Opinion ID: 723395
Heading Depth: 1
Heading Rank: 1

Heading: Procedural History (Chapter One)

Text: 4 In 1980, United Commercial Insurance Service and three individual defendants (the Raydens) sued Paymaster, and Paymaster counterclaimed, joining American Bankers Insurance Company (ABIC) as a counterclaim defendant. The litigation resulted in a judgment in excess of $11 million in favor of Paymaster for compensatory and punitive damages. While that judgment was on appeal, settlement negotiations proceeded. 5 Paymaster settled with all defendants, except ABIC, for $1.7 million which an earlier panel of this court characterized as compensatory damages. See United Commercial Ins. Serv. v. Paymaster Corp., 962 F.2d 853 (9th Cir.), cert. denied, Paymaster Corp. v. American Bankers Ins. Co., 506 U.S. 1022 (1992). Because all defendants were cross-claiming against each other for indemnity, United and the Raydens conditioned their participation in the $1.7 million settlement with Paymaster on their receiving a full release from ABIC of its cross claims for indemnity against them. 6 ABIC refused to grant the releases demanded by United and the Raydens until Paymaster executed a partial satisfaction of judgment in favor of ABIC, together with a written agreement providing that ABIC's liability for punitive damages of $2.4 million would be reduced by $1.7 million. Such an agreement arguably would have left ABIC liable to Paymaster for $700,000 in punitive damages, as well as whatever compensatory damages remained unsettled or unsatisfied after all other settlements or collections were concluded. Unfortunately, the apportionment of settlement funds to different types and amounts of damages was not made clear in all of the settlement documents. 7 The Raydens were to pay $500,000 toward the Paymaster judgment, and United $1.2 million. Paymaster and ABIC soon began to dispute the amount remaining due Paymaster on its judgment. ABIC insisted that it was entitled to one credit of $1.7 million on its compensatory damages liability as a matter of California law, and a duplicate credit of $1.7 million as the fruits of its independent settlement and mutual release agreement given to United and the Raydens to induce them to pay the settlement sums worked out with Paymaster. 8 The general rule in collecting California joint and several liability judgments is that a settlement with one defendant reduces the liability of all other defendants by an equal amount. Paymaster, 962 F.2d at 856 (citing California cases). ABIC thus asserted that it was entitled to two $1.7 million credits; one on its share of compensatory damages, and the other on its remaining liability for punitive damages (which, under California law, its insurers may or may not have been obligated to pay; a matter on which we express no opinion, as the point was not addressed in the trial court). 9 ABIC contended that its settlement and mutual releases with and between ABIC, United, and the Raydens had been given in consideration for an additional $1.7 million reduction in the punitive damages ABIC owed to Paymaster, separate from the $1.7 million in the settlement agreement between Paymaster and United and the Raydens, for which ABIC was eager to claim credit. 10 According to ABIC, the two amounts are identical because there was no other measure of the value of the cross claims for indemnity released by ABIC against its codefendents. No documentation expressly supports ABIC's theory, and no other party to the settlement has made such an assertion. 11 ABIC filed a Motion for Partial Relief from Judgment under Rule 60(b)(5). 1 Judge Wilson for the district court agreed with ABIC: 12 [T]wo separate satisfactions occurred. The documents provide that the partial satisfaction of punitive damages provided to ABIC was premised upon independent consideration, separate and apart from payments received by Paymaster which under the agreements operate to reduce compensatory damages. 13 Paymaster, 1990 WL 362043, at  7 (C.D.Cal. Aug. 9, 1990). Judge Wilson based his decision on two written agreements, the partial satisfaction, Paymaster's letter to ABIC about the settlement, and two declarations of counsel. As noted, Judge Wilson entered a judgment leaving Paymaster with only $1.7 million to show for its $11 million judgment, but giving ABIC in effect $3.4 million in reduced liability for compensatory and punitive damages. This judgment was appealed and affirmed by this Court in Paymaster, 962 F.2d at 858.