Chapter 10 CHAMPERTY & MAINTENANCE

• Jurisdiction: North Carolina

10 CHAMPERTY & MAINTENANCE

A. Definition

Champerty and maintenance are old common-law concepts.¹ They were intended to prevent traffic in doubtful claims and operate on buyers of pretended rights with no relation to the suitor or subject except as a purchaser of the profits of litigation.² The North Carolina Supreme Court has said that the common law "offenses" of champerty and maintenance have been considered and condemned in the state.³ It long ago decided that maintenance is an offence against public justice⁴ and that the English common-law prohibition on champerty prevails in North Carolina.⁵ In a colorful portrayal of the practice, an old federal court decision said:

Champertors are spoken of as pests of society, who were perpetually endeavoring to disturb the repose of their neighbors, and officiously interfering with other men's quarrels. They were punished [in English common law] by a forfeiture of one-third of their goods and perpetual infamy."⁶

Although a federal court described champerty as "a rarely seen civil claim,"⁷ reports of the demise of champerty and maintenance in North Carolina are fallacious, or at least premature, and yet they persist. The federal Fourth Circuit Court of Appeals said that a third-party defendant had rather persuasively documented that "most jurisdictions no longer recognize causes of action for damages based on champerty and maintenance" and that the "champerty and maintenance doctrine remains viable only as a defense in contract actions."⁸ Nonetheless, said the court, the defendant had cited no North Carolina decision formally repudiating champerty and maintenance. The court refused the invitation to "declare the tort dead," saying it did not need to decide "whether the North Carolina Supreme Court would fall into line" because it was thoroughly convinced the tort, "even assuming it still exists," did not apply to the facts before it. In a subsequent federal court action, the plaintiff asserted "champerty and maintenance are dead doctrines in North Carolina." The court responded that the proposition that champerty and maintenance were not dead in North Carolina was "so obvious that it hardly warrants any further explanation."⁹

The terms "champerty" and "maintenance" are generally used together,¹⁰ and the offences are said to be of the same nature,¹¹ although there is a distinction between them. An antebellum decision of the North Carolina Supreme Court referred to maintenance as the "milder offence" and to champerty as being an "aggravated species" of maintenance.¹² In the early twentieth century, the court articulated the difference.

Maintenance is officious intermeddling in a suit that in no way belongs to the meddler, by maintaining or assisting either party to the action with money or otherwise to prosecute or defend it. It is an intermeddling by a mere stranger, without profit.
Champerty is a species of maintenance in which a stranger makes a bargain with a party to an action to carry on the suit at the stranger's expense and to divide the subject of the suit between them if they prevail at law.¹³ It involves an "element of compensation for unlawful interference by bargain for part of the matter in suit or some profit growing out of it."¹⁴ Champerty has also been called "a bargain by a stranger with a party to a lawsuit to bear the costs in exchange for a stake in the outcome."¹⁵

The North Carolina Supreme Court has added that the harsher application of the doctrine has been relaxed and modified so that it is generally accepted that a contract or agreement will not be held within its condemnation unless the interference is clearly officious and for the purpose of stirring up "strife and continuing litigation."¹⁶

Champerty and maintenance are common-law torts.¹⁷ They can be the basis of either a primary claim¹⁸ or a counterclaim.¹⁹ Champerty can constitute a defense to an action brought by a plaintiff to enforce a contract²⁰ or an action based on an assigned claim. While actions arising out of contract can generally be assigned,²¹ a number of North Carolina decisions have said that assignment of a claim for personal injury, as opposed to the proceeds of the claim, gives the assignee control of the claim, promotes champerty, and is void as against public policy.²²

Champerty and maintenance should be distinguished from barratry. Barratry is the "offense of frequently exciting and stirring up suits and quarrels."²³ In 1941, the North Carolina Supreme Court said barratry was a common law offense in full force in the state.²⁴ However, the legislature subsequently codified it in part as a criminal offense,²⁵ after which the Court of Appeals held that since, at common law, barratry was a crime against the Crown that did not support a civil cause of action against a private individual, a civil cause of action for barratry does not exist in North Carolina.²⁶

B. Elements

The elements of maintenance are:

(1) Officious intermeddling in a suit,
(2) That does not belong to the meddler,
(3) By maintaining or assisting either party with money or otherwise to prosecute or defend it.²⁷

Champerty adds the following additional element:

(4) Compensation for unlawful interference by bargain for part of the matter in suit or some profit growing out of it.

Damages is not an element of champerty and maintenance in North Carolina.²⁸

C. Elements Defined

1. Officious Intermeddling in a Suit

In the context of the first element, the term "officious" apparently means "interfering" or "meddlesome." The North Carolina Supreme Court has said the interference must clearly be officious and "for the purpose of stirring up 'strife and continuing litigation.'"²⁹ Thus, a plaintiff's claim failed where she did not point to any evidence that the defendant interfered in her personal injury claim for those obnoxious purposes and, indeed, never alleged the defendant directly attempted to influence her decisions with respect to that claim.³⁰ On the other hand, in an early decision, a defendant agreed to pay the plaintiffs for successfully challenging a will; while the plaintiffs agreed to pay all the costs of the action, they were unsuccessful. In a subsequent action to recover on the agreement, the court said the actions of the plaintiffs constituted officious intermeddling in a suit that in no way concerned them and the courts could not lend their aid to enforce it.³¹

The relationship of attorney and client often justifies giving assistance in lawsuits.³² For example, in DaimlerChrysler Corp. v. Kirkhart,³³ the defendant was licensed to practice law in North Carolina. He brought suit on behalf of a single client against DaimlerChrysler for a statutory violation. In the course of discovery, he learned of and contacted other potential plaintiffs, some of whom subsequently retained him. Plaintiff DaimlerChrysler alleged the defendant attorney used information obtained through discovery to solicit potential clients and violated a statute prohibiting solicitation of legal business. It asserted a cause of action for barratry. The court said a civil cause of action for barratry does not exist in North Carolina, but the related principles of champerty and maintenance do create a civil cause of action that can be brought against another person. To the extent the complaint attempted to state a claim for champerty and maintenance, however, the defendant's conduct was covered by the exception for the relationship between attorney and client.

In an early case, the North Carolina Supreme Court said that "persons standing towards each other in the near relation of father and son, may maintain and assist each other in their suits, by their money, their services, and their influence."³⁴ And, in the later seminal case of Smith v. Hartsell,³⁵ the court in dicta cited authorities cataloguing instances in which parties may assist in a lawsuit. These include relationship by blood and marriage; charitable aid to poor and oppressed litigants; the relationships of landlord and tenant and master and servant; and persons with an interest, either in the subject matter of the litigation or in the question to be determined, whether small or great, certain or uncertain, vested or contingent.

2. Suit Does Not Belong to Meddler

The plaintiff must show the defendant has no interest in the suit.³⁶ An interest in the in subject matter is adequate. For instance, in Smith v. Hartsell,³⁷ a creditor with a valid debt against an intestate decedent did not make a claim against the estate, but made an agreement with the heirs in which they would agree to pay his claim if they recovered. In the creditor's action to recover under the agreement, the defendant heirs argued the agreement was invalid "by reason of stipulations for champerty and maintenance and because it contained an agreement to testify in the courts for a consideration." The court did not agree and said that the plaintiff's interest in the fund and its recovery was sufficient.

The interest apparently needn't be direct. For example, in a case reviewed by the federal Fourth Circuit Court of Appeals,³⁸ two plaintiffs sued to assert their interest in certain stock held by the defendant. They entered into an agreement with a third party named Halloran to sell him an option to purchase the stock, in exchange for which he would reimburse legal fees and expenses incurred by the plaintiffs in bringing suit to establish their right to the stock. The defendant and Halloran were already involved in litigation in New York and the rights to that stock were at issue in that litigation. When the defendant learned of Halloran's role, a third-party complaint was filed accusing Halloran of champerty and maintenance.³⁹ The appellate court found that Halloran's "role in the litigation was hardly champertous" He entered the battle to mitigate the effect of a potential judgment in the New York action filed by the defendant and others and, thus, "had a justification, a verifiable interest, in helping to...