Champerty, Maintenance, and Barratry

Champerty, maintenance, and barratry are related doctrines that trace their roots back to medieval England. The United States Supreme Court has succinctly described the three doctrines as follows: “Put simply, maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome; and barratry is a continuing practice of maintenance or champerty.” Historically, the doctrines have been justified as necessary to combat the “stirring up” of frivolous or vexatious litigation. Whatever merit this justification may have had historically, it has been largely undermined by the advent of the modern doctrines of abuse of process, malicious prosecution, and wrongful initiation of litigation — all of which more directly provide relief when a third party promotes frivolous or fraudulent litigation.

The doctrines of champerty, maintenance, and barratry have not been adopted into federal law in the United States; at the state level, the picture is mixed. Some states, including California, New Jersey, and Texas (among others) never incorporated the doctrines of champerty, maintenance, and barratry into their state law. Other states have expressly abolished these doctrines by statute or case law. In Massachusetts, for example, the Supreme Judicial Court overturned the doctrine of champerty in 1997, citing the “fundamental change in society’s view of litigation from ‘a social ill, which, like other disputes and quarrels, should be minimized’ to ‘a socially useful way to resolve disputes.’” Other states, such as New York and Illinois, retain prohibitions on champerty, but have construed the doctrines narrowly such that the partial assignment of proceeds in exchange for value (the most typical litigation funding structure) is permissible. In other states, the doctrines of champerty, maintenance, and barratry may apply with greater robustness.

Thus, while in the words of the Ninth Circuit Court of Appeals, “the consistent trend across the country is towards limiting, not expanding” the common law prohibitions on champerty and maintenance, the applicable state law (both statutory and common law) must be analyzed to determine the current status of these doctrines, as well as the viability and preferred structure of a litigation funding investment.