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The Minnesota Supreme Court abolishes Minnesota's common-law prohibition against champerty.
This appeal arose from a contract between appellant Prospect Funding Holdings LLC and respondent Pamela Maslowski whereby Prospect purchased an interest in Maslowski’s personal injury suit. When Maslowski settled her suit and did not abide by the terms of the contract, Prospect sued Maslowski to enforce the contract. Both the district court and the court of appeals held that Maslowski could not enforce the contract because it violated Minnesota's common law prohibition against champerty.
Was the contract between Prospect and Maslowski invalid for violating Minnesota's common law prohibition against champerty?
The court held that contract between Prospect and Maslowski, while champertous, since the company was a stranger to the lawsuit it funded, was not void because the Minnesota Supreme Court abolished Minnesota's prohibition against such agreements, as the rules of professional responsibility and civil procedure, in Minn. R. Prof. Conduct 7.2, 7.3, and 3.1, and Minn. R. Civ. P. 11.02 and 11.03, were sufficient protection against the prosecution of frivolous lawsuits.