You are an associate at the law firm of Baumfield & Baumfield LLP, a New York law firm. The Issue

| August 31, 2016

You are an associate at the law firm of Baumfield & Baumfield LLP, a New York law firm.
The Issue – Background Facts
One of the firm’s clients, ABC Insurance Company (ABC), is upset that a competitor,
Synergy Insurance Company (Synergy), was recently allowed to complete a corporate
transaction that has had the effect of capping the liability that Synergy will have with regard
to asbestos claims payable under insurance policies that it issued to various manufacturing
companies in the 1950s through 1980s. They did this by moving all of the relevant insurance
companies into a newly created subsidiary company, Brandenberg Insurance Company
(Brandenberg), without getting the policyholders’ approval for the change in insurer, and then
“de-merging” Brandenberg from Synergy so that Brandenberg no longer has any corporate
connection to Synergy. Brandenberg was given only a limited pool of $250 million in funds
to pay the claims, based on actuarial projections of the value of future claims. Within a year
of the de-merger, new projections revealed that claims would total at least $400 million, not
$250 million. Since then, the projections of total claims likely to be payable on the policies
keep going up. (Asbestos claims keep growing even though companies no longer use
asbestos, as more and more former employees present with asbestos-related illnesses, such as
mesothelioma.) Synergy asserts that it has no further obligation toward the policyholders
whose policies were transferred to Brandenberg, even though Brandenberg will not have
enough money to pay all of the claims.
ABC’s Connection to the Above
ABC is concerned because when Brandenberg’s funds run out, as they inevitably will, based
on the trends described above, state insurance law in each of the 50 states where Synergy
wrote its insurance policies requires that the shortfall due to Synergy’s former customers
must be paid from a special state emergency fund. The funds are financed by levies imposed
on each insurance company operating in that state. So all of the other insurance companies in
each state will be charged a special levy by the fund to cover the cost of paying for Synergy’s
policyholders’ claims! ABC thinks it is unfair that Synergy was able to do a deal that
effectively transferred its liability to its policyholders to ABC.
ABC initially challenged the corporate transaction to the state regulators in Pennsylvania,
where Synergy Insurance is based. It even litigated the matter up to the Pennsylvania
Supreme Court, and lost. So ABC has realized that the only way for the transaction to be
overturned is for affected Synergy policyholders to sue Synergy, for example via a class
action. ABC believes the policyholders would have a good claim for breach of contract since
Synergy transferred liability to a third party, Brandenberg, without securing the
policyholders’ consent. ABC believes that Synergy should have asked each affected
policyholder to grant a novation of the contract before that person’s contract could be

transferred to Brandenberg. ABC’s goal is to find affected policyholders and then either
convince them to sell their claims to ABC so that it can sue Synergy, or, alternatively, offer to
pay to fund their lawsuits against Synergy.
The Legal Issue
Traditionally, pursuing another party’s claims, and perhaps paying another party’s legal fees,
were forbidden under legal rules prohibiting champerty and maintenance unless the person
pursuing the claim or paying the fee had some interest in the outcome of the lawsuit. The
idea was that a person should not be able to cause mischief by encouraging lawsuits where
that person had nothing at stake.
Baumfield & Baumfield’s partners, Richard and Victoria Baumfield, are concerned that if
ABC acts on its idea of inciting the litigation described above, either by buying and then
litigating the claims itself or paying for policyholders’ to bring their own claims, it may be
prosecuted for breaching these rules. Accordingly, they would like to prepare a 50-state
survey of the law in this area so that they can determine in which states, if any, ABC may
bring or fund these claims. Therefore, they are asking their associates to each research the
law of one state (a different state for each associate) to help them in this project.
Your assignment
The specific legal question that you will be researching is as follows:
Do the ancient legal doctrines of champerty and maintenance still apply in Michigan?
If so, what are the rules? Will ABC be able to bring a policyholder’s claim itself or
fund a policyholder lawsuit in your state?
You will be expected to consult U.S. legal resources on websites such as Westlaw
International to come up with your answer. Do not forget to KeyCite (on Westlaw) your
cases to make sure that the cases you are citing are still good law. KeyCite will also help you
find the most recent cases on point. You may wish to consult legal encyclopedias such as the
Am Jur (American Jurisprudence) or CJS (Corpus Juris Secondum) to get you started. We
believe that in some states, these rules are now contained in statutes. In that case, you may be
able to find the statutes by linking through from the relevant cases. Remember that if there is
an applicable statute, you should check the relevant case authority interpreting the statute to
see how the statute is currently being interpreted and applied by the courts.
As noted, each associate will be researching one state. Students who attend the Thursday,
Week 4 seminar may pick a state in class. Other students may e-mail Tory and Richard. With
the state they wish to research Once a student has selected a state, that state will no longer be

Format: to be discussed in the Week 4 lecture. See Toni M. Fine, American Legal Systems:
A Resource and Reference Guide (LexisNexis 1997), Chapter 10 (to be posted on iLearn).
Length: there is no set word limit. Our advice is to write as much (or as little) as you need to
accurately describe the law. If you can do so in 2-3 double-spaced pages, great. If you need

4 or 6 pages, that is fine, too. We anticipate that you will need around 5-6 pages. If the law
has changed over time, just tell us the law as it exists today. You may cite cases that are a few
decades old if they are still good law.
Referencing: Be sure to cite the cases and any applicable statute sections that support your
analysis. Please attempt to follow Bluebook style.
Questions and review of drafts: Half of you will be assigned to Tory as your partner in the
law firm and the other half to Richard. You are required to consult with them once before the
assignment is due, after you have completed a draft of the memo. You may ask questions,
and Tory or Richard will review your draft assignment. Please bring a hard copy printout of
your memo to your meeting with your partner.
Turnitin: Please run your memo through Turnitin.
Due: Friday, October 24th, at 4 p.m. This is the end of Week 7.
Marks: This assignment is worth 15% of the final grade in this course. Thus, it will be
scored out of 15 points.

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