Opinion ID: 1448289
Heading Depth: 1
Heading Rank: 17

Heading: District Court Ruling on Reasonableness of Settlement

Text: In ruling that the settlement amount was reasonable, the district court was impressed with the fact that the figure had been arrived at in settlement conferences directed by the federal magistrate according to a formula agreed to by the participating parties. NPIC chose not to participate. The claims were subject to documentation available to NPIC long before the settlement conferences. Although we understand the respect extended to the federal magistrate, the record does not reflect that the district court made an independent determination as to the reasonableness of the settlement. Instead, the district court seems to have accepted the amount as reasonable because of the circumstances surrounding the settlement negotiations and the nature of the claims. The district court did not address in any depth the strength or weaknesses of plaintiffs' claims and Americold's defenses in the underlying tort litigation. Plaintiffs submitted Niewald's deposition testimony providing his assessment of Americold's defenses. He is an interested witness, however. The district court also apparently did not independently evaluate plaintiffs' damage evidence. The only damage evidence offered in the summary judgment motion or included in the record was settlement packages containing documentation of only some of the plaintiffs' claims (Arkwright's and IRI's, and Richmond's damage summaries). Although National Union had retained Arthur Andersen & Co. to review plaintiffs' damage documentation, no evidence of that review was presentedother than in Richmond's summary. A reasonableness of settlement determination is not to be a trial of the underlying litigation, but it should involve more than what plaintiffs presented to the district court. Under the Griggs test adopted in Glenn, the plaintiff has the burden of initially presenting a prima facie case to establish the reasonableness of the settlement amount. We have not had occasion to provide guidance on the proof required to satisfy plaintiff's burden. However, the proof requires, at a minimum, enough information for the district court to make an independent evaluation of the reasonableness of the settlement. The test requires that plaintiffs do more than ask the district court to take on faith that the amount of the settlement is reasonable, even if negotiated under the supervision of a federal magistrate. For example, affidavits with documentation could be offered to support the amounts of the claims. In a case of this size and complexity, independent expert testimony evaluating the strengths and weaknesses of the parties' positions could be presented. We give the district court flexibility. For guidance beyond factors suggested by the facts, we recommend those listed in Chaussee, 60 Wash. App. at 512, for evaluating reasonableness: `[T]he releasing person's damages; the merits of the releasing person's liability theory; the merits of the released person's defense theory; the released person's relative faults; the risks and expenses of continued litigation; the released person's ability to pay; any evidence of bad faith, collusion, or fraud; the extent of the releasing person's investigation and preparation of the case; and the interests of the parties not being released.' (Quoting Glover v. Tacoma General Hosp., 98 Wash.2d 708, 717, 658 P.2d 1230 [1983]). See Ashley, Bad Faith ActionsLiability and Damages § 3:39, pp. 116-18 (1992) for suggested factors in determining whether a settlement is collusive (arms-length bargaining, unrealistic computation of damages, discounting [[t]he absence of substantial discounting may indicate collusion], and secrecy). Given that plaintiffs' claims are for property damage and most have already been adjusted by the subrogated insurers, substantiation may be straightforward. However, the record on summary judgment does not contain sufficient evidence to establish the reasonableness of the Americold settlement as a matter of law.