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Assignment Agreement Template

Use our assignment agreement to transfer contractual obligations.

Updated February 1, 2024 Reviewed by Brooke Davis

An assignment agreement is a legal document that transfers rights, responsibilities, and benefits from one party (the “assignor”) to another (the “assignee”). You can use it to reassign debt, real estate, intellectual property, leases, insurance policies, and government contracts.

What Is an Assignment Agreement?

What to include in an assignment agreement, how to assign a contract, how to write an assignment agreement, assignment agreement sample.

Partnership Interest

An assignment agreement effectively transfers the rights and obligations of a person or entity under an initial contract to another. The original party is the assignor, and the assignee takes on the contract’s duties and benefits.

It’s often a requirement to let the other party in the original deal know the contract is being transferred. It’s essential to create this form thoughtfully, as a poorly written assignment agreement may leave the assignor obligated to certain aspects of the deal.

The most common use of an assignment agreement occurs when the assignor no longer can or wants to continue with a contract. Instead of leaving the initial party or breaking the agreement, the assignor can transfer the contract to another individual or entity.

For example, imagine a small residential trash collection service plans to close its operations. Before it closes, the business brokers a deal to send its accounts to a curbside pickup company providing similar services. After notifying account holders, the latter company continues the service while receiving payment.

Create a thorough assignment agreement by including the following information:

• Effective Date:  The document must indicate when the transfer of rights and obligations occurs.
• Parties:  Include the full name and address of the assignor, assignee, and obligor (if required).
• Assignment:  Provide details that identify the original contract being assigned.
• Third-Party Approval: If the initial contract requires the approval of the obligor, note the date the approval was received.
• Signatures:  Both parties must sign and date the printed assignment contract template once completed. If a notary is required, wait until you are in the presence of the official and present identification before signing. Failure to do so may result in having to redo the assignment contract.

Review the Contract Terms

Carefully review the terms of the existing contract. Some contracts may have specific provisions regarding assignment. Check for any restrictions or requirements related to assigning the contract.

Check for Anti-Assignment Clauses

Some contracts include anti-assignment clauses that prohibit or restrict the ability to assign the contract without the consent of the other party. If there’s such a clause, you may need the consent of the original parties to proceed.

Determine Assignability

Ensure that the contract is assignable. Some contracts, especially those involving personal services or unique skills, may not be assignable without the other party’s agreement.

Get Consent from the Other Party (if Required)

If the contract includes an anti-assignment clause or requires consent for assignment, seek written consent from the other party. This can often be done through a formal amendment to the contract.

Prepare an Assignment Agreement

Draft an assignment agreement that clearly outlines the transfer of rights and obligations from the assignor (the party assigning the contract) to the assignee (the party receiving the assignment). Include details such as the names of the parties, the effective date of the assignment, and the specific rights and obligations being transferred.

Include Original Contract Information

Attach a copy of the original contract or reference its key terms in the assignment agreement. This helps in clearly identifying the contract being assigned.

Execution of the Assignment Agreement

Both the assignor and assignee should sign the assignment agreement. Signatures should be notarized if required by the contract or local laws.

Notice to the Other Party

Provide notice of the assignment to the non-assigning party. This can be done formally through a letter or as specified in the contract.

File the Assignment

File the assignment agreement with the appropriate parties or entities as required. This may include filing with the original contracting party or relevant government authorities.

Communicate with Third Parties

Inform any relevant third parties, such as suppliers, customers, or service providers, about the assignment to ensure a smooth transition.

Keep Copies for Records

Keep copies of the assignment agreement, original contract, and any related communications for your records.

Here’s a list of steps on how to write an assignment agreement:

Step 1 – List the Assignor’s and Assignee’s Details

List all of the pertinent information regarding the parties involved in the transfer. This information includes their full names, addresses, phone numbers, and other relevant contact information.

This step clarifies who’s transferring the initial contract and who will take on its responsibilities.

Step 2 – Provide Original Contract Information

Describing and identifying the contract that is effectively being reassigned is essential. This step avoids any confusion after the transfer has been completed.

Step 3 – State the Consideration

Provide accurate information regarding the amount the assignee pays to assume the contract. This figure should include taxes and any relevant peripheral expenses. If the assignee will pay the consideration over a period, indicate the method and installments.

Step 4 – Provide Any Terms and Conditions

The terms and conditions of any agreement are crucial to a smooth transaction. You must cover issues such as dispute resolution, governing law, obligor approval, and any relevant clauses.

Step 5 – Obtain Signatures

Both parties must sign the agreement to ensure it is legally binding and that they have read and understood the contract. If a notary is required, wait to sign off in their presence.

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Contract Assignment Agreement

Rating: 4.8 - 105 votes

This Contract Assignment Agreement document is used to transfer rights and responsibilities under an original contract from one Party, known as the Assignor, to another, known as the Assignee. The Assignor who was a Party to the original contract can use this document to assign their rights under the original contract to the Assignee, as well as delegating their duties under the original contract to that Assignee. For example, a nanny who as contracted with a family to watch their children but is no longer able to due to a move could assign their rights and responsibilities under the original service contract to a new childcare provider.

How to use this document

Prior to using this document, the original contract is consulted to be sure that an assignment is not prohibited and that any necessary permissions from the other Party to the original contract, known as the Obligor, have been obtained. Once this has been done, the document can be used. The Agreement contains important information such as the identities of all parties to the Agreement, the expiration date (if any) of the original contract, whether the original contract requires the Obligor's consent before assigning rights and, if so, the form of consent that the Assignor obtained and when, and which state's laws will govern the interpretation of the Agreement.

If the Agreement involves the transfer of land from one Party to another , the document will include information about where the property is located, as well as space for the document to be recorded in the county's official records, and a notary page customized for the land's location so that the document can be notarized.

Once the document has been completed, it is signed, dated, and copies are given to all concerned parties , including the Assignor, the Assignee, and the Obligor. If the Agreement concerns the transfer of land, the Agreement is then notarized and taken to be recorded so that there is an official record that the property was transferred.

Applicable law

The assignment of contracts that involve the provision of services is governed by common law in the " Second Restatement of Contracts " (the "Restatement"). The Restatement is a non-binding authority in all of U.S common law in the area of contracts and commercial transactions. Though the Restatement is non-binding, it is frequently cited by courts in explaining their reasoning in interpreting contractual disputes.

The assignment of contracts for sale of goods is governed by the Uniform Commercial Code (the "UCC") in § 2-209 Modification, Rescission and Waiver .

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Other names for the document:

Assignment Agreement, Assignment of Contract Agreement, Contract Assignment, Assignment of Contract Contract, Contract Transfer Agreement

Country: United States

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Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

Find more Legal Forms and Templates

by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

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Updated on: November 24, 2023 · 3min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

• The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
• The assignor must agree to assign their rights and duties under the contract to the assignee.
• The assignee must agree to accept, or "assume," those contractual rights and duties.
• The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

• First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
• All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
• Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

• Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
• The effective date of the assignment and assumption agreement
• Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
• Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
• Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
• A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Assignment Agreement

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An assignment agreement is a contract that authorizes a person to transfer their rights, obligations, or interests in a contract or property to another person. It serves as a means for the assignor to delegate duties and advantages to a third party while the assignee assumes those privileges and obligations. This blog post will discuss assignment agreement, its purpose, essential elements, and implementation practices.

Key Functions of an Assignment Agreement

Below are some key functions of an assignment agreement.

• Facilitating Clear Transfer of Rights and Obligations: Assignment agreement plays a vital role in diverse industries and business transactions by facilitating a transparent transfer of rights and obligations between parties. These agreements encompass intellectual property rights, contractual duties, asset ownership, and other legal entitlements. By clearly defining the assignment's scope and nature, both parties can ensure a smooth transition without any uncertainties.
• Ensuring Protection of Interest: Another important objective of the assignment agreement is safeguarding the assignor and assignee's interests. These agreements provide a legal framework that protects the assignee's rights while relieving the assignor of responsibilities and liabilities associated with the assigned asset or contract. This protection ensures that neither party faces unexpected consequences or disputes during or after the assignment.
• Outlining Consensus on Terms and Conditions : Assignments often involve intricate terms and conditions, necessitating mutual understanding between the assignor and assignee. Assignment agreement serves as binding documents that outline the assignment's terms and conditions, including payment terms, timelines, performance expectations, and specific requirements. By reaching a consensus on these details, both parties can minimize potential conflicts and align their expectations.
• Complying with Legal Laws: Ensuring legal compliance and enforceability is an important objective of the assignment agreement. Also, it is prudent to create these documents according to the relevant rules, regulations, and industry requirements. By adhering to legal guidelines, the assignment agreement becomes a robust legal instrument that provides a solid foundation for potential legal action in case of breaches or disputes.
• Maintaining Confidentiality and Non-Disclosure: Many assignments involve confidential information, proprietary knowledge, or trade secrets that require protection. An objective of the assignment agreement is to establish clear guidelines regarding the confidentiality and non-disclosure of such information. These guidelines define the scope of confidential information, specify restrictions on its use or disclosure, and outline the consequences of any breaches. By ensuring clarity in these aspects, the agreement protects the interests of both parties and fosters a sense of trust .

Best Practices for Crafting an Assignment Agreement

Assignment agreements are vital in different business transactions, transferring rights and obligations from one person to another. Whether it's a merger, acquisition, or contract assignment, implementing an assignment agreement needs thorough consideration and adherence to best practices to ensure a seamless and lawfully sound process. Below are some key practices to follow when implementing an assignment agreement.

• Identifying the Parties Involved: The initial step in implementing an assignment agreement is to identify the parties participating in the assignment agreement. It is vital to accurately define the assignor, who will transfer the rights, and the assignee, who will receive them. The assignment agreement should include precise details of both parties' names and contact information.
• Defining the Scope and Extent of Assignment: It is imperative to define the assignment's scope and extent clearly to prevent potential disputes or ambiguity in the future. It specifies the rights, benefits, and obligations transferred from the assignor to the assignee. In addition, specific details such as intellectual property rights, contractual obligations, and any relevant limitations or conditions should be explicitly outlined.
• Reviewing and Understanding Existing Contracts or Agreements: Assignment agreements often transfer rights and obligations from preexisting contracts or agreements. It is essential to thoroughly review and comprehend these existing contracts to facilitate a seamless transfer. Identifying any provisions restricting or prohibiting assignment is important and should be addressed accordingly. Seeking legal advice is advisable to ensure compliance with contractual obligations.
• Obtaining Consent from Relevant Parties: In some cases, obtaining consent from third parties directly affected by the transfer of rights and obligations may be necessary. Also, it is important to identify these parties and obtain their consent in writing if required. Failure to get permission may lead to legal complications and a potential breach of contract .
• Crafting a Comprehensive Assignment Agreement: Upon collecting all relevant data, it is time to create a comprehensive assignment agreement. This agreement should utilize unambiguous language to define the rights and obligations transferred, specify the effective date of the assignment, and outline any other relevant terms and conditions. Engaging legal professionals specializing in contract law is highly recommended to ensure the agreement's legal validity and enforceability.
• Seeking Legal Advice and Performing Review: It is important to seek legal advice and conduct a thorough review before finalizing the assignment agreement. Experienced attorneys can provide valuable insights, identify potential risks, and ensure compliance with applicable laws and regulations. The legal review helps minimize the likelihood of errors or oversights that could result in future disputes or legal challenges.
• Executing and Recording the Assignment Agreement: Once the assignment agreement has been reviewed and approved, both parties should implement the document by signing it. Also, to enhance its enforceability, it is advisable to have the assignment agreement witnessed or notarized, depending on the jurisdiction's legal requirements. Additionally, maintaining a record of the executed contract is essential for future reference and as evidence of the assignment.
• Communicating the Assignment: Effective communication of the assignment to all relevant parties is important after executing the assignment agreement. Stakeholders, such as employees, clients, suppliers, and contractors, should be notified about the transfer of rights and obligations. It ensures a smooth transition and minimizes potential disruptions or misunderstandings.
• Documenting and Ensuring Compliance: Lastly, it is imperative to maintain proper documentation and ensure ongoing compliance with the assignment agreement's terms. Keeping copies of all relevant documents, including the assignment agreement, consent, and communications related to the assignment, is important. Regularly reviewing and monitoring compliance with the assignment agreement allows for prompt resolution of any issues and helps maintain a transparent and accountable process.

Benjamin W.

Key Terms for Assignment Agreements

• Assignor: The individual or entity that transfers their rights, responsibilities, or interests to another party using an assignment agreement. And by doing so, the assignor relinquishes any claims and duties associated with the assigned property, contract, or legal entitlements.
• Assignee: The individual or entity that receives the rights, interests, or obligations through an assignment agreement. The assignee assumes the transferred rights and responsibilities, essentially taking on the role of the assignor.
• Obligor: Refers to the party bound by a duty or obligation under a contractual or legal agreement. In an assignment agreement, the obligor is the party whose performance or obligations are assigned to the assignee.
• Assignable Rights: These are the specific rights or interests that can be transferred from the assignor to the assignee via an assignment agreement. These include intellectual property rights, contractual rights, real estate interests, royalties, and other lawful entitlements.
• Consideration: The value or benefit exchanged between the parties in an assignment agreement. Also, consideration is commonly paid in monetary payment, goods, services, or promises. It represents what each party gains or sacrifices as part of the assignment.
• Notice of Assignment: A formal written notification provided by the assignor to the obligor, serving as a communication of the assignment of rights, interests, or obligations to the assignee. This notice establishes the assignee's rights and enables the obligor to fulfill their duties to the correct party.

Final Thoughts on Assignment Agreements

In a nutshell, assignment agreement plays an important role in business transactions, allowing for transferring of rights, duties, and interests between parties. Moreover, by understanding these objectives and addressing them through well-drafted assignment agreement, businesses and individuals can engage in assignments with confidence and clarity. Also, since an assignment agreement includes several legal complexities, it is rational to consult a professional attorney who can guide you through the process.

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Meet some of our Assignment Agreement Lawyers

I have had my own law practice since 2014 and I enjoy solving my clients’ problems. That’s why I constantly stay on top of the latest developments in the law and business of startups, entertainment, art, intellectual property, and commercial enterprise. I constantly keep learning because everything I learn helps me make my client’s life better. I assist clients in all aspects of copyright, trademark, contract, trade secret, business, nonprofit, employment, mediation, art, fashion, and entertainment law. Even though I am licensed to practice law in NY, I have worked for clients all over the country and even in Europe, Africa, and Latin America. No matter the client, I always look for ways to protect their assets, artworks, businesses, and brands with strategies to help them grow. I am a fluent bilingual legal professional who can analyze complex legal and business problems and solve them creatively for the benefit of my clients. I am detail-oriented and attentive which makes me excellent at negotiating, drafting, and revising all types of agreements and deals. I advise creatives and companies on intellectual property issues, risk management, and strategic planning. My clients love what I do for them because I employ a practical, client-tailored, and results-oriented approach to their case, no matter how small.

My name is Ryenne Shaw and I help business owners build businesses that operate as assets instead of liabilities, increase in value over time and build wealth. My areas of expertise include corporate formation and business structure, contract law, employment/labor law, business risk and compliance and intellectual property. I also serve as outside general counsel to several businesses across various industries nationally. I spent most of my early legal career assisting C.E.O.s, General Counsel, and in-house legal counsel of both large and smaller corporations in minimizing liability, protecting business assets and maximizing profits. While working with many of these entities, I realized that smaller entities are often underserved. I saw that smaller business owners weren’t receiving the same level of legal support larger corporations relied upon to grow and sustain. I knew this was a major contributor to the ceiling that most small businesses hit before they’ve even scratched the surface of their potential. And I knew at that moment that all of this lack of knowledge and support was creating a huge wealth gap. After over ten years of legal experience, I started my law firm to provide the legal support small to mid-sized business owners and entrepreneurs need to grow and protect their brands, businesses, and assets. I have a passion for helping small to mid-sized businesses and startups grow into wealth-building assets by leveraging the same legal strategies large corporations have used for years to create real wealth. I enjoy connecting with my clients, learning about their visions and identifying ways to protect and maximize the reach, value and impact of their businesses. I am a strong legal writer with extensive litigation experience, including both federal and state (and administratively), which brings another element to every contract I prepare and the overall counsel and value I provide. Some of my recent projects include: - Negotiating & Drafting Commercial Lease Agreements - Drafting Trademark Licensing Agreements - Drafting Ambassador and Influencer Agreements - Drafting Collaboration Agreements - Drafting Service Agreements for service-providers, coaches and consultants - Drafting Master Service Agreements and SOWs - Drafting Terms of Service and Privacy Policies - Preparing policies and procedures for businesses in highly regulated industries - Drafting Employee Handbooks, Standard Operations and Procedures (SOPs) manuals, employment agreements - Creating Employer-employee infrastructure to ensure business compliance with employment and labor laws - Drafting Independent Contractor Agreements and Non-Disclosure/Non-Competition/Non-Solicitation Agreements - Conducting Federal Trademark Searches and filing trademark applications - Preparing Trademark Opinion Letters after conducting appropriate legal research - Drafting Letters of Opinion for Small Business Loans - Drafting and Responding to Cease and Desist Letters I service clients throughout the United States across a broad range of industries.

I have a background in Criminal Law, Family Law, Contract Law, and Environmental Law. I also have five (5) degrees in the following: Here are my degrees and background: 1) B.S. in Environmental, Soil, and Water Sciences 2) A.S. in Pre-Medical Sciences (anatomy, physiology, medical terminology) 3) A.S. in Aircraft Non-Destructive Inspection (science of x-rays, cracks in metal, liquid penetrant, magnetic particle inspections, ultrasonic inspections, and spectrophotometric oil analysis) 4) Master's in Natural Resources Law Studies (1 year focus in the environmental and pollution laws (Hazardous Waste Laws such as RCRA, CERCLA, FIFRA, Natural Resource laws such as ESA, CWA, CAA, FWPCA, Environmental Law, Sustainable Development, and Global Climate Change issues) 5) Juris Doctor and certificate in Native American Law

I am a lawyer in Glendale, Arizona. I have practiced in contract work including buy/sell agreements, contracts for the purchase of goods and services and real estate. I also practice in bankruptcy law and sports and entertainment law.

Gregory S. Davis is a native of New York and is a graduate of the Norman Adrian Wiggins School of Law at Campbell University. He also holds an undergraduate degree in Economics from the Wharton School at the University of Pennsylvania and an MBA from Bowie State University. Prior to entering the practice of law, Greg was a Trust officer for one of the largest U.S. Banks, an adjunct professor of finance at Meredith College and a Series 7 licensed financial advisor. Greg is currently the owner of The Law Office of Gregory S. Davis, PLLC (gsdavislaw.com) focusing on Estate Planning, Real Estate and Business Law. Greg is also an adjunct professor of Business Law at Wake Tech.

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I have 27 years of experience with drafting, editing, revising, reviewing and amending business and commercial contracts and agreements of all kinds.

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• assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Understanding an Assignment of Rights Letter in North Carolina

Personal injury cases can be complex and overwhelming, especially when it comes to understanding the various legal documents involved. One such document is the Assignment of Rights Letter, which plays a crucial role in cases involving medical providers. Let’s explore the concept of an Assignment of Rights Letter in North Carolina within the context of a personal injury lawsuit to a medical provider, its purpose, components, and more.

What is an Assignment of Rights Letter?

An Assignment of Rights Letter is a legal document that transfers the rights and obligations of an injured party, specifically their right to receive payment from a personal injury settlement or judgment, to a medical provider. This document ensures that the medical provider will be compensated for their services provided to the injured party, while the injured party gains access to necessary medical care without immediate financial burden.

The primary purpose of an Assignment of Rights Letter is to benefit both the injured party and the medical provider. For the injured party, it allows them to receive medical treatment without worrying about upfront costs, as the medical provider agrees to be paid directly from the settlement or judgment. For the medical provider, it offers a sort of guarantee of payment for their services, reducing financial risk and ensuring they are compensated for their work.

When is an Assignment of Rights Letter Appropriate?

Personal Injury Cases

An Assignment of Rights Letter is most commonly used in personal injury cases, such as automobile accidents, slip and fall accidents, or medical malpractice cases . In these situations, the injured party may require ongoing medical care, and the Assignment of Rights Letter ensures they can receive treatment without immediate financial concerns.

Medical Provider Involvement

Medical providers play a critical role in personal injury cases, as they provide necessary care to the injured party. They may request an Assignment of Rights Letter when they agree to treat the injured party on a lien basis or when they believe that the injured party’s insurance may not cover the full extent of the treatment costs.

Key Components of an Assignment of Rights Letter

Parties involved.

An Assignment of Rights Letter should clearly identify the parties involved: the injured party, who is assigning their rights, and the medical provider, who is accepting the assignment. This includes their full names, addresses, and other relevant contact information.

Rights and Obligations

The Assignment of Rights Letter must outline the specific rights and obligations being transferred from the injured party to the medical provider. This typically includes the right to receive payment from the personal injury settlement or judgment and the obligation to provide medical treatment to the injured party.

Payment Terms

The payment terms agreed upon in the Assignment of Rights Letter should be detailed, including any provisions for medical treatment costs, deductibles, or copayments. This section should also specify how the medical provider will be paid and any limitations or caps on the amount of payment.

Termination of the Assignment

The Assignment of Rights Letter should explain how the assignment can be terminated, such as by mutual agreement or upon payment of the medical provider’s fees. It should also outline the consequences of termination for both parties, such as the return of any unearned payments or the resumption of the injured party’s responsibility for medical costs.

The Benefits of an Assignment of Rights Letter

For the Injured Party

An Assignment of Rights Letter provides the injured party with financial relief and access to necessary medical care. By assigning their right to receive payment from their personal injury settlement or judgment, the injured party can obtain medical treatment without worrying about upfront costs. This arrangement ensures that their medical needs are met while they focus on recovering from their injuries.

For the Medical Provider

For the medical provider, an Assignment of Rights Letter offers security and mitigates financial risks. By accepting the assignment of rights, the medical provider is guaranteed payment for their services directly from the settlement or judgment. This arrangement reduces the risk of non-payment or delayed payment, allowing the medical provider to focus on providing quality care to the injured party.

Legal Considerations in North Carolina

Statutory requirements.

While North Carolina does not have specific statutory requirements for Assignment of Rights Letters, it is essential to ensure that the document is legally binding and enforceable. This includes ensuring that the injured party and medical provider have the legal capacity to enter into the agreement, that the document is signed by both parties, and that the terms of the agreement are clear and unambiguous.

Potential Pitfalls

When drafting or executing an Assignment of Rights Letter, parties should be aware of potential pitfalls that could undermine the effectiveness of the document. Some common issues include poorly drafted or vague terms, failure to clearly identify the parties involved, and failure to address all necessary components, such as payment terms and termination provisions. To avoid these pitfalls, it is advisable to consult with an experienced attorney who can assist in drafting a legally sound Assignment of Rights Letter.

Ethical Considerations

Protecting patient rights.

An important ethical aspect of an Assignment of Rights Letter is ensuring that the patient’s rights are protected throughout the process. This includes obtaining the injured party’s informed consent before entering into the agreement, ensuring that the injured party understands the implications of assigning their rights, and being transparent about the terms of the agreement.

Maintaining Confidentiality

Dealing with sensitive medical information and personal injury cases requires maintaining strict confidentiality. Both the injured party and the medical provider must ensure that all information is handled with care, and the Assignment of Rights Letter should include provisions to safeguard the privacy of the parties involved.

Common Misconceptions about Assignment of Rights Letters

Misunderstanding the purpose.

A common misconception about Assignment of Rights Letters is that they serve as a waiver of the injured party’s rights. In reality, the injured party is not relinquishing their rights but temporarily transferring their right to receive payment from the settlement or judgment to the medical provider.

Confusing it with Other Legal Documents

Another misconception is confusing an Assignment of Rights Letter with other legal documents, such as liens or subrogation waivers. While these documents may have some similarities, they serve different purposes and have distinct legal implications. It is crucial to understand the differences between these documents to avoid confusion and ensure that the parties’ interests are adequately protected.

The Role of an Attorney in the Process

Drafting and Revew

An attorney can play a crucial role in the process of drafting and reviewing an Assignment of Rights Letter. They can ensure that the document is legally sound, includes all necessary components, and protects the interests of both the injured party and the medical provider. An attorney’s expertise can help avoid potential pitfalls and disputes that could arise from a poorly drafted or ambiguous document.

Negotiation

In some cases, there may be disputes or complex issues that need to be resolved before an Assignment of Rights Letter can be finalized. An attorney can assist in negotiating the terms of the agreement, ensuring that both parties are satisfied with the outcome and that the document remains legally enforceable.

Tips for Drafting a Clear and Effective Assignment of Rights Letter

Use plain language.

When drafting an Assignment of Rights Letter, it is essential to use clear and concise language to avoid confusion and misunderstandings. Using plain language helps ensure that both parties understand their rights and obligations, making the document more effective and easier to enforce.

Address All Necessary Elements

An effective Assignment of Rights Letter should address all essential components, such as the parties involved, rights and obligations, payment terms, and termination provisions. By addressing each of these elements, the document becomes more comprehensive and provides a solid foundation for a legally enforceable agreement.

Double-Check for Accuracy

Before finalizing an Assignment of Rights Letter, it is crucial to double-check the document for accuracy, particularly regarding names, addresses, and other identifying information. Errors in this information can lead to disputes or enforcement issues, so taking the time to ensure accuracy can help avoid future problems.

Frequently Asked Questions

Can an assignment of rights letter be revoked or modified.

Yes, an Assignment of Rights Letter can be revoked or modified, but this typically requires the agreement of both parties. The letter should include provisions outlining the process for revocation or modification, such as written notice and mutual consent.

Does an Assignment of Rights Letter guarantee payment to the medical provider?

While an Assignment of Rights Letter provides a level of security for the medical provider, it does not guarantee payment. Payment is contingent on the injured party receiving a settlement or judgment in their personal injury case. If the injured party does not recover any compensation, the medical provider may not receive payment for their services.

Are there any restrictions on the type of medical providers who can accept an Assignment of Rights Letter?

Generally, there are no restrictions on the type of medical providers who can accept an Assignment of Rights Letter. However, it is essential to ensure that the medical provider has the legal capacity to enter into the agreement and is properly licensed to provide the necessary care.

How does an Assignment of Rights Letter affect the injured party’s personal injury settlement or judgment?

An Assignment of Rights Letter does not directly affect the injured party’s settlement or judgment. However, it does impact how the settlement or judgment is distributed. When the injured party receives compensation, the assigned portion will be paid directly to the medical provider, reducing the amount the injured party ultimately receives.

Is an Assignment of Rights Letter the same as a medical lien?

No, an Assignment of Rights Letter is not the same as a medical lien. While both documents involve the medical provider’s right to payment from a personal injury settlement or judgment, they serve different purposes and have distinct legal implications. A medical lien is a claim against the injured party’s settlement or judgment, whereas an Assignment of Rights Letter is a transfer of the injured party’s right to receive payment directly to the medical provider.

Understanding the concept of an Assignment of Rights Letter in North Carolina is essential for anyone involved in a personal injury case that includes medical provider treatment. By recognizing the purpose, components, and legal considerations, parties can navigate the process more effectively and protect their interests. Working with an experienced attorney can further enhance the process, ensuring a legally sound and enforceable document that benefits both the injured party and the medical provider.

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• The Assignment Of Litigation Rights And Champerty

It is not often that we examine a case involving the doctrine of champerty. The last time we did so was on March 8, 2023 ( here ). We also examined the champerty doctrine in 2021 ( here ), 2020 ( here ), and 2016 ( here ).

Today, we examine the champerty doctrine in our discussion of IKB Intl. S.A. v. Morgan Stanley , 2024 N.Y. Slip Op. 01675 (1st Dept. Mar. 26, 2024) ( here ).

Champerty is the prohibited practice of purchasing claims for the purpose of commencing litigation. It has been described as “a venerable doctrine developed hundreds of years ago to prevent or curtail the commercialization of or trading in litigation.” 1

The doctrine of champerty is codified in New York within Judiciary Law § 489. 2 Under Judiciary Law § 489, no corporation “shall solicit, buy or take an assignment of … a bond, promissory note, bill of exchange, book debt, or other thing in action, or any claim or demand, with the intent and for the purpose of bringing an action or proceeding thereon.” However, for an assignment of a claim to be void for champerty, the assignee must have made the purchase “for the very purpose of bringing such suit” to the “exclusion of any other purpose.” 3 Thus, while assignments “for the primary purpose of obtaining costs or [harassment]” are void as champertous, 4 assignments are not champertous where the intent to bring a suit is merely “incidental and contingent” to other rights. 5

Moreover, champerty does not apply where the assignee had a “preexisting proprietary interest” in the subject matter. 6

IKB began in the years immediately prior to the financial crisis of 2007-2008. Plaintiff IKB International S.A. (“IKB S.A.”) was a commercial bank incorporated in Luxembourg.

IKB S.A. purchased a number of certificates (“Certificates”) for residential mortgage-backed securities from Morgan Stanley, allegedly in reliance on misrepresentations that Morgan Stanley made in its offering documents. In particular, Morgan Stanley allegedly made misrepresentations to IKB S.A.’s investment managers, Standish Mellon and BlackRock, including misrepresentations regarding loan-to-value and combined loan-to-value statistics, owner-occupancy status of borrowers, and adherence to the originators’ underwriting guidelines. The contemporary value of the Certificates collapsed during the onset of the financial crisis as the poor quality of the underlying loans and resulting increased credit risk became apparent. Ultimately, IKB S.A. was placed into liquidation as part of the German government’s bailout of IKB S.A.’s parent, IKB A.G.

In November 2008, IKB S.A. sold the Certificates to IKB A.G. Two weeks later, IKB A.G. sold the Certificates to Rio Debt Holdings (Ireland) Limited (“Rio”), a newly created Irish special purpose vehicle. As part of the sale of Certificates to Rio, IKB A.G. became a junior lender to Rio and also became a portfolio administrator to Rio.

IKB A.G. and Rio subsequently executed an assignment on May 9, 2012 (the “2012 Assignment”) in which Rio assigned to IKB A.G. “all the rights of action and claims against any other party with respect to the Securities it may have obtained in connection with its purchase of the Securities from IKB Deutsche Industriebank AG … except rights of action and claims for the receipt of interest and principal on the Securities.” In exchange, IKB A.G. agreed to provide to Rio “a sum equal to the proceeds of any recovery stemming from a resolution of claims relating to the Assigned Rights, net of all agreed costs, taxes and expenses, which shall be set out and governed by a separate agreement to be executed by the Parties.”

IKB A.G. maintained that under a supplementary deed (the “Supplementary Deed”) and other governing documents, the parties agreed that 80% of the net litigation proceeds would revert to IKB A.G. Rio and IKB A.G. executed the Supplementary Deed on January 11, 2013—after Plaintiffs filed the summons in the action—but gave it retroactive effect from May 9, 2012.

IKB A.G. filed the summons in November 2012 and later filed the complaint on May 17, 2013. The complaint alleged causes of action for fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation. Defendants moved to dismiss the complaint, in part for lack of standing, arguing that the 2012 Assignment of the fraud claims back to IKB A.G. was void as champertous. The motion court denied the motion, finding that Defendants had not shown that “IKB AG’s primary or sole purpose [for the assignment] was not to enforce a legitimate claim, or that the claim was not acquired as part of a larger transaction or for leverage in other disputes between the parties.” The motion court determined that IKB A.G.’s intent in the 2012 Assignment was a factual question that required further development of the record. However, the motion court dismissed the causes of action for fraudulent concealment and negligent misrepresentation.

On summary judgment, Defendants again sought dismissal on the basis of champerty. The motion court held that the 2012 Assignment was not champertous “because IKB AG had a preexisting proprietary interest in the subject matter.” The motion court explained that

In order to finance the initial assignment of the Certificates to Rio in 2008, IKB AG and Rio entered into a loan agreement. Pursuant to the 2008 loan agreement between IKB AG and Rio, IKB AG as junior lender was entitled to 80% of the profits from the assets. While Defendants are correct that the loan has since been paid down to one dollar, this does not change the fact that, unlike other champertous assignments, the 2012 Assignment indisputably did not involve a “stranger” to the transaction, but a party with a prior interest. 7

The motion court also held that Defendants “failed to establish that the sole purpose for the 2012 Assignment was to profit off of litigation, to the exclusion of all other purposes.” The motion court explained that “[a]n assignment is not champertous merely because the parties enter into the assignment ‘for the purpose of collecting damages, by means of a lawsuit.’” 8 “Rather,” said the motion court, “there is a key distinction between ‘acquir[ing] a right in order to make money from litigating it [champertous] and … acquir[ing] a right in order to enforce it [not champertous].’” 9

The motion court found that Plaintiffs “provided evidence that they [were] still entitled to 80% of the future cash flows under the 2008 loan agreement with Rio because the loan was not paid off entirely—even though it was paid down almost in its entirety.” “Therefore,” concluded the motion court, “regardless of whether or not the 2012 Assignment’s primary purpose was litigation, Defendants [had] not provided sufficient evidence to establish that the sole purpose, to the exclusion of all other purposes, was to profit off of litigation.” “As such,” said the motion court, “Defendants have failed to establish that the 2012 Assignment is void as champertous.”

The Appellate Division, First Department unanimously affirmed.

As an initial mater, the Court rejected Defendants’ argument (as the Court framed it) that “any assignment of litigation claims — even when fashioned to protect an independent litigation right of the assignee — must necessarily be void,” stating that such a formulation was “not the law.” 10 “Rather,” explained the Court, “the champerty doctrine is intended to prevent opportunistic parties from profiting from litigation claims that otherwise would not have been brought — not preventing the assignment of legitimate claims to a party holding a beneficial interest in those claims to enforce its own rights.” 11 “The critical distinction,” noted the Court, was “‘between acquiring a thing in action in order to obtain costs and acquiring it in order to protect an independent right of the assignee.’” 12

The Court also held that the motion court “correctly found that champerty only prohibits the acquisition of a cause of action by a ‘stranger’ to the underlying dispute.” 13 The Court found that the evidence “establishe[d] that plaintiff IKB Deutsche Industriebank A.G. had an independent interest in pursuing the claims, and was not a stranger to the action.” 14 “IKB A.G. owns 100% of plaintiff IKB International, S.A., the original purchaser of the assets, and was the assignor’s junior lender beginning in November 2008,” said the Court. “Defendants’ reading of Justinian [did] not compel a different result,” concluded the Court. 15

• Bluebird Partners, L.P. v. First Fidelity Bank, N.A. , 94 N.Y.2d 726, 729 (2000).
• Ehrlich v. Rebco Ins. Exchange, Ltd. , 225 A.D.2d 75, 77 (1st Dept. 1996).
• See Richbell Information Servs., Inc. v. Jupiter Partners , 280 A.D.2d 208, 215 (1st Dept. 2001) (citing Moses v.McDivitt , 88 N.Y. 62 (1882)). In Justinian Capital SPC v. WestLB AG, N.Y. Branch , the New York Court of Appeals explained that to “constitute the offense [of champerty] the primary purpose of the purchase must be to enable [one] to bring suit, and the intent to bring a suit must not be merely incidental or contingent.” 28 N.Y.3d 160, 166 (2016) (internal quotation marks omitted).
• See 71 Clinton St. Apts. LLC v. 71 Clinton Inc. , 114 A.D.3d 583, 585 (1st Dept. 2014); Trust For the Certificate Holders of Merrill Lynch Mortg. Investors, Inc. v. Love Funding Corp. , 13 N.Y.3d 190, 198 (2009).
• New York Chinese TV Programs, Inc. v. U.E. Enterprises, Inc. , 1989 WL 22442, *13 (S.D.N.Y. Mar. 8, 1989).
• See Love Funding , 13 N.Y.3d at 198.
• Citing Jamaica Public Service Co., Ltd. v. La Interamericana Compania De Seguros Generales S.A. , 262 A.D.2d 73, 74 (1st Dept. 1999); In re Imax Sec. Litig. , 2011 WL 1487090, *6 (S.D.N.Y. Apr. 15, 2011).
• Quoting Universal Inv. Advisory SA v. Bakrie Telecom Pte., Ltd. , 154 A.D.3d 171, 180 (1st Dept. 2017).
• Quoting id.
• Slip Op. at *1.
• Id. (citation omitted).
• Id. (citing Justinian , 28 N.Y.3d at 167) (internal quotation marks omitted)).

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