426 Mass. 231 | Mass. | 1997
The plaintiff, Lisa Saladini, appeals from the decision of a judge in the Superior Court dismissing her complaint, sua sponte, on the ground that a written agreement she had with the defendant, George P. Righellis, was champertous and unenforceable. Saladini had sought a declaratory judgment establishing her rights under the agreement. We granted Saladini’s application for direct appellate review to consider whether we should continue to enforce the doctrine. We rule that the common law doctrines of champerty, barratry, and maintenance no longer shall be recognized in Massachusetts.
I
On September 23, 1992, Saladini and Righellis entered into a written agreement (agreement) pursuant to which Saladini agreed to advance funds to Righellis to allow him to pursue potential legal claims he had arising out of his interest in real estate in Cambridge, known as Putnam Manor. In return, Righellis agreed that, if pursuit of his claims yielded any recovery, the first amount recovered would be used to reimburse Saladini, and that Saladini would, in addition, receive 50% of any net recovery remaining after payment of attorney’s fees. Saladini, herself, had no interest in Putnam Manor.
Saladini thereafter advanced funds to Righellis that he used to retain an attorney under a contingent fee agreement to bring a lawsuit and to pursue his legal claims (Putnam Manor lawsuit). At some point Righellis became dissatisfied with that attorney’s representation and, with the concurrence of Saladini, hired a new lawyer, Robert Potters, to replace him. Righellis signed a new contingent fee agreement with Potters.
The original agreement between Saladini and Righellis did not anticipate retaining a second attorney to represent Righellis in the Putnam Manor lawsuit. Saladini maintains that to deal with this circumstance, she and Righellis agreed that each would pay one-half of the retainer required by Potters, each would pay one-half of the litigation disbursements, and that in all other respects the terms of their original agreement would remain in effect. No new or amended agreement was executed, but Saladini did pay one-half of the retainer to Potters and one-half of the litigation disbursements. All told, Saladini advanced a total of $19,229 to Righellis.
At some point Righellis settled the Putnam Manor lawsuit,
When Saladini became aware of the settlement, she filed suit, seeking to establish her rights under the agreement. She also sought, and a judge in the Superior Court granted, injunctive relief, enjoining Righellis and Potters from disbursing any of the settlement funds until her claims had been adjudicated.
In November, 1995, Righellis filed a motion for summary judgment that Saladini opposed. After reviewing the submissions of the parties, a judge in the Superior Court, sua sponte, invited both parties to submit memoranda on the issue whether the agreement between Saladini and Righellis was champertous. A hearing followed and, in September, 199.6, another judge ruled that the agreement was champertous and unenforceable as against public policy. She ordered that Saladini’s complaint be dismissed in its entirety. A judgment to that effect was entered on September 24, 1996. Saladini appealed. A judge granted Saladini’s motion to continue the preliminary injunction pending her appeal.
n
Champerty has been described as the unlawful maintenance of a suit, where a person without an4nterestJn it agrees to finance the suit, in whole^oiUa-part- in consideration for receiving a .portion of the„nxocee.ds-o£Jhe litigation. See Sherwin-Williams Co. v. J. Mannos & Sons, 287 Mass. 304, 312 (1934). In McInerney v. Massasoit Greyhound Ass’n, 359 Mass. 339, 348 (1971), we described the doctrine as a “narrow and somewhat technical concept,” a type of maintenance that occurs ' when a person engages im-‘-(offi&ious-intermeddling in a suit that no way belongsJp_onc.--hy maintaining or assisting either party with mone^¿_or-otherwise7-4e-&rosecuíe^or defend it.” Manning v. Sprague, 148 Mass. 18, 20 (1888), quoting 4 Blackstone, Commentaries 134.
The doctrine has a long and^ToJhis country, checkered history. The ancient prohibition againstchamperty arose in feudal England. See Radin, Maintenance by Champerty, 24 Cal. L.
We have long abandoned the view thaLliligatjon-is-suspect. and have recognized that agreements to purchase an interest in an action may actually foster resolution of a dispute. Joy v. Metcalf, 161 Mass. 514 (1894). In more recent cases we have questioned whether the doctrine continues to serve any useful purpose. In McInerney, supra at 349, quoting McKinnon, Contingent Fees for Legal Services/Report of the Amencsn Bar
We also no longer are persuaded that the champerty doctrine is needed to protect against the evils once feared: speculation in lawsuits, the bringing of frivolous lawsuits, or financial overreaching by a party of superior bargaining position. There are now other devices that more effectively accomplish these ends. Our rule governing contingéñtfees between attorneys and clients is based on the principle that an attorney’s fee must be reasonable. See SJ.C. Rule 3:05 (6); Berman, supra at 871. We also recognize a public policy against the recovery of excessive fees. Berman, supra at 872 n.7. Additional devices include Mass. R. Civ. R 11, 365 Mass. 753 (1974), providing sanctions for misconduct, and G. L. c. 231, § 6F, regulating the bringing of frivolous lawsuits.
Other States that no longer recognize the doctrine of champerty have continued to scmtinize an agreement to finance a lawsuit with care. See, e.g., Rice v. Farrell, 129 Conn. 362, 365 (1942). We shall do likewise. This means that if an agreement to finance a lawsuit is challenged, we will consider whether the fees charged are excessive or whether any recovery by a prevailing party is vitiated because of some impermissible overreaching by the financier.
The judgment of the Superior Court in dismissing the complaint is vacated, and the case is remanded for further proceedings.
So ordered.
The judge in the Superior Court noted Saladini’s claim that the doctrine of champerty had declined in modem jurisprudence. She concluded, correctly at the time she issued her decision, that the doctrine was still alive in Massachusetts, and she dismissed the entire complaint. We do not address Saladini’s argument that the judge improperly dismissed her claims under G. L. c. 93A, as our decision concerning the enforceability of Saladini’s agreement with Righellis revives the entire action.
This consisted of an initial retainer payment of $12,000 to the first attorney, $3,250 (50% of the retainer payment) to Potters, and an additional $3,979 for expenses relating to the Putnam Manor lawsuit.
In his exhaustive history of champerty and maintenance, Professor Radin traces the concept that only interested parties be present at the determination of a controversy back to ancient Greek communities and through the middle ages. Radin, Maintenance by Champerty, 24 Cal. L. Rev. 48, 48-60 (1935).
For example, we consistently have held that it is not unlawful “to engage in the business of buying choses in action and enforcing them by suit if necessary,” Gill v. Richmond Co-op. Ass’n, 309 Mass. 73, 76 (1941), although under English common law assignments of choses in action are within the scope of champerty. We have not prohibited agreements otherwise champertous where the party has an independent interest in the suit. See Williams v. Fowle, 132 Mass. 385, 388-389 (1882). We also have recognized the validity of contingent fee arrangements with attorneys, which otherwise would be champertous. See McInerney v. Massasoit Greyhound Ass’n, 359 Mass. 339, 349-350 (1971).
In addition Rule 3.1 of the new Massachusetts Rules of Professional Conduct, post 1301 (1998), states that a lawyer “shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that it is
The doctrine of champerty may also be unworkable or have harsh results. Rather than punishing the owner of the legal claim who has entered into a champertous agreement, the doctrine bestows on him a windfall. In this case, for example, Righellis would be permitted to retain the full benefit of the positive result achieved in the Putnam Manor lawsuit, while he would not have to honor his obligations to Saladini, the person whose support made pursuit of the lawsuit possible. A defendant sued in a champerty-supported litigation may not assert the champerty as a defense, Pupecki v. James Madison Corp., 376 Mass. 212, 220 (1978), but a court may refuse to enforce a champertous agreement even where the defense of champerty has not been asserted. Baskin v. Pass, 302 Mass. 338, 342 (1939), quoting Reuter v. Ballard, 267 Mass. 557, 563 (19&9).
Our ruling today should not be interpreted to indicate our authorization of the syndication of lawsuits. See Martin, Syndicated Lawsuits: 1 Illegal Champerty or New Business Opportunity, 30 Am. Bus. L.J. 485, 489-507 (1992); Dobner, Litigation For Sale, 144 U. Penn. L. Rev. 1529 (1996).