Professional Responsibility - Standing Committee on Professionalism
Taming the Champerty Beast:
A Proposal for Funding Class Action Plaintiffs'
Ronald C. Minkoff and Andrew D. Patrick
Being a plaintiff's class action lawyer can
make you very rich, but no one ever said
it was easy. You first have to find willing
class representatives with a decent claim.
But class representatives generally lack
the resources to pay the enormous expenses of
moving the case forward,2 so you have to fund the
cases yourself or get other lawyers to help.3
Meanwhile, deep-pocket defendants often use
their superior resources to turn the case into a bat-
tle of attrition. Faced with this, you may be forced
to settle quickly or to not go forward at all, no mat-
ter how strong the class's claim.4
To help eliminate this disparity in resources,
hundreds of litigation funding companies have
sprouted nationwide in recent years.5 Some of
these companies lend money at high interest rates
to plaintiffs' lawyers or their clients. Others are lit-
igation syndication companies that raise money
from investors and provide it in exchange for
either a portion of the recovery or a flat amount at
the end of the case.6
In June 2003, however, the Supreme Court of
Ohio dealt a severe blow to the litigation funding
industry. In Rancman v. Interim Settlement
Funding Corp.,7 the Court ruled that a funding
company's advance to a litigant in return for a per-
centage of the recovery was void under principles
of champerty and maintenance.
In this paper, we will show that the Rancman
holding is out of step with the times, that court rul-
ings and legislative decisions in other states have
severely limited champerty prohibitions in order
to permit third-party litigation funding, and that
champerty and maintenance rules are no longer
needed to protect against the evils that supposedly
result from such funding. We will also propose a
Ronald C. Minkoff is a partner and Andrew D. Patrick is an associate at
Frankfurt Kurnit Klein and Selz PC, New York, NY.
new funding mechanism for class action plaintiffs
that fully answers the concerns raised by champer-
ty adherents while protecting the interests of the
parties and the integrity of the courts.
The Definition and Origins of Champerty and
Maintenance
Maintenance is an officious intermeddling in
a suit that in no way belongs to one, by maintain-
ing or assisting either party with money or other-
wise, to prosecute or defend [the suit].8 Thus, any
third-party support for a lawsuit theoretically con-
stitutes maintenance. Champerty is a form of
maintenance9 that involves maintaining a suit in
return for a financial interest in the outcome.10
Because money is solicited from disinterested
parties to fund litigation, usually in return for a
share of the proceeds, syndicated lawsuits, by
definition, constitute champerty.
The prohibitions on champerty and maintenance
have their roots in medieval England.12 In the
Middle Ages, feudal lords and other wealthy indi-
viduals would fund land claims belonging to oth-
ers-usually the poor and dispossessed-against
their political and personal enemies, in return for
receiving part ownership of the landed estate. These
champertors had paid retainers-known as
maintainers--who would prosecute the suits ruth-
lessly on their behalf, taking all necessary steps to
win.'13 Because kings soon found themselves the
target of this vexatious litigation, and because of a
general distaste for litigation in general, laws against
champerty and maintenance were born.14
Given its British origins, it is not surprising that
state laws or court rules prohibiting champerty
have existed since our nation was established.
Nevertheless, the [champerty] doctrine has a...
checkered history in the United States.15 Several
states, including South Carolina, Massachusetts,
Continued on page 4
Spring 2004
Volume 15
Issue Number 1](ViewImageLocal?handle=hein.journals/proflw15&div=1&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most