Opinion ID: 221395
Heading Depth: 3
Heading Rank: 3

Heading: Champerty and Maintenance

Text: Champerty generally refers to an agreement in which `a person without interest in another's litigation undertakes to carry on the litigation at his own expense, in whole or in part, in consideration of receiving, in the event of success, a part of the proceeds of the litigation.' Schwartz v. Eliades, 113 Nev. 586, 939 P.2d 1034, 1036 (1997) (per curiam) (quoting Martin v. Morgan Drive Away, Inc., 665 F.2d 598, 603 (5th Cir.1982)). Maintenance refers to a person assisting in litigation in which he has no interest. Vosburg Equip. v. Zupanoic, 103 Nev. 266, 737 P.2d 522, 523 (1987); see also In re Primus, 436 U.S. 412, 424 n. 15, 98 S.Ct. 1893, 56 L.Ed.2d 417 (1978) (Put simply, maintenance is helping another prosecute a suit [and] champerty is maintaining a suit in return for a financial interest in the outcome....). The law on champerty and maintenance begins in antiquity with the Greek view that even a party's advocate should have a personal interest in the litigation, such as family ties. Max Radin, Maintenance by Champerty, 24 CAL. L. REV. 48, 48-49 (1935). [8] In feudal England, clerical opposition to litigation, especially in secular courts; fear that lords would purchase land with clouded title to aggrandize their estates; and concerns that the wealthy would purchase meritorious claims for insignificant amounts from plaintiffs too poor to prosecute them drove royal regulation of champerty and maintenance. Id. at 64-66. In this country, champerty and maintenance exist under the law of many states, but the doctrines are most visible as a contract defense. See Paul Bond, Comment, Making Champerty Work: An Invitation to State Action, 150 U. PA. L. REV. 1297, 1304 (2002) (conducting a fifty-state survey). Del Webb did not assert champerty as a contract defense. Nor is Del Webb a party to the allegedly champertous agreements between Mojave and its homeowners. The district court nonetheless held that under Nevada common law, Del Webb had a valid tort claim for champerty and maintenance for which damages and equitable relief could be awarded. The task of a federal court in a diversity action is to approximate state law as closely as possible in order to make sure that the vindication of the state right is without discrimination because of the federal forum. Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir.1980). Federal courts should hesitate prematurely to extend the law ... in the absence of an indication from the [state] courts or the [state] legislature that such an extension would be desirable. Torres v. Goodyear Tire & Rubber Co., 867 F.2d 1234, 1238 (9th Cir.1989) (certifying a products liability question to the Arizona Supreme Court while recognizing the modern trend favoring expansion of products liability); see also Ryan v. Royal Ins. Co. of Am., 916 F.2d 731, 744 (1st Cir.1990) ([L]itigants who reject a state forum in order to bring suit in federal court under diversity jurisdiction cannot expect that new trails will be blazed.). We conclude that there was no secure basis for the district court to predict that the Nevada Supreme Court would recognize a common-law tort cause of action for damages or equitable relief asserted by a stranger to an allegedly champertous agreement. [9] The Nevada Supreme Court stated a century ago that [t]he great weight of authority is to the effect ... that the rule rendering contracts void for champerty, cannot be invoked except between the parties to the champertous agreement in cases where such contract is sought to be enforced. Prosky v. Clark, 32 Nev. 441, 109 P. 793, 794 (1910). None of the Nevada Supreme Court's cases recognize champerty and maintenance as a tort. William Lyon Homes, Inc. v. Partington, No. 2:09-CV-0473-KJD-GWF, 2010 WL 1292296, at  (D.Nev. Mar. 30, 2010) ([T]here are no reported cases supporting [champerty's] application to tort claims or other affirmative relief....). [10] The district court concluded that NRS 1.030, which provides that [t]he common law of England, so far as it is not repugnant to or in conflict with the Constitution and the laws of the United States, or the constitution and laws of this state, shall be the rule of decision in all courts of this state, requires the application of the common law of champerty as it existed before July 3, 1776 unless the Nevada Supreme Court had expressly rejected it. NRS 1.030 does not call for the rigid application of common law as it existed before July 3, 1776. Rather, courts must interpret the common law in light of relevant conditions, which are not the conditions which existed when the United States Constitution was adopted, or when Nevada gained statehood, or even when NRS 1.030 was first enacted, but conditions which exist today. Rupert v. Stienne, 90 Nev. 397, 528 P.2d 1013, 1017 (1974). Nevada courts have long recognized that many of the conditions recognized as the basis for champerty and maintenance regulation no longer exist. The first Nevada Supreme Court case considering champerty acknowledged that the English doctrine of maintenance arose from causes peculiar to the state of society in which it was established, and that although once rigorously enforced, ... this rigor has... been relaxed [because] ... [t]he apprehension that justice would be trodden down if property in action should be transferred is no longer entertained. Gruber, 23 P. at 862. The Prosky court similarly recognized that [t]he reason for the enactment of the English statutes of champerty and maintenance ha[d] very largely ceased to exist. Prosky, 109 P. at 794. The Prosky court explained, as noted above, that the great weight of authority recognizes champerty and maintenance only as a defense to enforcing a champertous agreement. Id. The Gruber court noted that legal reforms such as the statute of frauds and statute of limitations have all taken place since the law of maintenance was enacted; and all these have contributed to prevent groundless and vexatious litigation. Gruber, 23 P. at 862. Nevada has enacted statutes, rules, and codes of conduct that serve purposes previously addressed by the doctrines of champerty and maintenance. See NEV. R. CIV. P. 11; NEV. R. PROF'L CONDUCT 3.1 (requiring attorneys not to defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous); D.R. Horton, Inc. v. Green, 120 Nev. 549, 96 P.3d 1159, 1162 (2004) (recognizing unconscionability as a bar to a contract's enforcement). Other state courts have relied on similar developments to abolish champerty and maintenance altogether. [11] These developments make it even more difficult to predict that the Nevada Supreme Court would recognize champerty as an affirmative tort. The consistent trend across the country is toward limiting, not expanding, champerty's reach. [12] See, e.g., Toste Farm Corp. v. Hadbury, Inc., 798 A.2d 901, 905 (R.I.2002) (collecting cases). [13] Some states have squarely rejected tort claims based on champerty. [14] Other states have refused to recognize champerty as anything more than a defense by a party to enforcement of the allegedly champertous agreement, implicitly rejecting a broader tort remedy. [15] Only a handful of cases have applied maintenance and champerty as torts in the United States in the last one hundred years. VICKI WAYE, TRADING IN LEGAL CLAIMS 14 (2008). Even those cases have sharply limited the scope of the tort they recognized. Under North Carolina law, for example, an assignment of a claim is not champertous unless the assigned claim is a tort claim; the assignment gives a stranger to the claim control of that claim, not merely the right to any proceeds; and the purpose, not merely the effect, of the stranger's involvement is to stir up litigation. See Charlotte-Mecklenburg Hosp. Auth. v. First of Ga. Ins. Co., 340 N.C. 88, 455 S.E.2d 655, 657 (1995); Odell v. Legal Bucks, LLC, 192 N.C.App. 298, 665 S.E.2d 767, 775 (2008). [A]n outsider's involvement in a lawsuit does not constitute champerty or maintenance merely because the outsider provides financial assistance to a litigant and shares in the recovery. Odell, 665 S.E.2d at 775. Illinois law requires the allegedly improper agreement to have caused meritless litigation. Medallion Prods., Inc. v. H.C.T.V., Inc., No. 06 C 2597, 2007 WL 1022010, at  (N.D.Ill. Mar. 29, 2007) (citing Weigel Broad. Co. v. Topel, No. 83 C 7921, 1985 WL 2360, at  (N.D.Ill. Aug. 21, 1985)). As noted, no Nevada state court has recognized even such a limited tort. The district court's approach nonetheless predicts that the Nevada Supreme Court would recognize a tort action for champerty that would be among the country's most expansive. There was no adequate basis, in short, for the federal district court, applying Nevada law, to recognize a tort claim for champerty as a basis for issuing the injunction in this case. Although the injunction is affirmed in part, that affirmance is not based on the district court's conclusion that the common law of champerty supported this relief. The district court's injunction is VACATED in part and AFFIRMED in part. Each party will bear its own costs on appeal.