91 F. Supp. 3d 319
N.D.N.Y.2015Background
- Plaintiff sues in NY state court for breach of contract and unjust enrichment over unpaid license fees for flight-simulator software supplied by Binghamton Simulator.
- Binghamton Simulator and Defendant entered a Subcontract on April 21, 2010 to provide software, with SBIR-derived rights for some modules.
- Software consisted of twelve modules; two SBIR modules had special rights; Defendant paid $144,755 for the first unit and $124,000 for the second; the second unit was paid before termination of that subcontract.
- Defendant delivered at least sixteen additional units using the Software; Defendant refused to pay further license fees, and the Army claimed Government Purpose Rights instead of SBIR rights.
- BSC Partners later purchased Binghamton Simulator’s assets and the related claims; Plaintiff acquired the instant action from BSC Partners in 2014 through corporate restructuring involving Kratos; Plaintiff formed to pursue the claims.
- Plaintiff amended complaint omitting DFARS clause 252.227-7014(k)(2) claim; only breach of contract and unjust enrichment remain; Defendant moves to dismiss for lack of standing or compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue under assignment | Plaintiff acquired the causes of action from BSC Partners and thus had standing. | Anti-assignment clause and lack of privity negate standing; assignment violated contract terms. | Standing complicates analysis, but champerty dismissal ultimately bars suit. |
| Champerty under NY law | Plaintiff did not acquire the claims solely for litigation; no champerty since no preexisting proprietary interest. | Transfer was a shell-for-litigation device to sue on a claim. | Champerty barred; assignment violated § 489 and requires dismissal. |
| Arbitration mootness | Arbitration clause could require arbitration per FAA if standing existed. | If proceedings are dismissed for champerty, arbitration is moot. | Arbitration motion denied as moot. |
Key Cases Cited
- Love Funding Corp. v. Merrill Lynch Mortgage Investors, Inc., 13 N.Y.3d 190 (N.Y. 2009) ( champerty doctrine; assignment purpose not to litigate when there is preexisting interest)
- Love Funding Corp. v. Merrill Lynch Mortgage Investors, Inc. (Love III), 591 F.3d 116 (2d Cir. 2010) (empties champerty when assignment pursues legitimate collection of claim)
- Fairchild Hiller Corp. v. McDonnell Douglas Corp., 28 N.Y.2d 325 (N.Y. 1971) (assignment incidental to asset purchase not champertous under certain conditions)
- Koro Co., Inc. v. Bristol-Myers Co., 568 F.Supp. 280 (D.D.C. 1983) (court holds champerty when claim is separated from assets to enable litigation)
- C.U. Annuity Serv. Corp. v. Young, 281 A.D.2d 292 (N.Y. App. Div. 2001) (no assignment void language; no inherent champerty unless explicit)