Phoenix Light SF Limited v. The Bank of New York Mellon Corporation
- Valerie Caproni
- 1:14-cv-10104
- U.S. District Court · Southern District of New York
- 5
In Phoenix Light SF v. Bank of New York Mellon, Judge Caproni held that champerty was waived and refused amendment.
The plaintiffs and The Bank of New York Mellon, as trustee; BNYM could not pursue the unpleaded champerty defense or amend its answer to add it.
What happened
In Phoenix Light SF Limited v. The Bank of New York Mellon Corporation, the defendant argued that the plaintiffs’ claims were invalid because their assignments were champertous, meaning connected to improper buying of litigation claims. The defendant had pleaded that the plaintiffs lacked standing but had not pleaded champerty as a separate defense.
The court explained that standing is a requirement for a federal court to hear a case and cannot be waived, while champerty is a separate defense that must be raised in the answer. The court also noted that the parties had already completed discovery and several motions.
Judge Valerie Caproni ruled that the champerty defense had been waived and stated that the defendant could not amend its answer to add that defense. The court left the defendant free to argue that the plaintiffs otherwise lacked standing.
The detailed version
- Phoenix Light SF Limited v. The Bank of New York Mellon Corporation · No. 1:14-cv-10104
- Valerie Caproni
- June 3, 2020
Background
On April 13, 2020, the Court ordered The Bank of New York Mellon, as trustee (BNYM), to explain why it had not waived an argument that the plaintiffs’ receipt of claims from an indenture trustee was champertous. The parties submitted letter briefs.
BNYM’s January 10, 2017 answer asserted that the plaintiffs lacked standing, but it did not assert champerty. The court described champerty as a common-law doctrine, codified in New York Judiciary Law § 489, intended to prevent the improper commercialization or trading of litigation. The court also noted that discovery, a summary-judgment motion, and Daubert motions had already been completed.
Standing and Champerty
The court distinguished standing from champerty. Standing concerns whether a plaintiff has the legal ability to bring a claim in federal court. Because standing limits the types of disputes federal courts may decide, a standing defect cannot be waived, and courts must independently consider it.
Champerty, by contrast, concerns the party’s motivation for entering a transaction. The court treated it as an affirmative defense, meaning a defense that the defendant must raise and prove. Because BNYM did not plead champerty, the court held that the defense was waived. The court rejected BNYM’s argument that champerty was merely another way of asserting that the plaintiffs lacked standing.
The court acknowledged that champerty and standing can be related in some circumstances. It nevertheless found no valid reason to extend standing’s no-waiver rule to champerty or to treat BNYM’s general standing defense as preserving a champerty defense that did not give the plaintiffs notice of that theory.
Ruling
The court found that BNYM had waived its champerty defense. It also stated that it would not allow BNYM to amend its answer because the litigation had progressed through discovery and multiple motion stages. The court clarified that BNYM remained free to argue that the assignment did not give the plaintiffs standing or that the plaintiffs otherwise lacked standing. The order did not decide whether the assignments were actually champertous.
Read the full 5-page opinion on CourtListener, the free public archive maintained by the Free Law Project.