Opinion ID: 1388000
Heading Depth: 2
Heading Rank: 4

Heading: The Defense of Champerty

Text: The Warshawskys also argue that SCR may not maintain a lawsuit against them based on its interest in the Notes and Guarantees because that interest was obtained with a champertous purpose in violation of Section 489 of New York's Judiciary Law. Section 489 renders it unlawful for a corporation or association... [to] solicit, buy or take an assignment of ... a bond, promissory note ... or any claim or demand, with the intent and for the purpose of bringing an action or proceeding thereon. N.Y. Jud. L. § 489. [A]n assignment made in violation of [this] statute is void and may not be sued upon. Semi-Tech Litig., LLC v. Bankers Trust Co., 272 F.Supp.2d 319, 331 (S.D.N.Y.2003), aff'd and adopted in relevant part, 450 F.3d 121, 123 (2d Cir.2006) (per curiam). The statute is violated if the `primary purpose ..., if not the sole motivation behind[] entering into the transaction' was bringing suit. Id. (quoting Bluebird Partners, L.P. v. First Fid. Bank, N.A., 94 N.Y.2d 726, 736, 709 N.Y.S.2d 865, 871, 731 N.E.2d 581, 587 (2000)) (ellipsis in original). But if the accused party's primary goal is found to be satisfaction of a valid debt, and the party only intends to bring suit absent full performance of the valid debt, the statute is not violated. Elliott Assoc., L.P. v. Banco de la Nacion, 194 F.3d 363, 381 (2d Cir. 1999) (internal quotation marks omitted). The district court concluded that the Warshawskys had waived the champerty defense by failing to raise it in their answer and found that, in any event, the claim failed on the merits. SCR offered proof, by affidavit, that it attempted to collect the debt without litigation, and that only after the Warshawskys failed to satisfy the debt did SCR decide to bring suit. Unrebutted as it is, we think this is sufficient evidence to support the district court's conclusion as a matter of law that SCR's primary goal was satisfaction of the debt, and, therefore, it did not violate section 489 in obtaining its interest in the Notes and Guarantees and bringing suit thereon. While the Warshawskys point to evidence of the denial of a license in Massachusetts to a company related to SCR because of the company's predatory collection practices, this raises no issue of triable fact as to SCR's intent in acquiring its interest in the Notes and Guarantees. The district court therefore correctly granted summary judgment to SCR with respect to the Warshawskys' claim that SCR's interest in the Notes and Guarantees is not valid because it was acquired in violation of section 489. Because the district court correctly granted summary judgment on the merits, we need not decide whether the court correctly found the argument to have been waived. The Warshawskys had sought to determine the amount of consideration SCR had paid Summitbridge for its interest in the Notes in hopes of demonstrating that it was nominalan indication of a champertous purpose in obtaining them. See, e.g., Aubrey Equities, Inc. v. SMZH 73rd Assocs., 212 A.D.2d 397, 398, 622 N.Y.S.2d 276, 278 (1st Dep't 1995) (finding issue of triable fact where the transfer was for what appears to be a token consideration). But the district court concluded, rightly in our view, that further discovery regarding the amount of consideration SCR paid for the Notes and Guarantees was not warranted. The Warshawskys had adequate opportunity to obtain that information, through discovery and otherwise, and failed to do so.