HEIR HUNTING.

• Author: Horton, David

INTRODUCTION 384 I. THE HISTORY OF HEIR HUNTING 393 A. Early Hostility 393 B. Modern Confusion 400 1. Champerty's Twilight 400 2. Legal Ethics 402 3. Unclaimed Property Statutes 404 4. Litigation Funding 407 II. EMPIRICALLY ASSESSING HEIR HUNTING 410 A. Data Description 410 B. General Results 411 III. POLICY IMPLICATIONS 419 A. Champerty 419 1. Purposes of Champerty 420 a. The Litigiousness Theory 420 b. The Interference Theory 426 2. Disadvantages of Champerty 428 B. Representation 430 C. Legislation 434 1. Fee Caps 435 2. Time Limits 438 CONCLUSION 439 INTRODUCTION

On January 25, 2016, Henry Imperial died intestate in San Francisco, California. (1) His property was worth more than $425,000, but none of his relatives came forward to claim it. (2) Thus, on April 29, the Public Administrator--an agency that handles the cases of decedents who have no apparent kin--filed a petition in probate court to administer Henry's estate. (3)

One day later, the phone rang in Hal Imperial's house in Oak Run, a rural area north of Sacramento. (4) The caller told Hal that if he was Henry's son, he "would be entitled to a beneficial interest in [Henry's] estate, but only if he acted immediately." (5) The caller said that he would send paperwork that Hal needed to sign and return as soon as possible. (6) Hal, whose poor health prevented him from working, followed the caller's instructions. (7) On May 3, he signed a contract with a company called American Research Bureau (ARB). (8) ARB promised to help Hal obtain his inheritance in return for an assignment of twenty-five percent of his share of the property. (9) On May 6, Hal's brother, Robert Imperial, a laborer who lived thirty-five miles east of San Francisco, signed the same agreement with ARB. (10)

Yet Hal and Robert did not need ARB's assistance. On May 23, three weeks after the phone call, the probate court granted the Public Administrator's petition to be appointed administrator of Henry's estate. (11) Like all administrators, the agency owed a duty to try to find Henry's heirs. (12) The Public Administrator would have had little difficulty locating Hal and Robert, who shared Henry's surname and lived in the same geographic area. But by each signing away a quarter of their birthright to ARB, Hal and Robert forfeited a total of $100,000. (13)

Rosemary Elizabeth Poston died intestate in San Francisco on May 9, 2016. (14) Her property, worth $2,000,000, was going to pass to her three surviving children. (15) Her sons, Michael and Robert, lived nearby and were handling her estate, but her daughter, Laurie Montoya, had long been estranged from the family. (16) Montoya had even lost contact with her own children. (17) Michael and Robert were unable to notify Montoya of the probate proceeding. (18) As a result, they filed a Declaration of Diligent Search with the court, explaining that they had examined telephone directories and records from jails, probation offices, and hospitals, but had no "current information on [Montoyas] whereabouts." (19)

This document captured the interest of Michael Heath, the President of Trust and Estate Search LLC (TES). (20) Using his company's proprietary database, Heath discovered Montoya's Social Security number and former address. (21) He then hired Ed Kelly, a private investigator, to "hit the streets" and find Montoya. (22) Health gave Kelly a letter to present to Montoya that described his business:

Trust & Estate Search has located money to which we believe you are entitled. We make our living locating missing people and unclaimed assets. For the work and expense of locating such assets and the rightful beneficiaries, we enter into an agreement with such people to be paid only from a portion of the asset that we have located for them. We are trying to get money to you that we believe is rightfully yours; we are not, and will not, ask for money from you. (23) Heath also asked Kelly to give Montoya a "gift" of $1,000 and a contract to sign. (24)

Kelly tracked down Montoya on skid row in San Francisco. (25) He allegedly told Montoya that he worked for her family, but that they did not want her to contact them. (26) Montoya claims that Kelly presented her with a one-page document that, he told her, would pass her share of Poston's estate to Montoyas children, allegedly offering her $1000 to sign. (27) Montoya did not have her reading glasses, but she trusted Kelly, accepted the offer, and took the cash. (28) But as Montoya later discovered, the document actually assigned 29%--totaling more than $111,000--of her inheritance to TES. (29)

In 1995, Carlos Colson died in San Franciscoko The Public Administrator opened a probate case, but could not find Colson's kin. (31) In 1997, Colson's mother, Evangelina Osorno Menchaca, came out of the woodwork to claim his estate. (32) Then, just as quickly as Menchaca had emerged, she vanished. (33) For two decades, Colson's property sat in limbo, on the verge of escheating to the state. (34)

Meanwhile, Estate Research Associates (ERA) was monitoring the Colson case and searching for Menchaca. In 2016, ERA discovered that Menchaca had died intestate in Mexico City some two decades prior, leaving six grandchildren who did not realize that they were entitled to inherit Colson's assets through Menchaca. (35) ERA sold Menchaca's grandchildren this information. (36) Then, in a fourty-five page court filing, ERA produced nineteen exhibits--passports, birth and death certificates, and genealogical charts--that proved its clients' relationships to Colson. (37) For its services, ERA collected 33% of each grandchild's inheritance, for a total of $68,126. (38)

Companies like ARB, TES, and ERA have deep roots in the Anglo-American probate system. Since the 1850s, these "heir hunters" have intervened in cases with unclaimed inheritances. (39) Heir hunters employ a business model that has remained virtually unchanged since the industry's inception. They start by finding decedents whose estates have yet to be distributed. (40) Then they perform research to identify the decedent's heirs, contact these individuals, and offer to reveal the relevant facts about the case and to help them collect in court. (41) In return, heir hunters ask for an assignment of a percentage of the heirs' recovery. (42)

Although heir hunting is pervasive, it has flown beneath the scholarly radar. (43) This inattention is surprising. In the past decade, there has been fierce debate about third party litigation funders: businesses that invest in pending claims. (44) The ancient doctrine of champerty once barred outsiders from encouraging "strife and contention" by buying an interest in a complaint. (45) However, champerty has fallen from favor in some jurisdictions, allowing companies to advance cash to plaintiffs in return for a cut of any future damages or settlement. (46) Dozens of commentators disagree about whether litigation funding facilitates access to justice, (47) exploits consumers, (48) or encourages litigation. (49) But that vast literature has overlooked heir hunting, which established the prototype for litigation funding and raises nearly identical issues. (50) In fact, in sharp contrast to the deluge of law review articles on litigation funding, only two student notes--one from 1953 and the other from 1991--have addressed heir hunting. (51)

In addition, the scholarly neglect of heir hunting is unfortunate because the rules that govern the practice are wildly unsettled. Originally, many heir hunters were scam artists who chased down known heirs before news of the decedent's death arrived through normal channels. (52) Courts invalidated these companies' assignments for champerty (53) or deemed their pseudo-legal services to be the unauthorized practice of law. (54) But starting in the 1990s, the pendulum began to swing in the other direction. Some judges departed from traditional doctrine and enforced heir hunting contracts, (55) finding that they confer "a substantial benefit" (56) and "provide the only means by which those entitled to unclaimed property might learn of their entitlement." (57) That trend generated a sharp split in authority over "[w]hether heir hunters should be viewed as 'self-serving intermeddlers' or the providers of 'useful and necessary service[s]."' (58)

This Article sharpens our understanding of heir hunting by reporting the results of the first empirical study of the industry. The Article's centerpiece is an original dataset of 1,349 probate filings from San Francisco County, California between 2014 and 2016. The Golden State allows heir hunters to collect directly from the estate if a probate court finds that their assignments are fair. (59) As a result, heir hunters routinely file their agreements in the public record. This disclosure norm enabled us to unearth 219 agreements from twenty-seven American states and eleven foreign countries that generated more than $1.5 million in heir hunting fees.

We use this evidence to critique existing regulation of heir hunting and propose reforms. First, we argue that the conventional approach of voiding heir hunting contracts for champerty is defensible but imperfect. Some courts apply champerty to prevent heir hunters from causing or exacerbating probate conflicts, (60) and our logit regression analysis suggests that estates with heir hunters are especially likely to devolve into litigation. Similarly, other judges invoke champerty to "protect[] beneficiaries of estates from... unnecessary expense." (61) We show that these consumer protection concerns are well-founded. Heir hunters often preempt the administrator's efforts to locate the decedent's kin. (62) Like ARB, which contacted Hal and Robert Imperial just one day after their father's probate case began, (63) the vast majority of heir hunters in our data secure contracts before the court even appoints an administrator. By intruding so early in the process, heir hunters provide an unnecessary...