Champerty and maintenance are two related common law doctrines that restrict outsiders from financing other people’s lawsuits. Maintenance is the broader concept: giving financial support to a litigant when you have no legitimate stake in the case. Champerty is a narrower version of the same idea, where the outside funder backs the case in exchange for a share of whatever the plaintiff recovers. Both doctrines developed centuries ago to keep wealthy strangers from using the courts as a weapon, and both still shape how modern litigation funding agreements are treated, though enforcement varies sharply from state to state.
How Champerty and Maintenance Differ
Maintenance covers any situation where someone with no genuine connection to a dispute helps pay to keep it in court. That could mean covering a litigant’s legal fees, court costs, or living expenses so the case can continue. The problem the doctrine targets is not generosity but interference: an outsider prolonging or enabling litigation that would otherwise not exist.
Champerty adds a profit motive. A champertous arrangement has three features: the funder has no genuine interest in the dispute, provides financial support for the litigation, and receives a portion of any judgment or settlement.1Legal Information Institute. Wex – Champerty If a plaintiff wins $100,000 and the funding agreement gives the backer $30,000, that is the textbook example. The funder is not helping out of goodwill. The lawsuit is an investment.
Where the Doctrines Came From
Both concepts trace to medieval England, where feudal lords bankrolled lawsuits against rivals as a form of economic warfare. Overwhelming an opponent with litigation costs was a way to seize property without violence, and the Crown treated it as a threat to legal order. Parliament responded with statutes such as the Statute of Westminster I in 1275, which prohibited royal officers from backing lawsuits in exchange for a share of the proceeds.2Berkeley Law. Maintenance by Champerty Later English statutes broadened the ban to other agents of powerful landowners, and the doctrines eventually crossed the Atlantic into American common law.
Exceptions That Have Always Existed
The rules were never meant to punish every act of helping a litigant. Several categories of support have long been treated as legitimate.
- Someone who already has a financial or legal stake in the subject matter can support the case without committing maintenance. Co-owners of property jointly funding a lawsuit to protect their shared interest is a common example.
- Relatives helping a family member pay for legal representation fall outside the doctrines. Courts have never expected families to stand aside while a loved one loses a meritorious case for lack of money.
- Charitable help for an indigent litigant is permitted. As Judge Cardozo put it, “maintenance for spite or envy or the promise or hope of gain” is forbidden, but “maintenance inspired by charity or benevolence” is not.1Legal Information Institute. Wex – Champerty
Why Contingency Fees Are Not Champerty
A lawyer taking a percentage of the client’s recovery looks like exactly what champerty was meant to prevent. Early courts saw it that way, and some treated contingency arrangements as champertous. That view softened over time as legislatures and courts came to view contingency fees as essential to court access for plaintiffs who cannot pay hourly rates. The gradual acceptance of contingency fees is one of the clearest examples of champerty’s liberalization in the United States.1Legal Information Institute. Wex – Champerty
The line is drawn based on who is doing the sharing. Once retained, an attorney becomes a direct participant in the case with ethical duties, court oversight, and fiduciary obligations to the client. An outside investor writing a check and waiting for a payout has none of those constraints, which is why the same profit-sharing structure is treated very differently depending on the identity of the recipient.
Buying Someone Else’s Legal Claim
Champerty also comes up when a person or company buys a lawsuit outright from the original plaintiff. Courts in jurisdictions that still enforce the doctrine will look at whether the buyer acquired the claim primarily to profit from litigating it or whether there was a legitimate business reason behind the purchase. Buying a debt along with the right to collect on it is usually fine, because the lawsuit is secondary to the underlying commercial interest. Buying a claim with no connection to your existing business, purely to extract a settlement, is where champerty is more likely to apply.
What Happens When a Court Finds Champerty
When a court concludes that a funding agreement is champertous, it declares the contract void as a matter of public policy. The agreement is treated as though it never existed, and the funder cannot enforce any of its terms.3Michigan Law Review. Michigan Law Review – Contracts – Champerty A funder who advanced $50,000 to support a $500,000 claim loses the right to collect a share of the recovery and may have no legal path to get the investment back.
Voiding the funding agreement does not automatically kill the underlying lawsuit. In most cases the plaintiff’s case survives, because the court’s concern is the corrupt bargain between funder and litigant, not the merits of the claim against the defendant. The funder absorbs the loss while the plaintiff continues. Outcomes vary, though. In at least one well-known Pennsylvania case, a court dismissed the underlying lawsuit after finding the funding agreement champertous, reasoning that the plaintiff lacked standing in equity because the entire case was built on a void arrangement.3Michigan Law Review. Michigan Law Review – Contracts – Champerty
Which States Still Enforce Champerty
The picture across the United States is uneven. Some states never adopted the doctrines. Others enforced them for decades before abolishing them by statute or court decision. And a meaningful number still treat champerty and maintenance as valid grounds for voiding a funding agreement or imposing penalties.
States that have significantly restricted or prohibited third-party litigation funding under champerty principles include Alabama, Kentucky, Maine, Minnesota, Mississippi, Montana, Nevada, and Pennsylvania, among others. Kentucky has a statute that voids contracts made in exchange for services in prosecuting or defending someone else’s case. Maine goes further and defines champerty as a criminal offense by statute.
On the other side, California, New Jersey, and Texas never incorporated the doctrines into state law. Massachusetts abolished champerty through its Supreme Judicial Court in 1997. Florida, Ohio, and South Carolina have similarly moved away from enforcement. One federal appeals court described the general trend as “towards limiting, not expanding” these common law prohibitions, though the trend is not universal. Anyone entering a litigation funding arrangement needs to know which side of the line their jurisdiction falls on.
How the Doctrines Apply to Modern Litigation Finance
The loosening of champerty rules opened space for a specialized litigation finance industry, in which firms provide capital to plaintiffs or law firms in return for a share of a successful outcome. Two categories dominate. Consumer legal funding gives cash to individual plaintiffs to cover living expenses while they wait for a personal injury or similar case to resolve; the money is repaid from the settlement, and if the plaintiff loses, nothing is owed. Commercial litigation finance backs law firms or corporate plaintiffs in larger cases and is structured more like an investment.
Supporters argue that outside funding lets plaintiffs with strong cases stand up to well-resourced defendants rather than accepting a low settlement out of financial pressure. Critics say outside money encourages weak lawsuits, inflates settlement demands, and turns the courts into a speculative marketplace. The debate essentially reruns the original champerty argument in modern form.
Attorney Ethics and Third-Party Funding
Even in states that no longer enforce champerty, professional conduct rules create limits on how funding can be structured. Two ABA Model Rules matter most.
Model Rule 1.8(e) prohibits lawyers from providing financial assistance to clients in connection with pending or contemplated litigation, with narrow exceptions. A lawyer may advance court costs and litigation expenses with repayment contingent on the outcome. A lawyer representing an indigent client may pay those costs outright. And in pro bono cases through nonprofit organizations, lawyers may provide modest gifts for basic necessities like food, rent, and medicine.4American Bar Association. Rule 1.8 Current Clients Specific Rules
Model Rule 5.4(a) prohibits lawyers from sharing legal fees with nonlawyers, subject to a few exceptions involving deceased partners’ estates, employee retirement plans, and court-awarded fees shared with nonprofit organizations that employed the lawyer.5American Bar Association. Rule 5.4 Professional Independence of a Lawyer Rule 5.4(c) separately bars anyone who pays a lawyer from directing the lawyer’s professional judgment. A litigation funder cannot dictate case strategy, control settlement decisions, or override the attorney’s independent judgment, no matter how much money is at stake.
Several states have codified these principles specifically for commercial funders. Indiana’s 2024 statute prohibits commercial funders from making any decision, having any influence, or directing the plaintiff or attorneys regarding the conduct of the case or any settlement. Louisiana adopted a nearly identical provision the same year. Even where champerty itself is no longer enforced, the concerns behind it, outside control over litigation and profit-driven meddling, continue to shape the rules.