The New York Court of Appeals has weighed in on the recently much-in-the-news defense of champerty without adding significant clarity. Bluebird Partners had acquired equipment trust certificates in circumstances that at least suggested it intended to pursue litigation against the indenture trustee for having failed to protect the interests of the certificate holders in the 1990 Continental Airlines Chapter 11 case. The indenture trustee moved to dismiss the complaint under Judiciary Law § 489 on the ground that Bluebird had acquired the claims "with the intent and for the purpose of bringing an action … thereon."

The trial court denied the motion, but the Appellate Division granted the motion to dismiss on the ground that no issue of fact existed as to Bluebird's intent. The Court of Appeals disagreed, reversed and concluded that the question of intent was in dispute and could not be resolved on a motion to dismiss.

The opinion raises the question whether the champertous intent must be the sole intent or only a primary intent of the purchaser, but unfortunately it does not clearly resolve the issue. While the decision professes a desire not to engender uncertainty in commercial transactions, leaving the question of intent to the trier of fact and not clearly resolving whether the champertous intent must be the sole intent or only a primary intent will undoubtedly engender additional uncertainty and litigation.

The decision should raise one caution for purchasers of claims. Bluebird, in buying the equipment trust certificates, apparently specified in the claims purchase documents that it was acquiring not only the certificates, but also "all legal rights" of the seller. That superfluous language added out of an abundance of caution backfired. Although the Court of Appeals refused to accept the indenture trustee's argument that the acquisition of such rights was a separate transaction that was champertous as a matter of law, apparently that language in the claims purchase document is the centerpiece of the indenture trustee's champerty argument, which has delayed the plaintiff's case and must be resolved at trial.