© 2015 The Texas Lawbook.
By Mark Curriden
(March 9) – A Delaware court ruled Wednesday that a business suing another business was within its legal means when it contracted with a litigation finance company to help pay the cost of going to trial.
Delaware Superior Court Judge Jan. R. Jurden decided that Boston-based Charge Injection Technologies (CIT) did not violate the state’s prohibition against “champerty and maintenance” when it engaged a third-party to finance the litigation.
The 13-page opinion released Wednesday is believed to be the first such ruling issued by a judge in the U.S.
The issue arose in a nine-year civil dispute in which CIT accused E.I. DuPont De Nemours of wrongfully disclosing confidential information about CIT technology in violation of multiple agreements between the two companies.
In June 2012, CIT signed a “forward purchase agreement” with London-based Burford Capital that called for Burford to pay the expensive litigation costs in the battle against DuPont.
In return, Burford would receive a percentage of any future proceeds of the litigation and a security interest in CIT’s claim as collateral.
Lawyers for DuPont objected, arguing that the “FPA is champertous because it provides Burford, a disinterested third-party, with de facto control over the litigation,” according to court documents.
DuPont argues that, “CIT has signed away all rights to litigation proceeds and has no real interest remaining in this litigation.”
Judge Jurden rejected the argument, ruling that “CIT is the bona fide owner of the claims in this litigation and Burford has no right to maintain this action. In this case, there was no assignment.”
The common law doctrines of champerty and maintenance originated in Medieval England in response to the practice of feudal lords and wealthy people financing litigation claims against their enemies.
“Because kings soon found themselves the target of this vexatious litigation, and because of a distaste for litigation in general, laws against champerty and maintenance were born,” Judge Jurden wrote, citing a 1992 legal journal on the subject. “The historical justification for prohibiting any form of champerty and maintenance was to prevent disinterested third-parties from stirring up or encouraging fraudulent and frivolous lawsuits.”
“This is an important ruling for CIT, a small company that would be hard-pressed to match DuPont’s resources in litigating its claims without access to litigation funding,” Alavi said. “We are pleased the Judge Jurden recognized that CIT’s arms-length litigation funding agreement does not violate the ancient doctrine of champerty and maintenance.”
In a written statement to The Texas Lawbook, Burford officials said the decision “simply reaffirmed what was already clear – that litigation finance as practiced by Burford has nothing to do with the “ancient” and “feudal” practices of maintenance and champerty.
“What this case illustrates more clearly is the need for litigation finance and the normal course of business obstructionism of companies like DuPont when they are litigation defendants,” Burford said in the written statement.
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