Justinian Capital SPC, Appellant,v.WestLB AG,, et al., Respondents.BriefN.Y.September 14, 2016APL-2015-00231 New York County Clerk’s Index No. 600975/10 Court of Appeals of the State of New York JUSTINIAN CAPITAL SPC for and on behalf of BLUE HERON SEGREGATED PORTFOLIO, Plaintiff-Appellant, – against – WESTLB AG, NEW YORK BRANCH, WESTLB ASSET MANAGEMENT (US) LLC and BRIGHTWATER CAPITAL MANAGEMENT LLC, Defendants-Respondents. BRIEF FOR AMICUS CURIAE BURFORD CAPITAL LLC MELISSA P. SOBEL BURFORD CAPITAL LLC 292 Madison Avenue, 23rd Floor New York, NY 10017 Tel.: (212) 235-6820 Fax: (646) 736-1986 DEREK T. HO KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C. Sumner Square 1615 M Street, N.W., Suite 400 Washington, DC 20036 Tel.: (202) 326-7900 Fax: (202) 326-7999 Counsel for Amicus Curiae Burford Capital LLC Dated: July 19, 2016 CORPORATE DISCLOSURE STATEMENT Pursuant to New York Court Rule 500.1(f) amicus curiae Burford Capital LLC states that its ultimate parent corporation is Burford Capital Limited, whose shares trade on the Alternative Investment Market of the London Stock Exchange. Burford Capital LLC has no other publicly traded parents, subsidiaries, or affiliates. ii TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT ......................................................... i TABLE OF AUTHORITIES ................................................................................... iii INTRODUCTION ..................................................................................................... 1 INTEREST OF AMICUS CURIAE ............................................................................ 2 SUMMARY OF ARGUMENT ................................................................................. 3 ARGUMENT ............................................................................................................. 6 I. SECTION 489 DOES NOT PROHIBIT TRANSACTIONS DESIGNED TO FACILITATE ENFORCEMENT OF VALID CLAIMS, ONLY THOSE THAT SEEK TO PROFIT BY SECURING LITIGATION COSTS ................................................................ 6 A. This Court Has Consistently Limited Champerty To Transactions Designed To Facilitate Profiting From Litigation Costs ...................................................................................................... 6 B. Transactions That Facilitate Litigation That Would Not Otherwise Be Brought Are Not Champertous Absent Intent To Profit From Litigation Costs ...............................................................14 II. SECTION 489’S SAFE HARBOR APPLIES TO TRANSACTIONS INVOLVING A PAYMENT OBLIGATION OF AT LEAST $500,000 ........................................................................................................18 A. Section 489 Requires Only A “Purchase Price” Of $500,000, Not An Actual Payment Of $500,000 .................................................18 B. The Lower Court’s Actual Payment Requirement Is Contrary To § 489’s Legislative History ............................................................20 CONCLUSION ........................................................................................................23 iii TABLE OF AUTHORITIES CASES Aronsky v. Board. of Educ., Cmty. Sch. Dist. No. 22, 75 N.Y.2d 997 (1990) ................................................................................... 12 Baldwin v. Latson, 2 Barb. Ch. 306 (N.Y. Ch. 1847) ................................................................ 7, 8 Beers v. Washbond, 86 A.D. 582 (3d Dep’t 1903) ........................................................................ 10 Bluebird Partners, L.P. v. First Fid. Bank, N.A., 94 N.Y.2d 726 (2000) ....................................................... 7, 11, 12, 13, 15, 16 Carlyle Inv. Mgmt. L.L.C. v. Moonmouth Co. S.A., No. CV 7841-VCP, 2015 WL 778846 (Del. Ch. Feb. 24, 2015) ................. 16 Charge Injection Techs., Inc. v. E.I. DuPont De Nemours & Co., No. 07C-12-134-JRJ, 2015 WL 1540520 (Del. Super. Ct. Mar. 31, 2015) . 16 No. 07C-12-134-JRJ, 2016 WL 937400 (Del. Super. Ct. Mar. 9, 2016) ..... 17 Commonwealth of N. Mar. I. v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55 (2013) ..................................................................................... 19 Del Webb Communities, Inc. v. Partington, 652 F.3d 1145 (2011) ................................................................................... 18 Delmar Box Co., In re, 309 N.Y. 60 (1955) ....................................................................................... 21 Devon It, Inc. v. IBM Corp., No. CIV.A. 10-2899, 2012 WL 4748160 (E.D. Pa. Sept. 27, 2012)............ 17 Elliott Assocs., L.P. v. Banco de la Nacion, 194 F.3d 363 (2d Cir. 1999) ............................................................... 8, 11, 13 Goodell v. The People, 5 Parker Crim. R. 206 (N.Y. Gen. Term 1862) .......................................... 8, 9 iv International Oil Trading Co., In re, 548 B.R. 825 (Bankr. S.D. Fla. 2016) .......................................................... 16 Mann v. Fairchild, 14 Barb. 548 (N.Y. Gen. Term 1853) ............................................................. 8 McKechnie v. Ortiz, 132 A.D.2d 472 (1st Dep’t 1987) ................................................................. 21 Mondis Tech., Ltd. v. LG Elecs., Inc., Nos. 2:07-CV-565-TJW-CE, et al., 2011 WL 1714304 (E.D. Tex. May 4, 2011) ............................................... 17 Moran Towing & Transp. Co. v. New York State Tax Comm’n, 72 N.Y.2d 166 (1988) ................................................................................... 12 Moses v. McDivitt, 88 N.Y. 62 (1882) ..................................................................................... 9, 10 Osprey, Inc. v. Cabana Ltd. P’ship, 532 S.E.2d 269 (S.C. 2000) .......................................................................... 17 Saladini v. Righellis, 687 N.E.2d 1224 (Mass. 1997) ..................................................................... 17 Strahan v. Haynes, 262 P. 995 (Ariz. 1928) ................................................................................ 17 Trust for the Certificate Holders of Merrill Lynch Mortg. Invr’s, Inc. v. Love Funding Corp., 13 N.Y.3d 190 (2009) ............................................................... 4, 5, 11, 14, 15 Wetmore v. Hegeman, 88 N.Y. 69 (1882) ..................................................................................... 9, 10 Wightman v. Catlin, 113 A.D. 24 (2d Dep’t 1906) ........................................................................ 10 STATUTES AND RULES Code of Civil Procedure § 77 .................................................................................. 12 N.Y. Ct. R. § 500.23 ................................................................................................. 1 v N.Y. Jud. Law § 489 ........................................................................................ passim LEGISLATIVE MATERIALS N.Y. Bill Jacket, 2004 A.B. 7244, ch. 394 ................................................. 11, 16, 19 S. 2992-A, Reg. Session (N.Y. 2003) ..................................................................... 20 OTHER AUTHORITIES Jackson, Lord Justice, Review of Civil Litigation Costs: Final Report (2009) ................................ 15 Molot, Jonathan T., Litigation Finance: A Market Solution to a Procedural Problem, 99 Geo. L.J. 65 (2010) .................................................................................. 15 INTRODUCTION Pursuant to New York Court Rule 500.23, Burford Capital LLC (“Burford”) respectfully submits this brief as amicus curiae in support of Appellant Justinian Capital SPC (“Justinian”). Justinian seeks reversal of the First Appellate Division’s decision affirming the dismissal of its complaint against WestLB AG, New York Branch, and WestLB Asset Management (US) LLC (collectively, “WestLB”) under New York Judiciary Law § 489, which codifies a limited version of the medieval doctrine of champerty. Although Burford supports Justinian’s appeal in this case, it believes Justinian’s arguments to this Court rest on an incorrect interpretation of § 489. Justinian’s arguments appear to accept the premise that an assignment of a claim with the intent to facilitate litigation that would not otherwise have been brought falls within the scope of § 489. See Justinian Br. 29-30 (arguing that the transaction between Justinian and WestLB is not champertous because “it did not stir up litigation that would not otherwise have been prosecuted”). That premise is wrong as a matter of law. As reflected in an unbroken line of this Court’s decisions, § 489 was designed to prohibit only a very limited category of transactions – those in which a litigant assigns its claims to a third party with the third party intending to profit through recovery of litigation costs, rather than the vindication of the merits of the underlying claim. That 2 longstanding limitation is fundamental to the doctrine of champerty in this State and this Court should reaffirm it. INTEREST OF AMICUS CURIAE Burford is the U.S. operating business of Burford Capital Limited (“Burford Capital”). Burford Capital is a leading global finance firm focused on corporate litigation finance with a market capitalization in excess of $1 billion. Burford Capital’s equity and debt securities are publicly traded on the London Stock Exchange. Burford does not take an assignment of the litigant’s claims when it provides financing to litigants. As a result, Burford’s litigation finance transactions do not fall within § 489’s basic requirement that there be an “assignment” of the claim. Burford nonetheless has a strong interest in ensuring that this Court does not depart from its settled precedents and inadvertently suggest that § 489 disfavors transactions making legitimate use of litigation finance. Litigation finance frequently enables litigants to litigate their cases with high-quality lawyers where otherwise that might not have been economically feasible. Burford thus seeks to vindicate this Court’s longstanding recognition that facilitating litigation by parties with bona fide legal claims – a core purpose of litigation finance – furthers public policy goals of ensuring the enforcement of substantive law and the effective vindication of private rights. 3 Burford has no financial interest in the outcome of this case. Neither party to this appeal sought Burford’s filing of this brief. Burford is filing this brief because neither party to this appeal – nor the courts below – have properly interpreted the scope of § 489. SUMMARY OF ARGUMENT I. Under this Court’s longstanding precedents, § 489 prohibits a carefully circumscribed category of transactions. Fundamentally, the champerty statute – like the common-law doctrine it supersedes – is triggered only if the transaction involves an “assignment” of a “bond, promissory note, bill of exchange, book debt, or other thing in action, or any claim or demand” to a third party. N.Y. Jud. Law § 489(1). No assignment, no champerty. Moreover, not all assignments are champertous – only those “with the intent and for the purpose of bringing an action or proceeding thereon.” Id. Long ago, this Court recognized that the Legislature could not have meant § 489 literally to prohibit assignments in all cases where the assignee intended to bring an action on the basis of the assigned claim. Such a broad reading would lead to extreme results. A bondholder could not purchase a bond with thoughts of a potential lawsuit if the debtor defaults. An acquirer of a company’s assets could not have the intent to pursue the target company’s existing legal claims. In short, no one could acquire a valid legal claim with the intent to pursue it. 4 Recognizing that such a prohibition would be contrary to sound public policy, which encourages the vindication of bona fide legal claims, this Court has repeatedly stated in cases spanning more than a century and a half that § 489 is much narrower. It prohibits assignments of claims to a third party only if the third party intends to profit by obtaining litigation costs, as opposed to enforcing the underlying legal claim. This Court stated the rule clearly in Trust for the Certificate Holders of Merrill Lynch Mortgage Investors, Inc. v. Love Funding Corp., 13 N.Y.3d 190 (2009): “In short, the champerty statute does not apply when the purpose of an assignment is the collection of a legitimate claim. What the statute prohibits . . . is the purchase of claims with the intent and for the purpose of bringing an action that the purchaser may involve parties in costs and annoyance, where such claims would not be prosecuted if not stirred up . . . in an effort to secure costs.” Id. at 201 (emphasis added). Applying that standard here, Justinian’s complaint should not have been dismissed. It does not appear that WestLB has contended that Justinian had an intent to stir up litigation in an effort to obtain costs. WestLB certainly has not adduced evidence that would demonstrate such intent beyond genuine dispute. Under the correct legal standard, WestLB’s assertion that Justinian’s lawsuit would not have been brought “but for” the transaction – in addition to raising a disputed factual issue that cannot be resolved at summary judgment – is insufficient to bring 5 the transaction within § 489’s scope. Nothing in § 489 or this Court’s cases supports the principle that transactions are champertous solely because they facilitate litigation that would not otherwise occur. To the contrary, as Love Funding makes clear, § 489 is not intended to impede transactions that facilitate the pursuit of legitimate claims. II. The Appellate Division’s decision should be reversed for a second, independent reason. Section 489 contains a safe harbor that exempts transactions that have an “aggregate purchase price of at least five hundred thousand dollars.” N.Y. Jud. Law § 489(2). The Appellate Division interpreted that to mean that $500,000 in cash (or other assets) had to have actually changed hands. But that interpretation cannot be squared with the statute’s text – which refers to the amount of the “purchase price.” As long as that purchase price is paid – whether through cash on the barrel, a loan, debt forgiveness, or some other legally enforceable obligation, the statute is satisfied. Nothing in the statute requires a cash transfer. The Appellate Division’s extra-textual interpretation also undermines the statute’s purpose, which is to exempt transactions involving large, sophisticated commercial parties. Given that such parties often use complex financial arrangements rather than simple cash payments, the lower courts’ imposition of an artificial requirement that cash have been actually transferred runs contrary to § 489’s objectives. The Court should reverse the decision below on that ground as well. 6 ARGUMENT I. SECTION 489 DOES NOT PROHIBIT TRANSACTIONS DESIGNED TO FACILITATE ENFORCEMENT OF VALID CLAIMS, ONLY THOSE THAT SEEK TO PROFIT BY SECURING LITIGATION COSTS Justinian argues that the transaction at issue here is not champertous because “(1) it did not stir up litigation that would not otherwise have been prosecuted, and (2) the purpose of the assignment was the collection of a legitimate claim.” Justinian Br. 29-30. WestLB contends that the transaction was champertous because “Justinian is not pursuing a legitimate claim of its own in this litigation . . . and that its only role in this case is to be Deutsche Pfandbriefbank’s [(‘DPAG’)] front.” WestLB Br. 19. Both sides have misconstrued the governing legal standard under § 489 and this Court’s precedents, under which a transaction is not champertous unless it assigns a claim to a third party with the intent that the third party profit by securing litigation costs. Contrary to the premise of both parties, a showing that a transaction facilitates litigation that otherwise would not have been brought does not bring a transaction within the scope of § 489. Rather, the statute requires a showing that the party obtaining the assignment of the claim intended to profit by generating and then recovering litigation costs. A. This Court Has Consistently Limited Champerty To Transactions Designed To Facilitate Profiting From Litigation Costs Section 489 prohibits “solicit[ing],” “buy[ing,] or tak[ing] an assignment of . . . any claim or demand, with the intent and for the purpose of bringing an action 7 or proceeding thereon” – subject to several express statutory safe harbors. This Court has long held, however, that § 489 did not import wholesale the medieval champerty doctrine into New York law. The earliest cases interpreting § 489’s predecessor statute “indicate that the prohibition of champerty was limited in scope and largely directed toward preventing attorneys from filing suit merely as a vehicle for obtaining costs, which, at the time, included attorneys’ fees.” Bluebird Partners, L.P. v. First Fid. Bank, N.A., 94 N.Y.2d 726, 734 (2000) (emphasis added). Since those early decisions, this Court has emphasized repeatedly and consistently that § 489 does not prohibit assignments made with the intent to sue to enforce a substantive right, but only assignments made with the intent to profit by obtaining litigation costs. More than 150 years ago, in Baldwin v. Latson, 2 Barb. Ch. 306 (N.Y. Ch. 1847), the Court of Chancery examined the case of an attorney who purchased a bond and mortgage, and subsequently filed suit to foreclose on that mortgage. The court rejected the mortgagor’s champerty defense, holding that “[t]he purchase, although within the letter, was not within the spirit and intent of the statute. The object of the statute was to prevent attorneys and solicitors from purchasing debts, or other things in action, for the purpose of obtaining costs by a prosecution thereof ; [the statute] was never intended to prevent the purchase [of debts] for the honest purpose of protecting some other important right of the assignee. Here[,] 8 the fact that the complainant had no interest whatever in the costs of the foreclosure, for his own benefit, and that he was advised by his counsel . . . that the purchase and foreclosure of this bond and mortgage were essential to the preservation of the interest which he previously claimed in the mortgaged premises, show that the case was not within the mischief which this statute was intended to guard against.” Id. at 308 (emphasis added). This holding was reiterated six years later in Mann v. Fairchild, 14 Barb. 548 (N.Y. Gen. Term 1853), which stated that “[t]he main object of the statute in question was to prevent litigation by prohibiting the purchase of choses in action by those whose pecuniary interests might be peculiarly advanced by instituting suits upon them, and who, in consequence of their position, might conduct such suits upon unequal terms.” Id. at 554; see Elliott Assocs., L.P. v. Banco de la Nacion, 194 F.3d 363, 373 (2d Cir. 1999) (noting that Mann’s language was a “reference to the scourge of attorneys using such debt instruments to obtain costs”). In 1862, the Supreme Court decided Goodell v. The People, 5 Parker Crim. R. 206 (N.Y. Gen. Term), which presented the question whether the statute covered the situation where an attorney purchased a promissory note with the intent or purpose to bring suit in New York’s “justices’ court,” where costs were not granted to the prevailing parties. Regarding the purpose of the statute, one 9 justice concluded that the law was “intended to reach a class of men who make a practice, either directly or indirectly, of buying small notes of fifty dollars and upwards, and then prosecuting them in courts of record, in the old common pleas, or in the Supreme Court, and make the defendants pay large bills of costs, even when the suit was undefended, there can be, I think, no doubt. Hence, it was entitled an act to prevent abuses, and to regulate costs. The law was aimed at attorneys in courts of record, who were the parties receiving the costs, and who thus often oppressed debtors by unexpected and unnecessary prosecutions.” Id. at 207. Another justice wrote separately, stating that “[t]he purchasing of debts by attorneys, with the intent to bring suits upon them in justices’ courts, does not seem to me to be within the mischief which the statute was intended to guard against. No costs being allowed to an attorney in a justice’s court, he has no object in buying debts to sue in that court, and I can see neither opportunity nor temptation for him to attempt to advance his pecuniary interests by so doing. As he has no temptation to litigate, as a party, in justices’ courts, no litigation is induced by his freedom from restraint in that direction.” Id. at 211. This Court also described § 489’s prohibition of profiting through litigation costs in a pair of 1882 cases, Moses v. McDivitt, 88 N.Y. 62, and Wetmore v. Hegeman, 88 N.Y. 69. In Moses, the plaintiff attorney purchased a bond for the 10 purpose of compelling the defendant to assign to him certain stock of a corporation, as a condition of an extension on the time of payment. This Court held that the attorney’s actions were not barred by § 489: [A] mere intent to bring a suit on a claim purchased does not constitute the offense; the purchase must be made for the very purpose of bringing such suit, and this implies an exclusion of any other purpose. As the law now stands, an attorney is not prohibited from . . . purchasing bonds . . . or other choses in action, either for investment or for profit, or for the protection of other interests, and such purchase is not made illegal by the existence of the intent on his part at the time of the purchase, which must always exist in the case of such purchases, to bring suit upon them if necessary for their collection. To constitute the offense the primary purpose of the purchase must be to enable him to bring a suit, and the intent to bring a suit must not be merely incidental and contingent. The object of the statute . . . was to prevent attorneys, etc., from purchasing things in action for the purpose of obtaining costs by the prosecution thereof, and it was not intended to prevent a purchase for the purpose of protecting some other right of the assignee. Moses, 88 N.Y. at 65 (emphasis added). Likewise, in Wetmore, this Court stated: “The aim of the statute was to prevent attorneys from purchasing claims for the express purpose of instituting suits thereon and thus oppressing debtors and making costs.” 88 N.Y. at 73 (emphasis added); see also Beers v. Washbond, 86 A.D. 582, 584 (3d Dep’t 1903) (noting that the intent of § 489 was to prevent “oppression by unnecessary litigation which would follow from the right of an attorney to purchase a claim for the sole purpose of enforcing it in the courts and getting costs therefrom”); Wightman v. Catlin, 113 A.D. 24, 29 (2d Dep’t 1906) (“It was only the abuse of 11 purchasing with the intent and for the purpose of bringing the action, that the attorney might be benefited by the costs which his own action had produced, which the Legislature prohibited.”). In Love Funding, this Court catalogued these precedents and concluded that, “[i]n short, the champerty statute does not apply when the purpose of an assignment is the collection of a legitimate claim. What the statute prohibits . . . is the purchase of claims with the intent and for the purpose of bringing an action that the purchaser may involve parties in costs and annoyance, where such claims would not be prosecuted if not stirred up . . . in an effort to secure costs.” 13 N.Y.3d at 201 (emphasis added); see also id. at 200 (“In describing champerty in terms of an acquisition made with the purpose of bringing a lawsuit . . . we intended to convey the difference between one who acquires a right in order to make money from litigating it[,] and one who acquires a right in order to enforce it.”). The legislative history of § 489 confirms that it was intended “to prohibit persons from acquiring claims for the primary purpose of commencing litigation to recover legal fees and costs.” N.Y. Bill Jacket, 2004 A.B. 7244, ch. 394 (A411). Before 1907, New York’s champerty prohibitions applied only to legal practitioners. See Bluebird Partners, 94 N.Y.2d at 734 (noting that, in 1907, the champerty “prohibitions were extended to nonlawyers and corporations”); Elliott 12 Assocs., 194 F.3d at 369 (recognizing that “[§] 489 was originally aimed at attorneys, [but that] subsequent revisions indicated an intent to cover ‘corporations’ and ‘associations.’”). Section 489’s predecessor, Code of Civil Procedure § 77, extended that champerty prohibition to non-attorneys, but in doing so it did not expand the scope of proscribed conduct. The Legislature incorporated the same operative language – with the intent and “for the purpose of bringing an action thereon” – which had long been interpreted in the context of the prohibition on attorneys to be limited to the acquisition of claims for the primary purpose of stirring up litigation to recover legal fees and costs. See supra pp. 7-10; Aronsky v. Board of Educ., Cmty. Sch. Dist. No. 22, 75 N.Y.2d 997, 1000 (1990) (“Under settled rules of construction, words having a ‘precise and well settled legal meaning in the jurisprudence of the state’ are to be understood in such sense when used in statutes, unless a different meaning is plainly indicated.” (quoting Moran Towing & Transp. Co. v. New York State Tax Comm’n, 72 N.Y.2d 166, 173 (1988))). Under this Court’s longstanding precedents, purchasing a claim for purposes of pursuing the claim’s economic value does not constitute champerty. This Court’s decision in Bluebird Partners illustrates the principle. There, Bluebird Partners, L.P. purchased a series of debt certificates at considerably reduced prices – anywhere from .25 cents to two cents on the dollar. The issue before the Court 13 was whether Bluebird Partners, L.P. violated § 489 when it purchased the certificates with an intent to sue on them. The Appellate Division held that it did, but this Court reversed, concluding that “litigation can be an appropriate and commonly used strategy” to collect on purchased debt. 94 N.Y.2d at 738. Likewise, the Second Circuit in Elliott reached the same conclusion when it reversed the district court and held that purchasing distressed debt from two insolvent Peruvian banks to sue on the debt instruments did not constitute champerty. See 194 F.3d at 381 (“Section 489 is not violated when, as here, the accused party’s ‘primary goal’ is found to be satisfaction of a valid debt and its intent is only to sue absent full performance”). As these cases indicate, it is commonplace for sophisticated commercial parties to acquire claims at a discount and then to seek to profit by vindicating the full economic value of those claims. Such transactions are not champertous. Rather, champerty prohibits only transactions where the purchaser seeks to profit through the generation and recovery of litigation costs. Under the correct legal standard, WestLB has failed to demonstrate – or even argue – that Justinian intended to profit by obtaining litigation costs in its effort to collect on the debt. It does not argue, for example, that Justinian contracted with DPAG with the intent to recover all or a part of any attorneys’ fees or other costs to which DPAG might be entitled in seeking to enforce its claims. 14 Nor does it offer any evidence that either party was motivated by recovery of litigation costs. This Court should reverse and grant summary judgment to Justinian on WestLB’s champerty defense because (as far as we understand) there is no dispute that Justinian and DPAG lacked the intent necessary to establish a violation of § 489. B. Transactions That Facilitate Litigation That Would Not Otherwise Be Brought Are Not Champertous Absent Intent To Profit From Litigation Costs The courts below found that the transaction here was champertous in part based on a finding that DPAG would not have sued “but for” the transaction with Justinian. WestLB defends the lower courts’ conclusion, while Justinian contends that the issue is genuinely disputed based on the record evidence. Compare Justinian Br. 29-30 (arguing that there are disputed facts), with WestLB Br. 21-22 (arguing that the “evidence overwhelmingly” supports the trial court’s finding that DPAG would not have otherwise sued). Both the lower courts and the parties, however, invoke the wrong legal test. Under this Court’s longstanding precedents, a showing that the transaction facilitates litigation that would not otherwise be brought does not satisfy § 489; the party asserting champerty must show that the litigation was “stirred up” specifically in the “effort to secure costs.” Love Funding, 13 N.Y.3d at 201; see supra Part I.A. As explained above, moreover, § 489 does not express disapproval 15 of litigation or the vindication of bona fide legal claims. To the contrary, this Court’s cases have repeatedly emphasized that the legal system encourages the vindication of private claims. Litigation funding benefits the legal system by ensuring that all litigants have access to justice. See, e.g., Lord Justice Jackson, Review of Civil Litigation Costs: Final Report 117 (2009). It benefits the legal system by ensuring that even less well-resourced litigants have access to high- quality counsel. And it ensures that litigation is resolved based on the merits of claims, and not skewed by resource imbalances. See Jonathan T. Molot, Litigation Finance: A Market Solution to a Procedural Problem, 99 Geo. L.J. 65, 105-109 (2010) (arguing that champerty doctrine impedes litigation finance transactions that can promote the accuracy of litigation). The lower courts’ suggestion – apparently embraced by both parties here – that transactions are champertous merely because they facilitate litigation that otherwise would not be brought cannot be squared with this Court’s precedents or sound public policy. The subjective nature of § 489’s intent requirement makes the parties’ proposed rule all the more problematic. Of course, all inquiries into purpose are necessarily factual. See Bluebird Partners, 94 N.Y.2d at 738 (“[T]he question of intent and purpose of the purchaser or assignee of a claim is usually a factual one to be decided by the trier of facts.”); Love Funding, 13 N.Y.3d at 200 (“inquiry into purpose is a factual one”). But whether litigation would have been brought 16 “but for” a transaction is a counter-factual question that will be difficult if not impossible to answer in many cases. Defendants will all too readily be able to manufacture factual disputes out of speculation – making it difficult to resolve champerty defenses at a suitably early stage in the litigation. See Bluebird Partners, 94 N.Y.2d at 734-35 (“This Court’s jurisprudence demonstrates that while this Court has been willing to find that an action is not champertous as a matter of law, it has been hesitant to find that an action is champertous as a matter of law.”). The result will be that champerty could be abused by defendants seeking to create litigation uncertainty and extract unjustified settlement concessions for otherwise meritorious claims. See N.Y. Bill Jacket, 2004 A.B. 7244, ch. 394 (noting that § 489 has led to abusive litigation practices) (A411). The prospect of protracted litigation over the intent prong of § 489 also creates unnecessary conflict with the attorney-client privilege and work-product protection. As virtually all courts to have addressed the issue have concluded, the financial terms of litigation funding agreements, and communications between litigation funders and the parties they fund, are protected by the attorney-client privilege, the work-product protection, or both.1 But defendants can be expected 1 See, e.g., In re International Oil Trading Co., 548 B.R. 825, 835 (Bankr. S.D. Fla. 2016) (concluding that the documents concerning the negotiation of a litigation funding agreement were protected by the attorney-client privilege and the work product doctrine); Charge Injection Techs., Inc. v. E.I. DuPont De Nemours & Co., No. 07C-12-134-JRJ, 2015 WL 1540520, at *4 (Del. Super. Ct. Mar. 31, 2015) (same); Carlyle Inv. Mgmt. L.L.C. v. Moonmouth Co. S.A., No. CV 7841-VCP, 2015 WL 778846, at *9 (Del. Ch. Feb. 24, 2015) (concluding that the documents 17 to routinely seek to invade those privileges based on the purported need to broadly explore the parties’ intent, which would be further exacerbated if the Court were to adopt the parties’ proposed “but for” rule. Finally, an overly expansive champerty doctrine would put New York out of step with the nationwide trend to curtail if not eliminate the doctrine. Champerty “has been practically discarded[,] both in England, the country of its origin, and in the United States.” Strahan v. Haynes, 262 P. 995, 997 (Ariz. 1928); see also Osprey, Inc. v. Cabana Ltd. P’ship, 532 S.E.2d 269, 279 (S.C. 2000) (holding that the doctrine “no longer is required to prevent the evils traditionally associated with” it). Several states have done away with champerty in the last 20 years. See Osprey, 532 S.E. 2d at 273-77 & n.2; Saladini v. Righellis, 687 N.E.2d 1224, 1227 (Mass. 1997). Even in states where champerty might still exist, courts have held that litigation funding has nothing to do with those doctrines. Just recently, in a closely watched case, a Delaware state court held that litigation funding did not violate Delaware’s champerty or maintenance laws. See Charge Injection Techs., Inc. v. concerning the negotiation of a litigation funding agreement were protected by Delaware’s work product doctrine because they were “prepared in anticipation of litigation”); Devon IT, Inc. v. IBM Corp., No. CIV.A. 10-2899, 2012 WL 4748160, at *1 (E.D. Pa. Sept. 27, 2012) (concluding that communications with funders and funding-agreement drafts were protected under attorney- client privilege and under the common interest doctrine); Mondis Tech., Ltd. v. LG Elecs., Inc., Nos. 2:07-CV-565-TJW-CE, et al., 2011 WL 1714304, at *3 (E.D. Tex. May 4, 2011) (holding that investor-related documents were privileged). 18 E.I. Dupont De Nemours & Co., No. 07C-12-134-JRJ, 2016 WL 937400 (Del. Super. Ct. Mar. 9, 2016). And as the Ninth Circuit has stated: “The consistent trend across the country is toward limiting, not expanding, champerty’s reach.” Del Webb Communities, Inc. v. Partington, 652 F.3d 1145, 1156 (2011). Litigation finance is a growing, multi-billion dollar global industry. See also A405-06 ¶ 7 (recognizing in 2004 that “in the past twenty years a market had developed in the United States, and particularly in New York, for the purchase and sale of legal claims”). The Legislature has made clear that it “want[s] to provide assurance to investors that New York would remain a market for such claims.” A406 ¶ 9. It is thus critical for § 489 to be interpreted and applied in light of its historically “narrow scope” and in recognition of the significant risk that adoption of outdated common-law doctrines will drive commercial funding transactions out of New York to other jurisdictions. Id. II. SECTION 489’S SAFE HARBOR APPLIES TO TRANSACTIONS INVOLVING A PAYMENT OBLIGATION OF AT LEAST $500,000 A. Section 489 Requires Only A “Purchase Price” Of $500,000, Not An Actual Payment Of $500,000 The parties here also debate the proper interpretation of § 489’s safe harbor for transactions with an “aggregate purchase price of at least five hundred thousand dollars.” N.Y. Jud. Law § 489(2). The textual answer to this question is clear: an “aggregate purchase price” does not require that the actual exchange of funds have 19 occurred, only a legally binding obligation to pay. See Commonwealth of N. Mar. I. v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55, 60 (2013) (“Where the statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used.”). The purpose of the safe harbor confirms the Legislature’s intent to define champerty’s contours narrowly. When the Legislature enacted the $500,000 safe harbor in 2004, it expressly recognized that the champerty doctrine “has led to abusive litigation” by “[o]bligors who have no defense to claims in the hands of their original creditors [but] are quick to assert a champerty defense merely because the claim has been purchased.” N.Y. Bill Jacket, 2004 A.B. 7244, ch. 394 (A411). The Legislature further recognized that the prospect of expensive litigation over champerty served as a serious deterrent to prospective financial transactions involving legal claims, because “[b]uyers do not invest large sums of money on claims for the purpose of spending more money on legal fees.” Id. The Legislature thus concluded that it was “necessary . . . to amend § 489 to achieve clarity and certainty for certain transactions and to avoid driving markets for such claims out of New York.” Id. Interpreting the safe harbor to require an up-front cash payment of $500,000 or more would frustrate the Legislature’s objectives. Regardless of how the payment is structured – whether the purchaser pays up front, or finances the 20 purchase through debt or other means – the existence of a bona fide legal obligation to pay $500,000 satisfies the Legislature’s core rationale. Moreover, putting artificial constraints on the types of financial instruments used or the structure of the parties’ payment obligations would undermine the Legislature’s goal of eliminating § 489 as a deterrent to large and sophisticated financial transactions. B. The Lower Court’s Actual Payment Requirement Is Contrary To § 489’s Legislative History WestLB misreads the safe harbor’s legislative history in urging the contrary conclusion. The safe harbor legislation was first introduced in 1999, and underwent several changes before its enactment in 2004. Significantly, the version of the provision initially proposed during the term in which it ultimately passed exempted transactions “if either (a) the bonds, promissory notes, bills of exchange, book debts, or other things in action, or any claims or demands, represented, constituted, comprised or included debts with an aggregate liquidated amount of at least one million dollars issued by or enforceable against an obligor, or (b) the person, co-partnership, corporation or association paid at least five hundred thousand dollars for bonds, promissory notes, bills of exchange, book debts, or other things in action, or claims or demands, issued by or enforceable against an obligor.” S. 2992-A, Reg. Session (N.Y. 2003) (emphases added) (A158-165). The Legislature rejected this version of the bill, and instead passed the current 21 statute exempting transactions “having an aggregate purchase price of at least five hundred thousand dollars.” N.Y. Jud. Law § 489(2) (emphasis added). The Legislature’s deliberate rejection of the 1999 bill forecloses WestLB’s reading of the statute. Moreover, WestLB’s reliance on an after-the-fact comment made in unrelated litigation by the bill’s sponsor – Assemblywoman Susan V. John – is unavailing. As an initial matter, “[t]he post-enactment statements of a member of the legislature, even one who sponsored the law in question, are irrelevant as to the law’s meaning and intent.” McKechnie v. Ortiz, 132 A.D.2d 472, 475 (1st Dep’t 1987); see also In re Delmar Box Co., 309 N.Y. 60, 67 (1955) (“Reliance is placed upon the views expressed by the assemblyman who introduced the bill in 1952, but those views cannot serve as a reliable index to the intention of the legislators who passed the bill. It is sufficient to note that, they were stated, not in the course of debate on the floor of the Legislature, but in a memorandum submitted to the governor after the passage of the bill, and there is no showing that the other legislators were aware of the broad scope apparently intended for the bill by its sponsor.”). A statement made in an unrelated case is even more far afield and irrelevant to this case. Regardless, Assemblywoman John’s statement does not support WestLB’s position. “[T]he champerty inquiry [in that case] was different because at least $900,000 was actually paid for the notes.” A17. Assemblywoman John’s statement 22 – that “[t]he Legislature intended to provide clear protection for transactions where a purchaser pays at least $500,000 in a single transaction or a series of transactions for the assignment or transfer of financial instruments and causes of action,” A406 ¶ 9; see also A8-9, 17 – simply addressed the facts of that case. Her opinion that actual payment is sufficient cannot reasonably be read to address whether actual payment is also necessary – an issue not presented there. Finally, the courts below found an actual payment requirement “necessary to avoid the safe harbor effectively doing away with champerty, a measure the legislature chose not to adopt.” A18. The courts apparently based this conclusion on the belief that without actual payment, parties could “merely recite a nominal amount equal to the monetary threshold.” A17-18. WestLB similarly argues that “merely reciting a $500,000 purchase price” fails to meet § 489’s safe harbor. WestLB Br. 14. It is not entirely clear what WestLB has in mind, but as explained above, a “purchase price” cannot simply be a fiction. The purchaser must assume an enforceable legal obligation to pay the price. And no rational purchaser would assume an obligation to pay a half million dollars unless it believed the rights being assigned (including any legal claims) were in fact worth more than that amount. The lower courts’ policy concern was thus misplaced – and, in any event, it was not a proper basis to ignore the text, purposes, and history of § 489’s safe harbor provision. CONCLUSION For the reasons discussed herein, this Court should reverse the decision below and grant summary judgment to Justinian. Dated: July 19, 2016 Washington, DC Melissa P. Sobel BURFORD CAPITAL LLC 292 Madison Avenue 23rd Floor New York, NY 10017 Tel: (212) 235-6820 Fax: (646) 736-1986 Respectfully submitted, DerekT. Ho KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C. 1615 M Street, N.W., Suite 400 Washington, D.C. 20036 Tel: (202) 326-7900 Fax: (202) 326-7999 dho@khhte.com Counsel for Amicus Curiae Burford Capital LLC 23