Question;You are an associate at the law firm of Baumfield & Baumfield LLP, a New York law firm.The Issue ? Background FactsOne of the firm?s clients, ABC Insurance Company (ABC), is upset that a competitor,Synergy Insurance Company (Synergy), was recently allowed to complete a corporatetransaction that has had the effect of capping the liability that Synergy will have with regardto asbestos claims payable under insurance policies that it issued to various manufacturingcompanies in the 1950s through 1980s. They did this by moving all of the relevant insurancecompanies 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 corporateconnection to Synergy. Brandenberg was given only a limited pool of $250 million in fundsto pay the claims, based on actuarial projections of the value of future claims. Within a yearof 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 policieskeep going up. (Asbestos claims keep growing even though companies no longer useasbestos, as more and more former employees present with asbestos-related illnesses, such asmesothelioma.) Synergy asserts that it has no further obligation toward the policyholderswhose policies were transferred to Brandenberg, even though Brandenberg will not haveenough money to pay all of the claims.ABC?s Connection to the AboveABC is concerned because when Brandenberg?s funds run out, as they inevitably will, basedon the trends described above, state insurance law in each of the 50 states where Synergywrote its insurance policies requires that the shortfall due to Synergy?s former customersmust be paid from a special state emergency fund. The funds are financed by levies imposedon each insurance company operating in that state. So all of the other insurance companies ineach state will be charged a special levy by the fund to cover the cost of paying for Synergy?spolicyholders? claims! ABC thinks it is unfair that Synergy was able to do a deal thateffectively 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 PennsylvaniaSupreme Court, and lost. So ABC has realized that the only way for the transaction to beoverturned is for affected Synergy policyholders to sue Synergy, for example via a classaction. ABC believes the policyholders would have a good claim for breach of contract sinceSynergy transferred liability to a third party, Brandenberg, without securing thepolicyholders? consent. ABC believes that Synergy should have asked each affectedpolicyholder to grant a novation of the contract before that person?s contract could betransferred to Brandenberg. ABC?s goal is to find affected policyholders and then eitherconvince them to sell their claims to ABC so that it can sue Synergy, or, alternatively, offer topay to fund their lawsuits against Synergy.The Legal IssueTraditionally, pursuing another party?s claims, and perhaps paying another party?s legal fees,were forbidden under legal rules prohibiting champerty and maintenance unless the personpursuing the claim or paying the fee had some interest in the outcome of the lawsuit. Theidea was that a person should not be able to cause mischief by encouraging lawsuits wherethat person had nothing at stake.Baumfield & Baumfield?s partners, Richard and Victoria Baumfield, are concerned that ifABC acts on its idea of inciting the litigation described above, either by buying and thenlitigating the claims itself or paying for policyholders? to bring their own claims, it may beprosecuted for breaching these rules. Accordingly, they would like to prepare a 50-statesurvey of the law in this area so that they can determine in which states, if any, ABC maybring or fund these claims. Therefore, they are asking their associates to each research thelaw of one state (a different state for each associate) to help them in this project.Your assignmentThe 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 orfund a policyholder lawsuit in your state?You will be expected to consult U.S. legal resources on websites such as WestlawInternational to come up with your answer. Do not forget to KeyCite (on Westlaw) yourcases to make sure that the cases you are citing are still good law. KeyCite will also help youfind the most recent cases on point. You may wish to consult legal encyclopedias such as theAm Jur (American Jurisprudence) or CJS (Corpus Juris Secondum) to get you started. Webelieve that in some states, these rules are now contained in statutes. In that case, you may beable to find the statutes by linking through from the relevant cases. Remember that if there isan applicable statute, you should check the relevant case authority interpreting the statute tosee 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. Withthe state they wish to research Once a student has selected a state, that state will no longer beavailable.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 toaccurately describe the law. If you can do so in 2-3 double-spaced pages, great. If you need4 or 6 pages, that is fine, too. We anticipate that you will need around 5-6 pages. If the lawhas changed over time, just tell us the law as it exists today. You may cite cases that are a fewdecades old if they are still good law.Referencing: Be sure to cite the cases and any applicable statute sections that support youranalysis. Please attempt to follow Bluebook style.Questions and review of drafts: Half of you will be assigned to Tory as your partner in thelaw firm and the other half to Richard. You are required to consult with them once before theassignment 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 ofyour 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 bescored out of 15 points.
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