Case: 23-60537 Document: 85-1 Page: 1 Date Filed: 06/12/2025
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
____________ FILED
June 12, 2025
No. 23-60537 Lyle W. Cayce
Clerk
____________
Caleb Crabtree; Adriane Crabtree, as assignees of the claims of
Casey Cotton,
Plaintiffs—Appellants,
versus
Allstate Property and Casualty Insurance Company;
John Does 1-5,
Defendants—Appellees.
______________________________
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 1:22-CV-348
______________________________
Before Smith, Wiener, and Douglas, Circuit Judges.
Jerry E. Smith, Circuit Judge:
This appeal turns on whether Mississippi’s champerty statute, Miss.
Code Ann. § 97-9-11 (Rev. 2013), voids an assignment of a cause of action
to a disinterested third party. 1 We certified that dispositive question of state
_____________________
1
“Champerty is generally defined as a bargain between a stranger and a party to a
lawsuit by which the stranger pursues the party’s claim in consideration of receiving part
of any judgment proceeds.” Sneed v. Ford Motor Co., 735 So. 2d 306, 309 (Miss. 1999)
(citation modified).
Case: 23-60537 Document: 85-1 Page: 2 Date Filed: 06/12/2025
No. 23-60537
law to the Supreme Court of Mississippi:
Does Miss. Code Ann. § 97-9-11 (Rev. 2013) allow a
creditor in bankruptcy to engage a disinterested third party to
purchase a cause of action from a debtor?
Crabtree v. Allstate Prop. & Cas. Ins. Co. (Crabtree I), No. 23-60537, 2024 WL
3451894, at *1 (5th Cir. July 18, 2024) (unpublished).
The Supreme Court of Mississippi answered that question in the
negative: “This Court finds that the plain language of Mississippi Code
Section 97-9-11 (Rev. 2020) prohibits a disinterested third party engaged by
a bankruptcy creditor from purchasing a cause of action from a debtor’s
estate.” Crabtree v. Allstate Prop. & Cas. Ins. Co. (Crabtree II), --- So. 3d ----,
2025 WL 1409047, at *1 (Miss. 2025).
In accordance with that answer to our certified question, we hold that
the Crabtrees have not asserted an injury caused by Allstate because they
never acquired Cotton’s bad-faith claim against Allstate. We therefore affirm
the district court’s dismissal for lack of subject matter jurisdiction.
I.
We summarized the facts of this case in Crabtree I:
Casey Cotton rear-ended Caleb Crabtree, causing Crabtree
extensive injuries. Cotton was insured by Allstate, but
Crabtree’s injuries exceeded Cotton’s policy limit, meaning
that Cotton risked liability for the excess should he be found at
fault. Allegedly, Allstate refused to settle with Crabtree and
did not inform Cotton of those settlement negotiations or of
Cotton’s potential personal liability. Those failures gave
Cotton a potential claim for bad faith against Allstate.
Crabtree and his wife sued Cotton, who declared bankruptcy.
The bankruptcy court allowed the personal-injury action to
proceed to trial, and the Crabtrees were awarded over $4
million. That made the Crabtrees judgment creditors in the
2
Case: 23-60537 Document: 85-1 Page: 3 Date Filed: 06/12/2025
No. 23-60537
bankruptcy proceeding. Cotton’s bad-faith claim against
Allstate was classified as an asset of the bankruptcy estate. To
facilitate a settlement between the Crabtrees and Cotton
concerning the personal-injury judgment, the bankruptcy court
allowed the Crabtrees to purchase Cotton’s bad-faith claim for
$10,000.
The Crabtrees, however, could not afford the $10,000 upfront, so they engaged Court Properties, [Inc.], to assist with
financing. Court Properties paid the bankruptcy trustee
$10,000 to acquire the bad-faith claim, then assigned that claim
to the Crabtrees in exchange for $10,000 plus interest at 8%
with repayment contingent on successful recovery from
Allstate. The Crabtrees sued Allstate in the action now on
appeal, asserting Cotton’s bad-faith claim.
The district court dismissed that action for lack of subject
matter jurisdiction. It held that the assignment of Cotton’s
claim to Court Properties and Court Properties’s assignment
to the Crabtrees were champertous and hence void under § 97-
9-11. Thus, it found that the Crabtrees lacked Article III
standing because, absent Cotton’s bad-faith claims, the
Crabtrees had not suffered any injury at Allstate’s hands.
Crabtree I, 2024 WL 3451894, at *1.
We held that Article III jurisdiction turned on whether one (or both)
of the assignments were champertous under Mississippi law:
If either Cotton’s assignment to Court Properties or Court
Properties’s assignment to the Crabtrees is champertous and
therefore void, the Crabtrees do not lawfully possess Cotton’s
claim, meaning Allstate’s bad-faith has not injured them, and
they lack standing to sue on that ground. So, this case may
proceed in federal court if and only if both assignments were
valid under § 97-9-11.
Id. at *2.
3
Case: 23-60537 Document: 85-1 Page: 4 Date Filed: 06/12/2025
No. 23-60537
II.
We explained in Crabtree I that “Court Properties did not have a ‘real
and legitimate interest’ in the bad-faith claim because it was a ‘disinterested
stranger[]’ that had no stake in Cotton’s bad-faith claim or the bankruptcy
proceeding.” Id. at *4 (alteration in original) (quoting Sneed, 735 So. 2d at
311, 313). In answer to our certified question, the Supreme Court of
Mississippi held that state law “prohibits a disinterested third party engaged
by a bankruptcy creditor from purchasing a cause of action from a debtor’s
estate.” Crabtree II, --- So. 3d ----,
2025 WL 1409047, at *1. That means that
the assignment of Cotton’s claim by the bankruptcy trustee to Court
Properties was champertous and void under Mississippi law. See Sneed,
735
So. 2d at 315 (explaining that a champertous agreement is “a void contract
under the laws of the State of Mississippi”). Because Court Properties never
acquired Cotton’s claim, it could not have assigned it to the Crabtrees.
Accordingly, the Crabtrees do not possess Cotton’s bad-faith claim against
Allstate, so they lack standing to sue in federal court.
******
The judgment of the district court is AFFIRMED.
4
