public policy against champerty, in the form of § 489 of the Judiciary Law, whereas New Jersey has no stated policy against champerty, but it no longer recognizes the doctrine. In such a situation, New York clearly has the stronger interest in the enforcement of its policy. Application of New York law would frustrate no New Jersey policy, whereas application of New Jersey law would certainly impair the purpose underlying the New York statute, namely the prevention of trafficking in litigation claims.
It should also be noted that this forum, the District of Columbia, has an interest in applying the law that most conforms to its own. Champerty is prohibited in the District of Columbia, as it is in New York. See Marshall v. Bickel, 445 A.2d 606, 609 (D.C. 1982); Golden Commissary Corp. v. Shipley, 157 A.2d 810, 814 (D.C. 1960); Merlaud v. National Metropolitan Bank, 65 App. D.C. 385, 84 F.2d 238, 240 (D.C. Cir.), cert. denied, 299 U.S. 584, 81 L. Ed. 430, 57 S. Ct. 109 (1936). The same is true under federal common law, as it has been interpreted by this Court. See District Distributors, Inc. v. Heublein, Inc., 1971 Trade Cas. (CCH) P 73,695, at 90,903 (D.D.C.1971). In light of all of these considerations, the Court concludes that the application of New York's law prohibiting champerty is an appropriate choice of law in this case.
Plaintiff's second argument is that even applying New York's Champterty law, the assignment at issue here is not prohibited. Plaintiff argues that § 489 of the Judiciary Law does not apply to the assignment of a cause of action that is "an incidental part of a substantial commercial transaction involving the sale of a corporation," Plaintiff's Opposition, at 14, and that therefore § 489 does not apply to the assignment at issue here because it was part of the stock purchase transaction between Premo and Lemmon. In support of this argument, plaintiff cites the case of Fairchild Hiller Corp. v. McDonnell Douglas Corp., 28 N.Y.2d 325, 321 N.Y.S. 2d 857, 860-61, 270 N.E.2d 691 (1971), as well as Prudential Oil Corp. v. Phillips Petroleum Corp., 69 A.D.2d 763, 415 N.Y.S. 2d 217 (1st Dep't 1979), and American Express Co. v. Control Data Corp., 50 A.D.2d 749, 376 N.Y.S. 2d 153 (1st Dep't 1975).
Defendants counter that Fairchild Hiller does not establish an exception to § 489 for any assignment made in the context of a "substantial commercial transaction." Rather, the case holds that, in order to fall within the statute, an assignment must be made solely for the purpose of bringing an action on the claim and "this implies an exclusion of any other purpose." 321 N.Y.S. 2d at 860. Defendants also point to the facts of that case, in which Fairchild Hiller obtained an assignment of claim as a part of the "operating assets" of a corporation that it was purchasing in toto. The Court stated that such an assignment did not contravene § 489 because the intent of the parties was to effect the larger purchase transaction, not solely to transfer the legal claim. The instant case is distinguishable from Fairchild Hiller because the claim here was not assigned along with all the other assets of Premo New Jersey to Lemmon; instead, it was shunted aside to plaintiff, an entity completely unrelated to Lemmon, and the assignment here was admittedly made solely to enable plaintiff to bring an action on the claim.
The case of Prudential Oil Corp. v. Phillips Petroleum Co., 69 A.D.2d 763, 415 N.Y.S. 2d 217 (1st Dep't 1979), is also distinguishable from the present one. In that case, a claim was assigned to the wholly-owned subsidiary of the assignor in the course of an extensive corporate reorganization. As it had before in American Express Co. v. Control Data Corp., 50 A.D.2d 749, 376 N.Y.S. 2d 153 (1st Dep't 1975), the Court emphasized the relationship between the assignor and the assignee in concluding that § 489 did not apply. Neither case enunciated the broad proposition proffered by plaintiff that any assignment made in the context of a "substantial commercial transaction involving the sale of a corporation" is excepted from § 489, and indeed the latter referred to the holding of Fairchild Hiller as "imprecise." Id. at 154. Both decisions did, however, reiterate the principle that an assignment made solely for the purpose of bringing suit is a prohibited one. 415 N.Y.S. 2d. at 218, 376 N.Y.S. 2d at 154.
In the Court's view, the critical inquiry is whether the assignment was made for the exclusive purpose of bringing an action on the claim. As Fairchild Hiller makes clear, this is usually a question of fact, 321 N.Y.S. 2d at 860; see also Knobel v. Estate of Hoffman, 432 N.Y.S. 2d 66, 68 (Sup. Ct. 1980), but the facts here are undisputed. Plaintiff's own witness, who was a key actor in concluding the deal, testified that the sole purpose for the assignment was to enable plaintiff to bring an action on the claim. Transcript, at 102. Thus, this case presents precisely the sort of assignment which is covered by § 489, and which, therefore, is prohibited as champertous.
Indeed, not only is the assignment here precisely the kind of assignment that is covered by § 489, but its prohibition will serve precisely the purposes that § 489 was designed to serve. The statute is designed to "prevent the resulting strife, discord, and harassment which could result from permitting attorneys and corporations to purchase claims for the purpose of bringing actions thereon." Fairchild Hiller, 321 N.Y.S. 2d at 860. It is, in other words, designed to prevent trafficking and speculation in lawsuits. In this case, there can be no doubt that the assignment was made in order to prosecute the claim on a speculative basis. The claim was split off from the other assets of Premo New Jersey, and Blackman and Silverang were taking a chance on winning a windfall settlement or an award of damages.
In reaching the conclusion that this assignment was champertous, the Court is also mindful of the nature of the underlying cause of action. Plaintiff here is seeking to enforce a claim under the federal antitrust laws. It has been stated that the role of a treble-damage plaintiff under the antitrust laws is one of "private attorney general." Waldron v. Cities Service Co., 361 F.2d 671, 673 (2d Cir. 1966), aff'd, 391 U.S. 253, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1968). An assignee for one dollar who is plainly speculating on a lawsuit is hardly the sort of plaintiff Congress contemplated for such a role. Cf. District Distributors, Inc. v. Heublein, 1971 Trade Cas. (CCH) P 73,695, at 90,903 (D.D.C. 1971) (dismissing a claim under the Clayton Act brought by a plaintiff who had purchased it for $1.00).
Thus, it is clear that the assignment from Premo New Jersey to plaintiff was champertous, and because it was champertous, it is null and void. See Lee v. Community Capital Corp., 67 Misc. 2d 699, 324 N.Y.S. 2d 583, 585 (Sup. Ct. 1971). No recovery is permitted to a corporation that takes a champertous assignment. Bottenus v. Blackman, 71 Misc. 2d 583, 336 N.Y.S. 2d 790, 795 (Sup. Ct. 1972). See also Bennett v. Supreme Enforcement Corp., 275 N.Y. 502, 11 N.E. 2d 315, 316 (Ct. App. 1937); Frank H. Zindle, Inc. v. Friedman's Express, Inc., 258 A.D. 636, 17 N.Y.S. 2d 594, 595 (1st Dep't 1940); American Restaurant China Manufacturers Association, Inc. v. Corning Glass Works, 24 Misc. 2d 634, 198 N.Y.S. 2d 366, 371 (Sup. Ct. 1960). Accordingly, plaintiff here may not recover, and shall be barred from seeking relief.
V. THERE IS NO WAY THAT PLAINTIFF CAN NOW RECTIFY ITS INABILITY TO SUE ON THE INSTANT CLAIM.
Because the Court concludes that the assignment from Premo New Jersey to plaintiff was champertous, plaintiff is without recourse to revive the claim. Even assuming, arguendo, that the letter from the President of Lemmon, which plaintiff sought to introduce in evidence, constitutes a valid assignment of the claim, that assignment is also void. Because it is made pursuant to the Stock Purchase Agreement, it is governed by New York law, and thus is proscribed by § 489 of the Judiciary Law.
If, on the other hand, plaintiff were to admit that the letter is insufficient to effectively assign the claim and were to attempt to obtain an entirely new, independent, and formal assignment from Lemmon, that assignment would also fail. If it were governed by New York law, it would fail on the grounds of champerty. If it were governed by New Jersey law, it would fail for lack of consideration. Further, defendants could object again that Lemmon never owned the claim and thus could not assign it. There also would be a problem with the statute of limitations, which has now run. Although plaintiff maintains that the statute of limitations might be subject to equitable tolling, the equities are not at all with plaintiff. Plaintiff brought this suit twice and has been on notice of the defects alleged by defendants since 1981.
The only other conceivable recourse is for plaintiff to be substituted by either Lemmon, Premo New Jersey or Premo New York. Lemmon, however, has made clear that it has no interest in prosecuting this action, and again it is not clear that Lemmon actually ever purchased the claim. A suit by Premo New Jersey would be subject to the defense that the statutory merger between Premo New York and Bio-research was invalid. Also, as defendants correctly point out, it would be virtually impossible now to put the pieces of Premo New Jersey back together again. The same is true for Premo New York, and only if it were reconstructed could this suit go forward.
In short, there is no way for Messrs. Blackman and Silverang to climb out of the box into which they have placed themselves. They should not have sought to speculate on a cause of action in the courts of the United States. The Court has given careful consideration to their case, and will not countenance any further arguments that they are entitled to relief here. In light of their conduct, they are not entitled to receive any equitable consideration from this or any other Court.
For all of the foregoing reasons, the Court shall enter an order granting summary judgment in favor of defendants.
For the reasons stated in the accompanying opinion, it is, by the Court, this 7 day of July, 1983,
ORDERED that summary judgment is granted in favor of defendants, and it is
FURTHERED ORDERED that this case shall stand dismissed, with costs in favor of defendants.