A doctrine with ancient and medieval roots,1 champerty makes illegal an agreement to divide litigation proceeds between the owner of the litigated claim and a party unrelated to the lawsuit who supports or helps enforce the claim.2 The practice is outlawed in New York by Judiciary Law §489, pursuant to which any corporation or association found in violation of the law can be liable for a fine of up to $5,000, and any person, copartnership, corporation, or association found violating the section may be found guilty of a misdemeanor.3 New York Court of Appeals precedent places a high burden of proof on the party asserting champerty, requiring a showing that the purpose of the assignment was the collection of a claim that would not have been prosecuted otherwise.4
A number of recent Commercial Division cases have addressed the assertion of a champerty defense. While most have been cautiously avoiding finding claims champertous, one Commercial Division court recently held that champerty existed where a company and a law firm formed a partnership, the primary purpose of which was to acquire debt instruments and profit from the related litigation.
Recent Precedent
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