Opinion ID: 1464318
Heading Depth: 2
Heading Rank: 5

Heading: New York Court of Appeals' Response

Text: The New York Court of Appeals accepted our certification and answered the second question and both parts of the third question in the negative, rendering it unnecessary to answer our first inquiry. Trust v. Love Funding, 13 N.Y.3d at 198, 890 N.Y.S.2d at 380-81, 918 N.E.2d 889. In responding to our second question, the Court of Appeals emphasized that New York's prohibition of champerty has always been `limited in scope and largely directed toward preventing attorneys from filing suit merely as a vehicle for obtaining costs.' Id. at 199, 890 N.Y.S.2d 377, 918 N.E.2d 889 (quoting Bluebird Partners, L.P. v. First Fidelity Bank, N.A., 94 N.Y.2d 726, 734, 709 N.Y.S.2d 865, 870, 731 N.E.2d 581 (2000)). The Court of Appeals distinguished between acquiring a thing in action in order to obtain costs, which constitutes champerty, and acquiring it in order to protect an independent right of the assignee, which does not. Trust v. Love Funding, 13 N.Y.3d at 199, 890 N.Y.S.2d at 382, 918 N.E.2d 889. [I]f a party acquires a debt instrument for the purpose of enforcing it, that is not champerty simply because the party intends to do so by litigation. Id. at 200, 890 N.Y.S.2d at 382, 918 N.E.2d 889. Noting our observation that the Trust had a preexisting proprietary interest in the Arlington Loan, the Court of Appeals concluded that, [i]f, as a matter of fact, the Trust's purpose in taking assignment of UBS's rights under the Love MLPA was to enforce its rights, then, as a matter of law, given that the Trust had a preexisting proprietary interest in the loan, it did not violate Judiciary Law § 489(1). Id. at 202, 890 N.Y.S.2d at 383, 918 N.E.2d 889. Our third question asked whether the Trust's intent either to recover more in damages from a lawsuit than from a potential settlement or to be indemnified for reasonable costs and attorneys' fees evidenced champerty. The New York Court of Appeals concluded that it did not. To acquire indemnification rights to the costs of past litigation is not to acquire a thing in action in order to obtain costs from prosecution thereon. Similarly, no New York case has been brought to our attention that stands for the proposition that it is champerty to settle a dispute by accepting a transfer of rights that has the potential for a larger recovery than one had demanded as a cash settlement. Id. at 202-03, 890 N.Y.S.2d at 384, 918 N.E.2d 889 (footnote omitted).