May 5, 2010
MVB Collision D/B/A MID ISLAND COLLISION, A/A/O ROBERT HICKEY, Plaintiff(s)
Allstate Insurance Company, Defendant(s)
Steven L. Goldstein, LLP, Attorney for Plaintiff
Marjorie E. Bornes, Esq., Attorney for Defendant
Michael A. Ciaffa, J.
The Court's prior decisions in this case addressed, at some length, the difficult and complex legal issues presented by defendant's champerty defense. In its decision dated June 10, 2009 (2009 NY Slip Op 29251), the Court ruled that it could not determine the validity of the champerty defense without a hearing. A subsequent decision, dated July 16, 2009 (2009 NY Slip Op 51580), set forth the "burden-shifting protocol" that would be applied at the hearing. The Court's third decision, dated October 29, 2009, reiterated that its inquiry "remains a factual one." Finally, in light of the intervening Court of Appeals' decision in the Love Funding case (Trust for the Certificate Holders, et al v. Love Funding Corp. 2009 NY Slip Op 07323, decision dated October 15, 2009), the Court made plain that the latter decision "will certainly guide this Court's inquiry".
Consistent with these rulings, the Court heard testimony and received evidence from the parties on two hearing dates. The testimony was particularly helpful in clarifying the critical factual issue - - namely, plaintiff's intent in obtaining the assignment. Post hearing memoranda were also submitted. Counsel for both parties are to be commended for providing the Court with forceful and useful presentations of their respective contentions.
The hearing testimony, as a whole, confirms that the assignment at issue was clearly intended as a tool, to be used by plaintiff in its ongoing dispute over the labor rate paid by Allstate for covered auto repairs. It is equally evident that litigation was the intended vehicle through which plaintiff would be using the assignment.
According to plaintiff's assignor, Robert Hickey, he signed the assignment at plaintiff's request. After learning that he could be held liable for the difference between the labor rate paid by Allstate and the rate charged by plaintiff, he agreed to let plaintiff step in his shoes. "[B]asically, they were going to try [to] get the money [from Allstate], so I wouldn't have to pay it, "
James Jarocki, a repair adjustment supervisor, testified that the Hickey claim was one of 47 similar lawsuits brought by plaintiff as an assignee. The multiple lawsuits, taken together, establish quite clearly that plaintiff was obtaining assignments with the intention of suing Allstate. However, the practice must be viewed in the broader context of an ongoing, unresolved disagreement over labor rates. In one telling exchange between an Allstate adjuster, John DiGiose, and plaintiff's principal, Robert Jesberger, DiGiose admitted he told Jesberger that if plaintiff didn't like Allstate's labor rate, it should sue Allstate. DiGiorno was not joking.
Brian McGauvern, plaintiff's general manager, attested that his company had failed to negotiate an agreed price with Allstate in a large percentage of cases. His company tried to involve the NYS Insurance Department in the dispute, to no avail. "Civil remedies" appeared to be plaintiff's only viable option.
Most importantly, according to plaintiff's proof, taking assignments from customers was the only alternative that made business sense. Other approaches, such as asking customers for the difference, risked the loss of their business on future matters. Attempts to negotiate with Allstate on the customer's behalf were constantly rebuffed. Prior to taking the assignment, McGauvern claimed "[w]e made every attempt to negotiate... We called everybody." Plaintiff received "[n]o response. No help."
In the final analysis, the Court must make a difficult choice between the public policy arguments advanced by each side. Defendant contends that plaintiff is guilty of "stirring up litigation" by taking assignments from car repair customers solely for the purpose of suing defendant over the parties' ongoing labor rate dispute. Plaintiff, in turn, argues that since it had "a pre-existing proprietary interest" in obtaining payment for repairs to its customer's cars, its acquisition of the assignment was for a proper business purpose, and therefore was not champertous.
Guided by the Court of Appeals' decision in Love Funding, the Court concludes that plaintiff met its burden of proving that its intent and purpose in obtaining the assignment was legitimate. A key difference between a legitimate and an illegitimate assignment lies "between one... acquire[d]... to make money from litigating it and one... acquire[d]... to enforce... [and] protect [the assignee's] own interest[s]..." Love Funding, supra. While it may be true, as argued by defendant, that plaintiff took the assignment with the intent of "stirring up" and "creat[ing]" litigation in cases where "it was not going to reach an agreed price with Allstate" (defendant's mem. pp. 15-16), it is also true that plaintiff's auto repair business and defendant's involvement in claims settlement gave plaintiff a "preexisting proprietary interest" in getting paid a fair labor rate from defendant. See Love Funding, supra.
On balance, under the formulation of the champerty doctrine announced by the Court of Appeals, the Court finds that plaintiff proved that pursuit of that legitimate property interest justified its obtaining an assignment from Mr. Hickey. Even if plaintiff knew or believed that litigation over the claim would be inevitable, the Court cannot say that "stirring up litigation" was the sole or primary purpose of the assignment. Nor is this a case where an assignment was taken principally in the hope that it would enable the assignee to obtain a windfall profit. See MVB Collision, Inc. v. Allstate Ins. Co., decision dated June 10, 2009 (2009 NY Slip Op 29251); cf DNS Equity Group Inc. v. Lavallee, 2010 NY Slip Op 50298 (Dist Ct Nassau Co.).
Finally, nothing herein is intended to address defendant's alternative argument that "because Mr. Hickey had no right to recover the additional amounts sought for the repair of his vehicle, he had no claim to assign at all." To the extent that issue may remain in this case, it was outside the scope of the champerty hearing.
For these reasons, defendant's motion to dismiss the complaint on grounds of champerty, is DENIED.