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Where an owner settles a contractor's claims and assigns its rights against the architect, the contractor is not barred from pursuing the claims if the contractor was "not a stranger" to the claims at issue.

January 11, 2013
Mar-Paul Company, Inc. v. Jim Thorpe Area School District, 2011 Pa. Dist. & Cnty. Dec. LEXIS 580, 25 Pa. D&C5th 206 (Carbon County, 2011)

The contractor sued the owner school district for delay claims, and the owner joined the architect. The owner settled with the contractor and assigned its rights against the architect to the contractor. The contractor continued action against the architect in the owner's name. The architect moved for summary judgment, claiming that the assignment was unenforceable as it constituted Champerty. Champerty is a bargain by a stranger with a party to a suit, by which such third person undertakes to carry on the litigation at his own cost and risk, in consideration of receiving, if successful, a part of the proceeds or subject sought to be recovered. Champerty seeks to bar a party from speculating and profiting in litigation in which he has no legitimate interest. A champertous agreement is one in which a person having otherwise no interest in the subject matter of an action undertakes to carry on the suit at his/her own expense in consideration of receiving a share of what is recovered. To invalidate the assignment, the architect had to show: (1) the contractor had no legitimate interest in the suit; (2) the contractor must be spending his own money to prosecute the suit; and (3) the contractor must by his bargain with the owner share in any recovery. The architect showed (2) and (3), but his motion was denied because he could not show (1); rather, the contractor was not a stranger to the litigation or claims as it was the original plaintiff and its claims were resolved in the same litigation.

Case Law Alert, 1st Quarter 2013

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Gregory J. Kelley
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