Litigation Finance in New Hampshire
New Hampshire courts have long disregarded the doctrine of champerty, opening the door for litigation finance agreements. Although New Hampshire case law does not directly address the enforceability of such agreements, relevant case law establishes that those agreements should be enforceable.
Nearly eighty years ago, the New Hampshire Supreme Court held that the doctrine of champerty would not prohibit the validity of an agreement under which an attorney would pay his client’s litigation expenses in return for a promise of repayment that was contingent upon recovery in the cases. There, a client and his attorney, Markarian, entered into an agreement under which the attorney would advance the legal expenses for the client and would be reimbursed out of the funds recovered. Markarian was discharged prior to the completion of the case later sued for his services rendered and money expended on the client’s behalf. The client raised the doctrine of champerty as a defense to the enforcement of the contract.
The court began its analysis by noting the changing attitude toward contracts in champerty, determining that such contracts no longer constituted a violation of public policy. Thus, the court concluded that a contract that was conditioned upon a successful result in litigation would be enforceable. But this ruling only was directly applicable to attorneys’ contingency fee agreements.
The doctrine was re-affirmed a half-century later in Adkin Plumbing & Heating Supply Co. v. Harwell in 1992. As in Markarian, the question in Adkins was about the enforcement of a contingent-fee agreement between a client and an attorney. No cases since Adkin have addressed the question whether New Hampshire law recognized the doctrine of champerty. But two things about the decisions in these cases offer some comfort to those considering entering a litigation finance agreement under New Hampshire law.
First, the rejection of the doctrine of champerty was unequivocal. While some jurisdictions carve out a narrow exception to the doctrine to permit contingent attorneys’ fees, New Hampshire was not so reserved. Second, both of these opinions provide that it is lawful to make a contract duty contingent upon the outcome of litigation. This is one of the fundamental elements of any litigation finance contract, and it is the element that implicates the prohibition on “speculation” in litigation, which is at the core of the doctrine of champerty.
Since this aspect of champerty has been conclusively ruled out in New Hampshire, it seems that there is nothing in the common law to support an argument that litigation finance agreements are void as against public policy.
Topics: litigation finance, legal reform, third-party funding, Michigan, usury, non-recourse financing
