Legal Definitions - champertous

Champertous

The term champertous describes an agreement, contract, or action that involves champerty. Champerty is a specific type of arrangement where a third party, who is not directly involved in a lawsuit, agrees to finance the litigation (pay for legal fees, court costs, expert witnesses, etc.) in exchange for a share of any money or property recovered from that lawsuit. Historically, such agreements were viewed with suspicion because they could encourage unnecessary lawsuits or give an outside party undue influence over legal proceedings.

Here are some examples to illustrate the concept:

• Example 1: Litigation Funding for a Business Dispute

  A small tech startup believes a larger competitor stole its intellectual property and wants to sue, but lacks the funds for a lengthy legal battle. A specialized litigation finance firm offers to pay all the startup's legal expenses, including attorney fees and court costs, in exchange for 35% of any settlement or judgment the startup receives. This agreement would be considered champertous because the finance firm is an outside party funding the lawsuit for a share of the potential recovery.

• Example 2: An Investor Funding a Class Action Lawsuit

  A group of consumers wants to file a class action lawsuit against a major pharmaceutical company for alleged harm caused by a defective drug. An investment group, seeing the potential for a large payout, offers to cover all the significant costs associated with the class action, such as expert witness fees and extensive discovery, on the condition that they receive 25% of any damages awarded to the plaintiffs. This arrangement is champertous because the investment group, not being a plaintiff, is financing the litigation in anticipation of a share of the outcome.

• Example 3: A Friend's Agreement to Fund a Personal Injury Claim

  After a serious car accident, an individual has significant medical bills and lost wages but cannot afford to hire a lawyer or pay court filing fees for a personal injury claim. A wealthy friend offers to pay all the legal expenses for the lawsuit, including the lawyer's hourly rate and court costs, with the understanding that if the lawsuit is successful, the friend will receive a substantial percentage of the compensation awarded. This agreement between the friend and the injured party would be deemed champertous, as the friend is an external party funding the litigation for a portion of the potential recovery.