Crabtree v. Allstate Property
- Case Type:
- Consumer
- Case Status:
- Affirmed in part and Reversed in part
- Citation:
- 23-60537 (5th Circuit, Jul 18,2024) Published
- Tag(s):
-
- Ruling:
- The Fifth Circuit certified to the Mississippi Supreme Court the narrow issue of whether the Mississippi champerty statute (Miss. Code Ann. § 97-9-11) voids the assignment of a cause of action from a debtor in bankruptcy to a creditor if the creditor engages a disinterested third-party to purchase the cause of action from the debtor.
- Procedural context:
- The district court, applying Miss. Code Ann., dismissed the creditors' action against the debtor's insurance company on the basis that Mississippi's champerty statute (Miss. Code Ann. § 97-9-11) voided the transfers of the debtor's cause of action, so that the injured persons did not have standing to bring the action against the insurance company.
The injured persons appealed.
- Facts:
- Casey Cotton rear-ended Caleb Crabtree. Crabtree's injuries exceeded the limits on Cotton's insurance policy. Allstate Insurance broke off negotiations with Crabtree and failed to inform Cotton. Allstate's failure to inform Cotton gave rise to a bad-faith claim.
Caleb Crabtree and his spouse sued Cotton. Cotton filed for bankruptcy. With the bankruptcy court's approval, the Crabtrees agreed to purchase Cotton's bad faith claim against Allstate. The Crabtrees did not have sufficient funds to pay the $10,000 purchase price and entered into an agreement with a litigation finance company. Under the agreement, the litigation finance company paid the $10,000 purchase price and took an assignment of the bad faith claim against Allstate. The litigation finance company then assigned the claim to the Crabtrees, and the Crabtrees agreed to pay the litigation finance company $10,000 plus 8% interest from the proceeds of a judgment or settlement with Allstate.
- Judge(s):
- Smith, Wiener, and Douglas, Circuit Judges
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