M.V.B. Collision Inc. v. Allstate Ins. Co., 2009 NY Slip Op 29251 (N.Y. Dist. Ct. 6/10/2009)

• Decision Date: 10 June 2009
• Docket Number: 22783/08
• Citation: M.V.B. Collision Inc. v. Allstate Ins. Co., 2009 NY Slip Op 29251 (N.Y. Dist. Ct. 6/10/2009), 2009 NY Slip Op 29251, 22783/08 (N.Y. Dist. Ct. Jun 10, 2009)
• Parties: M.V.B. COLLISION INC. D/B/A MID-ISLAND COLLISION A/A/O ROBERT HICKEY, Plaintiff(S) v. ALLSTATE INSURANCE COMPANY, Defendant.
• Court: New York District Court

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2009 NY Slip Op 29251

M.V.B. COLLISION INC. D/B/A MID-ISLAND COLLISION A/A/O ROBERT HICKEY, Plaintiff(S) v. ALLSTATE INSURANCE COMPANY, Defendant.

22783/08

District Court of Nassau County, Second District.

Decided June 10, 2009.

Marjorie E. Bornes, Esq., Steven F. Goldstein, LLP.

MICHAEL A. CIAFFA, J.

Defendant moves for an order dismissing the instant action pursuant to CPLR 3211 and 3212. Plaintiff opposes the motion.

The complaint in this case, brought by plaintiff as an assignee, alleges that the assignor's vehicle required extensive repairs following an auto accident, and that defendant was required to pay the fair and reasonable cost of such repairs under an insurance policy covering the vehicle. Defendant allegedly refused to make payment for such repairs, as the insurance policy required.

According to defendant's moving papers, plaintiff, an auto repair shop, acquired the assignment for the "very purpose" of bringing suit on the claim. By so acting, plaintiff allegedly violated New York's Champerty statute (Jud. L. §489) as a matter of law. If the assignment was obtained for such an illegal purpose, defendant contends the assignment would necessarily be judged invalid, and the plaintiff would thus lack standing to bring the action.

Defendant's argument raises a weighty and complex issue under New York Law. The ancient doctrine of "champerty", now codified in Jud. L. §489, prohibits the taking by assignment of a "thing in action, or any claim or demand, with the intent and for the purpose of bringing an action or proceeding thereon." Defendant's allegations of plaintiff's wrongdoing fit squarely within the literal language of this prohibition.

Historically, the doctrine of champerty grew out of an odious practice by medieval speculators akin to "the sin' of usury." See Bluebird Partners, L.P. v. First Fidelity Bank, N.A., 94 NY2d 726, 734 (2000). In its most classic form, a speculator would buy a claim for a fraction of its potential value and agree to bear the expenses of suit in the expectation of earning a windfall profit if the suit succeeded. Id. English law strongly disapproved of the practice. Id. As explained in one early leading treatise: medieval champerty laws were founded on the principal "that no encouragement should be given to litigation" by a stranger "to enforce those rights which others are not disposed to enforce."4 Kent's Commentaries, 509 n.c., quoted in Elliot Assoc. L.P. v. Republic of Peru, 12 F. Supp 2d 328, 350 (SDNY 1998), rev'd on other gnds, 194 F3d 363 (2d Cir. 1999). Such lawsuits, according the Blackstone, "pervert[ed] the process of law into an engine of oppression." 4 Blackstone Commentaries, 135, quoted in Elliot Assoc., supra.

The early precedents from this state's courts interpreted the doctrine in a narrower fashion, largely directed toward attorneys engaged in the practice of filing suits "merely as a vehicle for obtaining costs which, at that time, included attorney's fees," Bluebird Partners, supra. However, from at least 1907 forward, the prohibition against champerty has explicitly applied to assignments obtained by both non-lawyers and corporations. Id.

Without doubt, under current New York Law, the statutory prohibition is applicable wherever an assignment is obtained "for the very purpose of bringing . . . suit." See Bluebird Partners, supra, quoting Moses v. McDivitt, 88 NY 62, 65 (1882). Pending further guidance from the Court of Appeals, it appears that the prohibition applies equally to cases where pursuit of litigation is "at least . . . the primary purpose for . . . entering into the transaction." See Bluebird Partners, supra; but cf Trust for Certificate Holders, et al v. Love Funding Corp., 556 F3d 100 (2d Cir. 2009) (certifying issue for New York Court of Appeals "whether a finding of a primary' champertous intent is legally sufficient to void an assignment under §489(1), or whether a further finding is required that the proscribed intent was [the] sole [purpose]").

In the instant case, defendant points to a series of indicia that the assignment to plaintiff "was clearly designed to buy a cause of action and, in fact, that is its only purpose." Defendant's papers recite the long history of disputes and disagreements between the parties over the applicable labor rate for insured auto repairs, and their inability to resolve the disputes through other means. In the face of this history, defendant observes that plaintiff acquired the assignment just two weeks before the instant action was commenced, and contends from such circumstances that "[t]he absolute, undeniable truth is that the assignment' was created [to] pursue litigation...