Accrued Financial Services, Incorporated (AFS), is a corporation engaged in the business of conducting lease audits on behalf of tenants in commercial buildings and factory outlet malls. AFS is paid a percentage—usually 40 to 50 percent—of the discrepancy overcharges that it discovers and collects as a result of its audits. 

The tenant signs a letter of agreement with AFS and assigns all legal causes of action it may have against the landlord to AFS. The assignment grants AFS the authority to file lawsuits in its name against landlords at its discretion. After AFS conducted an audit of Prime Retail, Incorporated (a landlord), on behalf of tenants who had signed assignment agreements, AFS brought a lawsuit against Prime Retail, asserting various claims of overcharges. The U.S. District Court dismissed the case, finding that the assignment of the tenants’ claims to AFS violated public policy and were therefore illegal. AFS appealed. 

Issue 

Does the assignment by a tenant of its legal claims against a landlord violate public policy and is it therefore illegal? 

Language of the Court 

These relationships between AFS and the tenants were essentially lawsuit-mining arrangements under which AFS “mined for” and prosecuted lawsuits with no regard for the informed wishes of the real parties in interest. AFS thus became a promoter of litigation principally for the sake of the fees that it would earn for itself and not for the benefit that it might produce for the tenant, the real party in interest. Under these arrangements, even though the tenant might conclude, after reviewing the facts uncovered, that a lawsuit would imprudently damage the landlord–tenant relationship—or that pursuing aggressive allegations would do more harm than good—the tenant lost the right to control its destiny. Because we see these broad assignments as nothing more than arrangements through which to intermeddle and stir up litigation for the purpose of making a profit, we conclude that they violate Maryland’s strong public policy against stirring up litigation and are therefore void and unenforceable in Maryland. 

Decision 

The U.S. Court of Appeals held that the tenants’ assignment of their legal causes of action against Prime Retail to AFS violated public policy and was therefore illegal and void. The Court of Appeals affirmed the decision of the district 

Why did the court of appeals find the tenants’ assignments of their legal causes of action against Prime Retail to AFS illegal?

How can these assignments be distinguished from typical contingency fee arrangements that plaintiffs’ lawyers often have with clients?

Did AFS act ethically in this case?

What would be the consequences if a party’s legal cause of action could be assigned to another party to pursue? Explain.

What are the rights and obligations of the parties involved? Define and explain

Answer rating: 100% (QA)

In every premises of work company or else commercial building like any other organization there must be presence of some policies put therein to guide the organization to gear up towards meeting its o... View the full answer