July 17, 2019

Colorado Court of Appeals: When Liability Based on Respondeat Superior, Settlement with Agent is Setoff Against Jury Verdict for Principal

The Colorado Court of Appeals issued its opinion in Marso v. Homeowners Realty on Thursday, February 8, 2018.

Respondeat Superior—Agent—Amendment of Answer—Affirmative Defense—Setoff—Settlement—Statutory Prejudgment Interest.

Dilbeck was employed by or associated with Homeowners Realty, Inc., d/b/a/ Coldwell Banker Home Owners Realty, Inc. (Coldwell) and acted as the Marsos’ agent in their purchase of a house. Two years after the purchase, the Marsos discovered that uranium tailings had been used as fill material, creating a potential health hazard. The Marsos filed a complaint against Dilbeck and Coldwell alleging negligence against Dilbeck and respondeat superior liability against Coldwell. Before the scheduled trial date, the Marsos settled with Dilbeck for $150,000, inclusive of interest. The jury was instructed to determine the total amount of damages sustained by the Marsos and was not informed of the amount of the settlement with Dilbeck. The jury returned a verdict of $120,000 against Coldwell. In post-trial proceedings, the trial court set off the settlement payment of $150,000 against the $120,000 jury verdict, resulting in a zero recovery for the Marsos. Because the settlement payment exceeded the jury verdict, the court entered judgment in favor of Coldwell and later entered a cost award against the Marsos of approximately $30,000.

On appeal, the Marsos contended that the court abused its discretion in allowing Coldwell to amend its answer to assert the affirmative defense of setoff over the Marsos’ timeliness objection. Because Coldwell did not obtain the settlement agreement until shortly before trial and the Marsos had no right to rely on the absence of a setoff, the amendment did not result in legal prejudice to the Marsos. Under these circumstances, the court did not abuse its discretion in allowing Coldwell to pursue its setoff defense.

The Marsos next argued that the trial court erred when it set off the settlement payment against the jury verdict. When a party’s liability is based entirely on respondeat superior, a settlement with the agent is setoff against the jury verdict entered against the principal. Therefore, the trial court did not err in this regard.

The Marsos also contended that the trial court erred when it set off the settlement payment before statutory prejudgment interest accrued on the jury verdict. Statutory prejudgment interest accrues on the jury verdict before the setoff. Here, the court must calculate the interest that accrued on the jury’s verdict from the date of the Marsos’ injury to the date of Dilbeck’s settlement payment and add it to the jury verdict

The judgment and cost award in Coldwell’s favor was reversed, and the case was remanded for further proceedings.

Summary provided courtesy of Colorado Lawyer.

Tenth Circuit: Complaint Not Moot when Injury Can Be Redressed By Favorable Judicial Decision

The Tenth Circuit Court of Appeals issued its opinion in EEOC v. CollegeAmerica Denver, Inc. on Tuesday, September 5, 2017.

This case arises out of a dispute between CollegeAmerica Denver., Inc. (Company) and a former employee, Ms. Potts. The Company and Potts resolved a dispute by entering into a settlement agreement, but the Company came to believe that Potts breached the settlement agreement, leading the Company to sue Potts in state court. The suit sparked the interest of the Equal Employment Opportunity Commission (EEOC), which believed that the Company’s interpretation and enforcement of the settlement agreement was unlawful and interfered with the statutory rights of Potts. Based on this belief, the EEOC sued the Company in federal court.

The district court dismissed the EEOC’s unlawful-interference claim as moot, however, the EEOC is appealing the dismissal in light of the Company’s new theory against Potts: that she breached the settlement agreement by reporting adverse information to the EEOC without notifying the Company. The EEOC believes that by presenting this new theory, the Company was continuing to interfere with Potts’s and the EEOC’s statutory rights. The Tenth Circuit Court of Appeals reviewed this appeal and holds that the claim is not moot.

In deciding if a case is moot, the Tenth Circuit assesses whether a favorable judicial decision would have some effect in the real world. In other words, if a plaintiff no longer suffers an actual injury that can be redressed by a favorable judicial decision, the claim is moot.

A special rule applies when the defendant voluntarily stops the challenged conduct. When the conduct stops, the claim will be deemed moot only if two conditions exist: (1) it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur; and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation. The court held that the first condition was not met, as the Company continued to stand by its new theory of how Potts had breached the settlement agreement. Therefore, mootness due to voluntary cessation is not applicable here.

The Tenth Circuit further disagreed with the Company’s argument that the case was moot because the outcome would not affect anything in the real world. The court found that if the EEOC prevailed on the merits and obtained an injunction, the Company could not present its new theory in the state-court suit against Potts. The inability to present this theory would constitute an effect in the real world, preventing dismissal based on mootness.

The Tenth Circuit further rejected the Company’s newly raised argument that the EEOC sought overly-broad, unauthorized injunctive and declaratory relief, finding that a federal court should not dismiss a meritorious constitutional claim because the complaint seeks one remedy rather than another plainly appropriate one.

The Tenth Circuit Court of Appeals REVERSED and REMANDED for further proceedings.

Colorado Supreme Court: Mutual Mistake of Material Fact Allows Reopening Workers’ Compensation Claim After Settlement

The Colorado Supreme Court issued its opinion in England v. Amerigas Propane on Tuesday, May 30, 2017.

Workers’ Compensation—Mutual Mistake of Material Fact—Colorado Workers’ Compensation Act.

In this case, the supreme court considered whether a provision of the mandatory form settlement document promulgated by the Director of the Division of Workers’  Compensation waives an injured employee’s statutory right under C.R.S. § 8-43-204(1) to reopen a settlement based on a mutual mistake of material fact. The court concluded that it does not because provisions of the form document must yield to statutory rights. Accordingly, the court reversed the judgment of the court of appeals.

Summary provided courtesy of The Colorado Lawyer.

Tenth Circuit: Excess Insurer’s Duty to Settle Attaches Only After Primary Insurer Exhausts Policy Limits

The Tenth Circuit Court of Appeals issued its opinion in SRM, Inc. v. Great American Insurance Co. on Tuesday, August 25, 2015.

An SRM dump truck crossed railroad tracks in the path of an oncoming Burlington Northern train and was t-boned. The truck driver was killed in the collision, and three railway workers were seriously injured. The collision derailed the train and caused extensive damage to its engine and cars. The three injured workers sued Burlington Northern, SRM, and SRM’s primary insurer, Bituminous. Great American, SRM’s excess insurer, also received notice of the claims and monitored the case for exposure under the excess liability policy. About a year after the accident, SRM’s attorney demanded that both Bituminous and Great American tender their policy limits of $1 million and $5 million, respectively, but Great American rejected that approach in favor of an aggressive defense. When the trial court ruled at a pretrial hearing that federal law precluded the best available defense, SRM’s attorney reiterated that both Bituminous and Great American should tender policy limits because settlement might be impossible at a later date. Great American again declined, suggesting the claims would be resolved in mediation.

Before mediation, both Bituminous and Great American estimated that potential exposure could exceed both policies’ coverage limits, although Great American suggested that a jury award would be within limits. At mediation, the plaintiffs initially requested $20 million, but later in the day offered to settle all claims for $6.5 million. Great American countered with $450,000. Over Great American’s objection, SRM’s attorney disclosed that SRM was willing to contribute $500,000 in addition to the $6 million policy limits to settle the case. A week later, the parties agreed to settle for $6.5 million, with Bituminous contributing $1 million, Great American contributing $5 million, and SRM contributing $500,000.

SRM then sued Great American in state court in a second round of litigation involving multiple parties and claims. The trial court severed SRM’s claims against Great American and Great American removed to federal court. In this suit, SRM alleged that Great American breached its excess liability insurance contract and the implied covenant of good faith and fair dealing by failing to initiate settlement negotiations. Great American moved for summary judgment and the district court granted its motion, concluding that Great American did not owe SRM a duty to investigate or initiate settlement agreements until Bituminous tendered its policy limits at the time of settlement. SRM sought reconsideration, contending that Great American had a common law duty of good faith and fair dealing, which it breached. The district court rejected SRM’s argument and it appealed.

On appeal, SRM blamed Great American for forcing it to pay $500,000 out-of-pocket to settle the plaintiffs’ claims, arguing the case would have settled within limits if Great American had tendered its policy limits sooner, and that Great American’s actions violated its duty of good faith and fair dealing. The Tenth Circuit, applying Oklahoma law, noted that Oklahoma courts have yet to decide whether an excess insurer owes a duty to attempt to settle claims before the primary insurer exhausts its policy limits. The Tenth Circuit evaluated the terms of the insurance policy between SRM and Great American. The Tenth Circuit agreed with the district court that the terms of the excess policy were unambiguous, and that Great American’s contractual duties to negotiate and settle claims did not commence until policy limits were exhausted. SRM argued that the common law duty of good faith and fair dealing is implied, so it applies regardless of the terms of the policy. The Tenth Circuit disagreed, noting the duty attached to an insurer’s contractual obligations. The Tenth Circuit found that Great American was entitled to summary judgment.

The Tenth Circuit affirmed the district court.

Tenth Circuit: Settling Defendant Has No Interest in Attorney Fee Award from Class Coffers

The Tenth Circuit Court of Appeals issued its opinion in Tennille v. Western Union Co. on Tuesday, November 17, 2015.

A class of plaintiffs challenged Western Union’s business practice of retaining funds from failed wire transfers and collecting interest on the failed transfer moneys without informing the parties to the transfer of its failure. After years of litigation, the class reached a settlement wherein Western Union would deposit the unredeemed customer money into a class settlement fund (CSF), less administrative fees, from which class members could receive a refund. Counsel for the plaintiff class then sought attorney fees, requesting 30% of the $135 million in the CSF. Western Union objected, and the district court referred the matter to a magistrate judge.

The magistrate judge determined that Western Union had no right to object to the attorney fee award but addressed many of the issues raised by Western Union in considering the reasonableness of the attorney fee award. The magistrate judge agreed with Western Union’s central contention that the money in the CSF did not represent the benefit counsel obtained for the class because that money belonged to class members. The magistrate judge calculated the actual benefit to the class as $65 million and recommended that the attorney be awarded 35% of that common fund. Both parties objected to the magistrate judge’s recommendation.

The district court also expressed doubts about Western Union’s standing to challenge the attorney fee award, but it allowed Western Union to participate in the objection hearing. The district court ultimately determined that the CSF was the value to the plaintiffs and awarded 30% of the CSF to class counsel as attorney fees. Western Union appealed.

The Tenth Circuit first addressed class counsel’s argument that Western Union lacked standing to bring the appeal. The Tenth Circuit noted that generally, settling defendants in class actions lack standing to challenge fee awards when those fees are to be paid from the class recovery. Western Union argued it would be injured in this case because of its “reversionary interest” in the CSF. The terms of the settlement provided that if there were moneys left in the CSF after all class members who came forward had been paid, they would escheat to the states in a cy pres fund, and then if any states challenged their share of the moneys, that state’s pro rata share would be deposited in a third fund from which Western Union would be entitled to claim actual costs and fees associated with defending the states’ claims. Western Union claimed that, because of the potential for it to receive reimbursement through the third fund, it had an interest in the attorney fee award from the CSF. The Tenth Circuit disagreed. The Tenth Circuit noted that Western Union has never argued that the moneys in the CSF belonged to anyone but the class members, and thus it has no interest that would be invaded by diminution in the CSF. The Tenth Circuit found that Western Union’s interest in the third reversionary was too attenuated to confer a legally protectable interest.

The Tenth Circuit affirmed the district court’s attorney fee award.

Tenth Circuit: Settlement Fair Because it Incentivized Western Union to Change its Business Practices

The Tenth Circuit Court of Appeals issued its opinion in Tennille v. Western Union Co. on Friday, May 1, 2015.

Western Union was the subject of a class action lawsuit challenging its practice of holding and earning interest on customers’ money after failed wire transfers without notifying customers of the failure. While an interlocutory appeal from Western Union was pending, Western Union and the class representatives reached a settlement, agreeing that Western Union would change its business practices to notify customers when wire transfers failed, would help customers whose unclaimed money had escheated to the state to reclaim their money, and would pay interest for the time Western Union held the funds before the escheat. The settlement will be funded using approximately $135 million in customers’ unclaimed funds still held by Western Union, and the funds will be distributed as follows: (1) a $7,500 incentive award to each of the four named plaintiffs; (2) interest to the customers who have already claimed their money from Western Union for the time period from the transfer’s failure to the customer’s claim, minus Western Union’s administrative fees; (3) the unclaimed money plus interest to the customers whose money Western Union still holds, minus Western Union’s administrative fees; (4) the costs of administering the settlement; and (5) 30 percent of the settlement award to class counsel as attorney fees.

Because the settlement was reached during the pendency of the interlocutory appeal, the Tenth Circuit remanded to the district court to consider whether to certify the class and approve the settlement. The district court preliminarily certified the class and approved the settlement, directing that notice be sent to the approximately 1.3 million putative class members. A dozen class members objected to the settlement, including Sikora Nelson (represented by counsel) and Paul Dorsey (pro se). The district court held a “fairness hearing” and eventually overruled all the objections, entered a final class certification, approved the settlement, and entered judgment. Objectors posted bond after it was reduced by the Tenth Circuit and appealed.

The named plaintiffs argued the objectors lacked standing to pursue the appeal, but the Tenth Circuit disagreed, finding Article III standing as to all class members. Plaintiffs also argued the objectors were raising arguments that were not properly preserved below, but the Tenth Circuit again disagreed, noting it has wide discretion to consider all arguments on appeal and the arguments were raised in some form in the lower court proceedings.

Objectors first contended the district court erred in certifying the class because the named plaintiffs could not fairly and adequately protect the interests of the class as a whole, and the district court should have created subclasses to adequately address the needs of all class members. Objector Nelson first argued that because the named plaintiffs had arbitration clauses in their agreements with Western Union and not all class members had arbitration provisions, including Nelson, the plaintiffs could not adequately protect the other class members’ interests. The Tenth Circuit noted that at the time the class was certified the district court had already ruled the arbitration provisions were unenforceable. Nelson argued she, and other similarly situated class members, could have negotiated a much better settlement than the named plaintiffs, but the Tenth Circuit disagreed, finding Nelson had agreed not to initiate any class actions in her contract.

Next, Nelson argued that because she was a Michigan resident and a Michigan statute allowed treble damages for such failed wire transactions, the named plaintiffs could not adequately represent her interest or the interest of other Michigan residents. However, because the district court had already ruled that Colorado law governed the claims, the Tenth Circuit found this argument unavailing. Nelson also argued that because the plaintiffs had already reclaimed their money from Western Union while she and other class members had not, plaintiffs were not similarly situated. The Tenth Circuit noted that Western Union’s challenged conduct was the same as to all class members, and the difference was not enough to preclude plaintiffs from representing the class.

Nelson also challenged the district court’s approval of the settlement, contending it was unfair because absent class members will finance most of the settlement for the entire class. Although the Tenth Circuit was “not unsympathetic to Nelson’s argument,” it determined them to be ultimately unpersuasive, since Nelson and others who had not already claimed their money would not have known about it absent the settlement agreement, and because the settlement agreement incentivized Western Union to change its business practices. Although there is a possibility that the settlement funds will run out before all class members have received their share, that possibility is unlikely to be realized based on historical data indicating that only 15 percent of Western Union’s customers ever seek a refund of their money.

The Tenth Circuit next addressed Nelson’s procedural challenge to the Rule 23 notice, finding the given notice satisfied due process by identifying several ways they could obtain additional information about the claims they would be releasing if they joined the settlement. Objector Dorsey also challenged how the notice was given to class members, arguing Western Union should have cross-checked all its databases instead of mailing to the last known address of class members. The named plaintiffs assert that Western Union did cross-check its databases, and also the class administrator used the post office’s change of address database to update the addresses. The Tenth Circuit found the mailed notice sufficient. Dorsey also speculated that those plaintiffs whose transactions were “zeroed out” by administrative fees may not have received notice, but the Tenth Circuit found that in fact all class members were notified. The Tenth Circuit similarly found a typo in the notice insignificant, given the corrective measures taken on the class action website. Dorsey finally argued that because he did not receive the email notice, despite having a current email address on file with Western Union, there must have been something wrong with the email notice. The Tenth Circuit disagreed.

Finally, Dorsey and Nelson argued the district court failed to exercise its independent judgment by adopting verbatim the orders drafted by plaintiffs and Western Union in certifying the class and approving the settlement. The Tenth Circuit was satisfied that the court exercised independent judgment. Objectors also claim the district court did not address their objections, but the Tenth Circuit found that it did, albeit briefly.

The Tenth Circuit affirmed the district court’s order certifying the class and approving the settlement.

Tenth Circuit: No Abuse of Discretion to Deny Eve of Trial Amendment of Final Pretrial Order

The Tenth Circuit Court of Appeals issued its opinion in Monfore v. Phillips on Tuesday, February 10, 2015.

Sherman Shatwell went to the hospital complaining of neck pain, and although doctors determined he had throat cancer, he was not told until a year later, when it was too late to treat it. His surviving spouse and child brought negligence claims against the doctors and hospital. Two weeks before trial, a settlement was reached with some of the parties but not with Dr. Phillips. Dr. Phillips sought to amend the final pretrial order in order to claim contributory negligence by the settling parties but the trial court denied his motion. The jury found Dr. Phillips liable for negligence and awarded over $1 million in damages. Dr. Phillips appealed, arguing the district court’s denial of his motion to amend was reversible error.

The Tenth Circuit, in a majority opinion penned by Judge Gorsuch, conducted an abuse of discretion review and found none. The majority opinion admonished Dr. Phillips for not anticipating an eve of trial settlement by some of his co-defendants, and was unsympathetic to what it saw as Dr. Phillips’ regret for his decision to present a unified front with his co-defendants. The majority opinion also pointed out the prejudice to the plaintiff that could have come from Dr. Phillips’ eve of trial modification of the final pretrial order. Finding that even though the district court could have allowed Dr. Phillips to “rejigger his defense at the last minute,” the majority opinion concluded that outcome was far from mandatory. The Tenth Circuit affirmed the judgment of the district court.

Judge Moritz wrote a separate concurrence to point out that this was a closer call than the majority opinion implied. Judge Moritz evaluated the appeal under the four-pronged Koch analysis and found that the majority opinion focused too much on lack of surprise to Dr. Phillips rather than prejudice to the opposing party. Judge Moritz pointed out that although Dr. Phillips should not have been surprised by the settlement of some of the co-defendants, likewise the plaintiff should not have been surprised that Dr. Phillips would seek to revise his trial strategy in light of the settlement. Nevertheless, Judge Moritz found Dr. Phillips failed to satisfy his double burden of proving both manifest injustice and abuse of discretion, and concurred with the majority affirmance of the district court’s decision.

Colorado Court of Appeals: Surviving Spouse’s Settlement of Wrongful Death Claim Precludes Son’s Filing of Identical Claim

The Colorado Court of Appeals issued its opinion in Barnhart v. American Furniture Warehouse Co. on Thursday, November 21, 2013.

Wrongful Death Act—Summary Judgment—Claim of Heir if Spouse has Settled.

On January 19, 2011, Mildred Fernandez sustained injuries in an American Furniture Warehouse (AFW) store. She died shortly thereafter. She was survived by her husband and son.

Husband’s counsel informed AFW’s insurer that he had been retained and would be asserting a wrongful death claim under Colorado’s Wrongful Death Act (Act). In December 2011, husband agreed to settle his claim in return for $400,000, and executed a release of all claims against AFW.

Son then brought an action, also asserting a wrongful death claim under the Act. AFW moved for summary judgment on the ground that son’s claim was barred by the Act’s limitation that “only one civil action” may be brought for recovery of damages for the wrongful death of one decedent. The district court granted the motion.

On appeal, son argued that his claim was not barred because husband’s settlement was not an “action” within the meaning of CRS § 13-21-203(1)(a). The Court disagreed.

The Act provides that a decedent’s surviving spouse has the exclusive right to bring an action under the Act within the first year after the date of death. During the second year, a decedent’s spouse and heirs have equal rights to bring an action. However, only one civil action may be brought to recover damages for the wrongful death of any one decedent.

Husband settled his claim without filing suit. Son argued that only a spouse’s lawsuit or settlement of a lawsuit can bar a subsequent claim under the Act. Based on the plain language of the statute, the Court agreed with son that an “action” is commonly regarded as referring to a judicial proceeding. However, this limiting interpretation would lead to an absurd result. Son offered no rational reason why the General Assembly would have intended to treat pre-litigation and litigation settlements differently, and none was apparent to the Court.

The Court concluded that a beneficiary with the primary right of action has the power to settle his claim with or without filing suit and that such settlement is binding on all other beneficiaries. The judgment was affirmed.

Summary and full case available here.

Colorado Court of Appeals: Notice-Prejudice Rule Properly Applied by Trial Court to Third-Party Settlement

The Colorado Court of Appeals issued its opinion in Stresscon Corp. v. Travelers Property Casualty Company of America on Thursday, September 12, 2013.

Construction—Insurance Policy—Notice–Prejudice Rule—No Voluntary Payment Clause—Settlement—Collateral Source Rule—Damages—Attorney Fees.

Plaintiff Stresscon Corporation (concrete company) and defendant Travelers Property Casualty Company of America (insurance company) appealed the trial court’s judgment. The judgment was affirmed in part and reversed in part, and the case was remanded.

In this complex construction case, the general contractor and the concrete company settled their dispute without litigation. Before entering into the settlement, the concrete company did not inform the insurance company of the settlement or obtain its consent.

The insurance company argued that the notice–prejudice rule adopted in Friedland v. Travelers Indemnity Co., 105 P.3d 639, 643 (Colo. 2005), for example, does not apply to breaches of “no voluntary payment” clauses, and insurers are prejudiced as a matter of law whenever an insured settles with a third-party claimant before that third party has filed a lawsuit. “No voluntary payment” clauses in insurance policies prohibit insureds from voluntarily settling claims and making payment, or from assuming certain expenses, without the insurer’s consent, at the risk of losing insurance benefits. The notice–prejudice rule applies to “no voluntary payment” clauses in insurance policies. The notice–prejudice rule provides that (1) if an insured does not provide the insurer with notice of a claim until after the insured has settled, then (2) the insured will lose benefits after the settlement based on a presumption of prejudice, unless(3) the insured rebuts the presumption that the insurer’s interests were prejudiced by the lack of notice, and(4) the insurer does not then prove that it actually was prejudiced by the lack of notice. Further, an insured’s pre-litigation settlement with a third party does not conclusively establish that an insurer was prejudiced. Here, sufficient evidence was presented at trial to support the jury’s finding that the insurance company was not prejudiced. Therefore, the trial court properly applied the notice–prejudice rule in this case, and the record supports the jury’s verdict that the insurance company unreasonably delayed or denied the claim.

The insurance company argued that the trial court should have granted a judgment notwithstanding the verdict because the court had erroneously allowed the jury to consider conduct that occurred before the effective date of CRS §§ 10-3-1115 and -1116, which was August 5, 2008. The insurance company waived this argument, however, because it did not request a limiting instruction.

On cross-appeal, the concrete company, relying on the collateral source rule, argued that the trial court improperly reduced its damages by the amount that the insurer of one of the members of the crane team paid to satisfy the judgment in the first trial. The unambiguous language of the “other insurance” clauses in the insurance policies, however, states that the concrete company contracted away its right to recover benefits from both the insurance company and the insurer of the member of the crane team. Therefore, the trial court did not err when it reduced the damages by the amount that the insurer for the member of the crane team paid to the concrete company to satisfy the judgment in the first trial.

The concrete company also argued that the trial court incorrectly deducted the fees and costs that it incurred in bringing the fee request—namely, the “fees-on-fees”—from its award under CRS § 10-3-1116(1). A request for fees-on-fees in connection with a § 10-3-1116(1) claim is a request for damages, and the trial court erred in denying this portion of the concrete company’s fees claim. The case was remanded to the trial court for a determination of the reasonable amount of attorney fees and costs that the concrete company incurred in defending the judgment on the statutory claim on appeal.

Summary and full case available here.

Colorado Court of Appeals: Insurance Company Owed Duty to Third-Party so Trial Court’s Grant of Motion to Dismiss in Error

The Colorado Court of Appeals issued its opinion in Medical Lien Management v. Allstate Insurance Company on Thursday, June 6, 2013.

Breach—Assignment—Personal Injury—Settlement—Notice.

In this breach of assignment action, plaintiff Medical Lien Management, Inc. (MLM) appealed the judgment dismissing its complaint against defendant Allstate Insurance Co. (Allstate). The judgment was reversed and the case was remanded.

In October 2005, Fred Martinez was injured in an automobile accident caused by a tortfeasor insured by Allstate. In March 2007, in consideration for payment by MLM of his medical bills, Martinez executed a written agreement granting MLM a lien on, and assigning his rights to, any and all proceeds derived from his personal injury claim in an amount equal to the fees and costs of the medical treatment paid by MLM. MLM eventually paid $9,938 for such treatment. In October 2008, Martinez settled his personal injury claim against the tortfeasor insured by Allstate. Allstate issued payment to Martinez without paying MLM.

MLM asserted that the court erred in granting Allstate’s CRCP 12(b)(5) dismissal motion for failure to state a claim. First, an individual can validly assign the sums to be recovered from his or her personal injury claim before settlement. Here, the language of the agreement was sufficient to withstand a pleadings challenge as to whether the parties intended to affect a present transfer of the proceeds of Martinez’s personal injury recovery. Additionally, the complaint adequately alleged a valid assignment to MLM of Martinez’s rights to proceeds resulting from his injury and notice of the assignment. Once a debtor receives notice of a valid assignment, it is required to pay the assignee. Allstate failed in this regard. Therefore, the trial court erred in granting Allstate’s motion to dismiss for failure to state a claim.

Summary and full case available here.

Colorado Court of Appeals: Bashor-type Agreement Upheld as Permissible; Summary Judgment Reversed

The Colorado Court of Appeals issued its opinion in DC-10 Entertainment, LLC v. Manor Insurance Agency, Inc. on Thursday, February 14, 2013.

Insurance Coverage—Broker—Damages—Assignment of Claims—Assault and Battery Exclusion—Negligent Misrepresentation.

DC-10 Entertainment, LLC (DC-10) appealed the trial court’s summary judgment in favor of Manor Insurance Agency, Inc. (Manor). The judgment was reversed and the case was remanded for further proceedings.

DC-10, a nightclub and lounge, obtained insurance coverage through Manor, an independent insurance broker that services multiple insurance companies. Through Manor, DC-10 procured a commercial general liability policy with Penn-Star Insurance Company (Penn-Star) and a liquor liability policy with Founders Insurance Company (Founders).

Heaven Henderson suffered injuries when she was physically assaulted by an unknown assailant on DC-10’s premises. Henderson sued DC-10. DC-10 then submitted claims to Penn-Star and Founders for defense and indemnity coverage. Both companies denied the claim because the policies contained an assault and battery exclusion. DC-10 settled with Henderson and then sued Manor, asserting claims of negligence and negligent misrepresentation. The court granted Manor’s motion for summary judgment.

DC-10 contended the trial court erred in determining that the settlement agreement was insufficient to establish that DC-10 incurred damages. Because the agreement does not contain a pretrial stipulated damages award, DC-10 did not bear the burden of proving the reasonableness of the judgment. Instead, the burden shifted to Manor to prove that the damages award, as determined by the arbitration judge, was unreasonable. In challenging the reasonableness of the damages award, Manor also may raise the affirmative defense of collusion or fraud. Because these are factual issues, the trial court erred in granting summary judgment.

Manor challenged the enforceability of an assignment of proceeds of negligence claims against an insurance broker. Manor owed a duty to DC-10 to obtain the insurance coverage that DC-10 requested. An assignment of claims against an insurance broker, where the claim arises from a commercial transaction and the insured has the same expectations of the insurance broker that he or she would have of the insurer, is not prohibited. Accordingly, DC-10’s assignment of the proceeds from its negligence and negligent misrepresentation claims against Manor to Henderson, the injured third party, was enforceable.

Finally, Manor contended that DC-10’s negligence and negligent misrepresentations claims failed as a matter of law because DC-10 did not present evidence that assault and battery coverage, if obtained, would have covered the alleged patron-on-patron assault in the underlying lawsuit. Because the availability of coverage sought by DC-10 remained a disputed factual question, Manor did not meet its burden of proof on this issue on its motion for summary judgment.

Summary and full case available here.

Tenth Circuit: Employment Discrimination Settlement Agreement Enforceable; Extended Time to File Notice of Appeal Applies When Judgment Not Entered in Separate Document

The Tenth Circuit published its opinion in Walters v. Wal-Mart Stores, Inc. on Tuesday, January 8, 2013.

Bennie Walters brought employment discrimination claims against his former employer, Wal-Mart Stores, Inc. (“Wal-Mart”). The parties reached an apparent settlement during a settlement conference and signed a document entitled “Settlement Terms,” that set forth the key terms of the agreement, indicating a fuller agreement was to be prepared within 20 days. Walters later refused to sign the final agreement. The district court granted Wal-Mart’s motion to enforce the agreement and denied Walters’ motion for reconsideration but did not enter the judgment in a separate document. The court did, however, enter a “Minute Sheet” on the docket, but that unsigned document did not indicate that Wal-Mart’s motion had been granted.

Wal-Mart argued that Walters’ appeal was untimely because it was filed more than 30 days after the minute sheet entry and F.R.A.P. 4(a) requires a notice of appeal be filed within 30 days after a judgment is entered. F.R.C.P. 58(a) requires that a judgment must be set out in a separate document. The Tenth Circuit held that the unsigned minute sheet was not a separate judgment so Walters’ time for appeal was governed by F.R.C.P. 58(c)(2), which gave him 150 days to file a notice of appeal. The denial of Walters’ motion for reconsideration also did not start the clock. When no separate judgment has been entered, “an appellant remains entitled to the extended deadline for filing a notice of appeal even if he files a motion for reconsideration before the judgment is deemed ‘entered’ under F.R.C.P. 58(c).”

Once the court determined it had jurisdiction, it reviewed the district court’s decision to enforce the settlement agreement for abuse of discretion and found none. Under Oklahoma contract law, “[a] party generally may not repudiate a settlement agreement absent fraud, duress, undue influence, or mistake.” The court found no duress. The court also rejected Walters’ claim that he was improperly denied the 21 days to consider the settlement included in the final agreement. The provision was included in order to comply with the Older Workers Benefit Protection Act (“OWBPA”). Because the OWBPA 21-day consideration period for a valid waiver of an age discrimination claim does not apply to settlement of court cases, the agreement was not unenforceable on that basis. Because Walters did not challenge Wal-Mart’s compliance with OWBPA’s requirements that do apply to court cases, he waived that argument. The court affirmed the district court.