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15 Prof. Law. 1 (2004-2005)

handle is hein.journals/proflw15 and id is 1 raw text is: Taming the Champerty Beast: A Proposal for Funding Class Action Plaintiffs' Ronald C. Minkoff and Andrew D. Patrick eing 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.11 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 Sprng 2004 Volume 15 Issue Number 1