Litigation Finance in Oregon

Oregon is another state that recognizes that the reasons for champerty doctrine ended long ago, making it an archaic relic that has no place in modern law.  This recognition is not a recent one; it came in the nineteenth century, in a case arising from a transaction very much like a modern litigation finance agreement.  There, the Oregon Supreme Court held that such agreements are enforceable.

The case was Brown v. Bigne, 21 Ore. 260, 266, 28 P. 11, 13 (1891). It arose when Bigne was appointed as the executor of the estate of his business partner, Manciet.  Bigne asserted a claim against the estate for his share of the partnership interests, but Manciet’s heirs disputed that claim.  Bigne wanted to pursue legal action against Manciet’s heirs, but he lacked the funds to do so.  He contracted with Brown, assigning Brown half of his proceeds of the legal action in return for an advance of funds to be used in the litigation against Manciet’s heirs.

When Bigne prevailed in the litigation against the Manciets, he refused to pay Brown according to the contract, contending that the agreement was void under the doctrine of champerty.  The trial court rejected Bigne’s argument, ruling that the contract was enforceable.  Bigne took the case to the Oregon Supreme Court.

The Supreme Court began its analysis by recognizing that the contract between Brown and Bigne would have been void under the doctrine of champerty.  But it also noted that there were good reasons to question whether the doctrine should have contemporary application because it was originally designed to prevent members of the nobility from using others’ litigation as an instrument for harassing their enemies.  In this connection, the court considered the modern version of the doctrine and the justifications for it.  As the court explained:

upon modern construction the doctrine of champerty and maintenance as regards a layman is confined to cases where a man for the purpose of stirring up strife and litigation encourages others, either to bring actions or to make defenses which they have no right to make or otherwise would not make; such interference is considered as having a tendency to pervert the course of justice. ( Dorwin v. Smith, 35 Vt. 69; Findon v. Parker, 11 M. & W. 675; Stanley v. Jones, 7 Bing. 369.) The gist of the offense consists in the officious intermeddling in another suit, and contracts not within the mischief to be guarded against should not be held to come within the rule. . . .  The doctrine of champerty is directed against speculation in lawsuits and to repress the gambling propensity of buying up doubtful claims. It is not and never was intended to prevent persons from charging the subject matter of the suit in order to obtain the means of prosecuting it. Id.

 Thus, the court concluded that the doctrine could have no application when a person invested in a well-founded legal claim.  It is a shame that so many contemporary courts and commentators have still not caught up with the Oregon Supreme Court.

Topics:  litigation finance, legal reform, third-party funding, Oregon, champerty

 Works Cited: Brown v. Bigne, 21 Ore. 260, 266, 28 P. 11 (1891)

 

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TownCenter Partners, LLC lead Asset Manager is Mr. Roni A. Elias. From modest beginnings, and with the help of a hand-picked dream team of professionals we have built one of the most dynamic and fastest growing companies in the country. TownCenter Partners LLC(TCP) is a real estate partner and master-planner providing development, leasing, management, and third party services. The company’s demonstrated ability to apply big ideas in creative and innovative ways has played a defining role in the firm’s success. Yet, TCP's most important insight has been the core understanding that it is not sight lines or site plans, but human activity, that defines a space and creates a place.

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