Case Note by Jacie L. Bellina
“Charity—not champerty—is at the heart of this case.” The doctrine of champerty, a concept that the courts are not often faced with in the modern day, generally prohibits bargains involving a party to a lawsuit and a stranger for a portion of the judgment proceeds. In Crabtree v. Allstate Property & Casualty Insurance Co., a seemingly simple personal injury case transformed into a debate about officious intermeddling in litigation, the answer to which may have wide-ranging implications for justice and common commercial exchanges in litigation. While champerty statutes may still have a valid place in the law, the Mississippi Supreme Court erred in its decision based on statutory construction of the plain language, the purpose and origins of champerty, and the implications for public policy, litigation, and wronged parties with legitimate claims. The full eradication of champerty laws is not necessary if the champerty doctrine avoids existence in the extreme with courts evaluating the surrounding circumstances, history, and details of the allegedly champertous agreement.
In September 2018, Caleb Crabtree suffered severe injuries after being rear-ended by Casey Cotton, who was reportedly going over seventy-five miles per hour upon impact. Because of negligence on Cotton's part, multiple settlement offers were given to Cotton's insurer, Allstate Property and Casualty Insurance Company (Allstate). All offers were refused by Allstate, and Allstate allegedly failed to inform Cotton of the offers. Caleb and his wife Adriane Crabtree proceeded to court, filing suit against Cotton and Allstate in the Lamar County Circuit Court in December 2018. In the midst of the personal injury suit, Cotton declared bankruptcy in the United States Bankruptcy Court for the Southern District of Mississippi in March 2021. During bankruptcy proceedings, the Crabtrees were allowed to purchase Cotton's bad faith claim against Allstate for $10,000. Since the Crabtrees could not afford to pay the fee, Court Properties, LLC became involved. In November 2021, Court Properties paid the bankruptcy trustee, and the trustee assigned the claim to the Crabtrees. The Crabtrees agreed to pay the $10,000 back to Court Properties with eight percent interest upon successful recovery from Allstate. In January 2022, a jury verdict in favor of the Crabtrees was entered in the amount of $4,605,000 for their personal injury case.
Pursuant to their bad faith claim, the Crabtrees filed suit in the United States District Court for the Southern District of Mississippi against Allstate in 2022. Allstate promptly filed a motion to dismiss for lack of subject matter jurisdiction, alleging the sale of the bad faith claim was champertous and void under section 97-9-11 of the Mississippi Code. Agreeing with Allstate, the court dismissed the action as champertous. Upon appeal to the United States Court of Appeals for the Fifth Circuit, the court of appeals certified a question to the Mississippi Supreme Court: “Does MISS. CODE ANN. § 97-9-11 (rev. 2013) allow a creditor in bankruptcy to engage a disinterested third party to purchase a cause of action from a debtor?” The Mississippi Supreme Court answered the question in the negative, thereby affirming the determination of the district court. The case was then sent back to the Fifth Circuit, and the court of appeals affirmed the decision of the district court based on the Mississippi Supreme Court's answer. The Crabtree's case was dismissed and they were barred from recovery.
While champerty statutes may still have a valid place in the law, the Mississippi Supreme Court's conclusion in Crabtree is incorrect because it is contrary to the plain language of section 97-9-11, inconsistent with case law, at odds with the origins and purposes of champerty law, and dangerously far reaching for public policy. First, section 97-9-11, by its plain language, requires an inducement factor in champerty cases. Second, despite the majority believing the contrary, this decision does not align with important cases of Mississippi's history. Third, champerty law takes its origin and purpose from protecting the justice system against those with specifically malicious, profit-driven intentions, and such actors are not at play in this case. Finally, the court's decision has several negative policy implications for the everyday sale of choices of actions and debt.
Part II of this Note discusses the origins of the champerty doctrine, its place in the modern day, the space Mississippi's champerty statutes occupy, and relevant case law. Part III of this Note examines the Mississippi Supreme Court's analysis of the Fifth Circuit's certified question based on the plain language of section 97-9-11 and past precedent. Part IV discusses the failure of the court to acknowledge section 97-9-11's inducement language, the inconsistency of the court's decision with champerty's origins and Mississippi's case law, and the conclusion's ultimate consequences for public policy. Part V briefly concludes.
About the Author
Jacie L. Bellina, J.D. Candidate 2027, Tulane University Law School; B.A. 2024, Louisiana State University.
Citation
100 Tul. L. Rev. 1137