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In recent years, most jurisdictions have relaxed or abolished the prohibitions of champerty, maintenance and barratry, which had historically barred third-party investment in legal claims. 1 These jurisdictions recognize that the original purposes of these prohibitions are outdated and irrelevant to modern day jurisprudence.2
Massachusetts, where LawFunds®' is headquartered, no longer recognizes champerty and its related doctrines. 3 In 1997, the Supreme Judicial Court of Massachusetts abolished the common law doctrines of champerty, maintenance and barratry in Massachusetts noting that:
"As Justice Holmes, then a member of this court, said a century ago: 'It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past.' " Saladini v. Righellis, 426 Mass. 231, 236, 687 N.E.2d 1224 (1997).
In Saladini, the Supreme Judicial Court upheld a third party's agreement to finance a plaintiff's lawsuit in exchange for a percentage of the contingent recovery. Id. at 234. In so doing, the Court noted that "[w]e have long abandoned the view that litigation is suspect, and have recognized that agreements to purchase an interest in an action may actual foster resolution of a dispute." Id.
Following Saladini, the Massachusetts lower courts have consistently recognized the abolition of champerty and its sister doctrines and upheld contingent financing agreements. For example, in 1999, the Appellate Division enforced a plaintiff's assignment of his interest in the proceeds of a personal injury action to secure a loan to a third party. Yung v. Reymonde, 1999 Mass.App.Div. 194 (Aug. 13, 1999), (aff'd. on other grounds, 739 N.E.2d 1122, 1125 (Mass. 2000)). In Yung, the court noted that "the common law rule against champerty was abolished, so that claims financed by others who are not parties to the litigation are legally recognized, even though reimbursement is to come from the proceeds of the litigation." Id.
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"We have long abandoned the view that litigation is suspect, and have recognized that agreements to purchase an interest in an action may actual foster resolution of a dispute."
Massachusetts Supreme Judicial Court
Saladini v. Righellis, 426 Mass. 231, 234 (1997).
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