November 19, 2019 Top Story

No Deal: Appeals Court Strikes Champertous Contract

State policy against champerty prevails over choice-of-law provisions

By Katherine M. Devanney

Forum selection clauses and choice-of-law provisions cannot override a state’s policy against champertous contracts, the Minnesota Court of Appeals held for the second time in three years, invalidating on public policy grounds an otherwise valid litigation funding contract.

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The decisions in Maslowski v. Prospect Funding Partners LLC, et al. confirm that champerty and the related defense of maintenance remain powerful tools for invalidating otherwise properly-negotiated contracts. In the wake of Maslowski, ABA Section of Litigation leaders caution that practitioners should evaluate not only the law they have chosen to apply to their agreement, but also that of the state(s) in which the practical effect of their agreement is likely to be felt.

Maslowski I

In March 2012, Minnesota resident Pamela Maslowski was injured in a motor vehicle accident. She sued for damages and entered into a litigation funding agreement that provided her with $6,000 in exchange for an interest in her personal injury action. The agreement included a choice-of-law provision designating New York law to govern the contract, and a forum selection clause providing that all actions arising out of the agreement would be brought in New York.

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