Opinion ID: 608853
Heading Depth: 3
Heading Rank: 2

Heading: The G-III Purchase Agreement

Text: 41 As previously noted, plaintiff's G-III claim went to trial and the jury rendered a verdict for plaintiff. Thereafter, the district court determined, based on a post-verdict motion, that the sums the plaintiff received from the other six manufacturers by way of settlements exceeded the amount of the jury verdict. In accordance with the governing law, it therefore properly entered judgment for defendant, unless it committed error in calculating the setoffs. See Baughman v. Cooper-Jarrett, Inc., 530 F.2d 529, 533 (3d Cir.), cert. denied, 429 U.S. 825, 97 S.Ct. 78, 50 L.Ed.2d 87 (1976). 42 Both plaintiff and defendant agree that the proper determination of damages requires a two-part calculation. First, the court must treble the jury's award. Second, the court must then set off any amounts received earlier as settlements of the antitrust claims involved in this case. See Baughman, 530 F.2d at 533; Flintkote Co. v. Lysfjord, 246 F.2d 368 (9th Cir.), cert. denied, 355 U.S. 835, 78 S.Ct. 54, 2 L.Ed.2d 46 (1957). The parties also agree that the district court correctly trebled the jury verdict of $997,500 to arrive at a total verdict of $2,992,500. Plaintiff argues, however, that the district court committed an error in arriving at the amount it received in settlement of its antitrust claims from the defendant Mitsubishi Aircraft International, Inc. (Mitsubishi). It was partly because of such error, says plaintiff, that the total setoff from the six settlements was in excess of the trebled verdict. 43
44 We address plaintiff's settlement with the defendant Mitsubishi, keeping in mind that the following facts are undisputed. Plaintiff ultimately executed two separate settlement documents with Mitsubishi. Pursuant to the First Mitsubishi Settlement, plaintiff was to receive: 1) $300,000 in cash; 2) one Mitsubishi Diamond II airplane for $2,600,000; and 3) options to purchase two additional Diamond II airplanes for $2,600,000 each. Mitsubishi represented to plaintiff that the market price for a Diamond II was approximately $3,200,000. The First Mitsubishi Settlement also obligated plaintiff to forfeit $75,000 of the $300,000 in cash if plaintiff did not purchase at least one Diamond II. 45 The First Mitsubishi Settlement contained a most favored nation clause under which plaintiff promised Mitsubishi that it would not settle its claims against any other defendant for less than a specified dollar amount. Despite the apparent value of the First Mitsubishi Settlement, the most favored nation clause stated in pertinent part: The parties hereto stipulate that for purposes of this paragraph of this agreement only, and for no other purposes, this settlement has a present value of $400,000.00 for the benefit of the plaintiff[ ] and as a cost to Mitsubishi. (J.A. at 823). 46 Subsequently, when plaintiff tried to sell its options on the Diamond II's, it became aware that the market price for a Diamond II was actually $600,000 less than Mitsubishi had represented. Thus, plaintiff's right/options to purchase Diamond II's were worthless and the value of the Mitsubishi Settlement to plaintiff was reduced by approximately $1,800,000. Plaintiff contacted Mitsubishi and threatened, inter alia, to rescind the First Mitsubishi Settlement and/or to sue Mitsubishi under Texas law for damages for misrepresentation. Although plaintiff never formally revoked the First Mitsubishi Settlement, ultimately Mitsubishi paid plaintiff $1,800,000 in cash and plaintiff and Mitsubishi signed the Second Mitsubishi Settlement covering all claims between the parties (including the earlier antitrust claims). 47 The basic issue presented is whether, under the undisputed facts above, the district court was entitled to include the $1,800,000 in calculating the Mitsubishi setoff. 6 Plaintiff, relying largely on the most favored nation clause, says that the amount of the setoff should be no more than $400,000. It notes that it never formally revoked the first settlement and argues that the $1,800,000 in cash was received in settlement of a potential state law fraud claim and not in partial settlement of plaintiff's antitrust claim. 48 Momentarily passing over the fact that a most favored nation clause is generally included for the benefit of a settling defendant (rather than a plaintiff), by its express terms the most favored nation clause in this case is inapplicable to the valuation of the settlement for purposes of calculating setoff. Even if we were to indulge in the unlikely assumption that plaintiff intended that the most favored nation clause be somehow applicable for setoff purposes, the $400,000 amount improperly fails to include the represented value of the options that plaintiff received. See Merola v. Atlantic Richfield Co., 515 F.2d 165, 172 (3d Cir.1975) (discussing valuation of antitrust settlement for purposes of attorneys' fees; [W]here the benefit [from a settlement] is in non-monetary form, the district court must bring an informed economic judgment to bear in assessing its value. If probative evidence of the monetary value of such a benefit is available, it should of course be used.). As other courts have recognized, the value of options received in an antitrust settlement must be considered when valuing that settlement, at least where the plaintiff intends to exercise those options. See Basile v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 640 F.Supp. 697 (S.D.Ohio 1986); see also Bal Theatre Corp. v. Paramount Film Distrib. Corp., 206 F.Supp. 708, 714 (N.D.Cal.1962) (recognizing that in antitrust context, [t]he rule ... seems to be that anything of value received should be set off in addition to the cash settlement). 49 It is true that courts have adopted the parties' valuation of their settlement, provided the record supported that valuation. In this case, however, we think the record supports the district court's finding that the $1,800,000 received in the second settlement was properly set off. The fact that plaintiff threatened to sue Mitsubishi for fraud does not alter the reality that the second settlement proceeds were part of the true value of the original settlement. 7 Any other approach to the second settlement would do violence to the equitable principle that one who has recovered from one coconspirator may not recover the same item of damage from another conspirator. Baughman, 530 F.2d at 533. 50 Finally, we do not consider that the affidavit of Mitsubishi's in-house counsel, Yukihisa Hotta, creates a disputed issue of material fact. Mr. Hotta stated that the $1,800,000 represented threatened single damages under the Texas [fraud] statute.... (J.A. at 913). 8 Plaintiff says this representation is unchallenged. Nevertheless, it amounts to no more than a mathematical truism. The pertinent question is not what the $1,800,000 may have represented, but rather, what claim or claims it was in fact paid to settle. By the terms of the Second Mitsubishi Settlement, the $1,800,000 was paid to settle all claims between the parties--including the antitrust claims. In addition, we note that Mr. Hotta's affidavit refers to threatened single damages of $1,800,000. The amount of these threatened damages was simply the amount plaintiff believed it was defrauded in the First Mitsubishi Settlement. 51 The district court ruled that the total amount of this settlement set off from the jury award should be $2,025,000 rather than the $400,000 specified in the most favored nation clause of the first settlement agreement. Thus, whether presenting an issue of law or ultimate fact, we conclude that the district court committed no error in including the amount of the second settlement in the setoff calculation. In so concluding, we reiterate that neither in the district court nor on appeal does plaintiff challenge the district court's right to resolve the merits of this issue on the record before it. 52
53 The amount of the total Mitsubishi Settlement when combined with the other five settlements exceeded the trebled amount of the jury verdict and thus seemingly dictated a judgment for defendant. However, plaintiff argues that the district court erred in refusing to allocate the proceeds received from the settlements among the three claims originally at issue in this lawsuit. It emphasizes that the settlements occurred prior to the date the district court granted summary judgment on two of the claims. 54 The allocation issue is important because, if meritorious, the so-called Falcon Jet settlement aside, 9 it would mean that the aggregate amounts of the setoffs would only partially cover the amount of the jury verdict and would thus require that the judgment for defendant be vacated. In refusing to make the allocations sought by plaintiff, the district court seems to have relied primarily on its conclusion that such an allocation would have been irreconcilable with the outcome of this case because [t]wo of the three claims did not survive summary judgment. (J.A. at 81). While the district court also relied on the equities, we need not reach that ground here. 55 We are not persuaded that hindsight evaluation of a general settlement of claims based on a subsequent determination of their relative merits as against a non-settling defendant should be dispositive of their settlement values. After all, the incentive to settle typically flows from uncertainty as to the outcome. But our disagreement with the hindsight approach here does not end the matter. 56 None of the six settlement instruments here purported to allocate the settlement proceeds among the three common claims asserted against all defendants on a joint-liability basis. Plaintiff, nevertheless, asserted in the district court as it does here that each settlement sum should be allocated for setoff purposes among the three claims, in certain percentages, based on the purchase prices of the three planes in question. Thus, in plaintiff's view, only 30 percent of each of the six settlements should be set off against the verdict, because of the relationship of the base price of the G-III to the total of the base prices of all three planes. Nevertheless, such an allocation, in and of itself, would have no inexorable relationship to the litigation value the settling parties attached to each claim when all were still viable. We therefore agree with the district court that such an approach is not acceptable here and that Baughman does not dictate otherwise. See Baughman, 530 F.2d 529. 57 Plaintiff next argues that the district court should have held an evidentiary hearing to determine a fair allocation of the claims for each of the six settlements. Determining after the fact how parties to a general settlement valued various claims in arriving at their settlement is inherently difficult. Consequently, such valuations would be unlikely to represent precisely what factors each party weighed and how it valued them in reaching the settlement. To add to the uncertainty, the settling defendants would ordinarily have no interest in how the proceeds were allocated among the various claims. On the other hand, the plaintiff would have a real interest in aggrandizing by hindsight the amounts attributable to the claims now known to have been decided in favor of the defendant. 58 Given the foregoing considerations, we conclude that where a plaintiff executes a general settlement instrument which settles multiple claims with a defendant, but a non-settling defendant is not a party to that agreement, the non-settling defendant need show only that the plaintiff settled a claim on which the non-settling defendant was found liable at trial. If the defendant makes this showing, the burden then shifts to the plaintiff to prove that, under the terms of its agreement with the settling defendant, the settlement or part thereof did not represent damages arising under the same theory of liability as those forming the basis for the jury award. The view we adopt is consistent with the rule that a settling plaintiff is entitled to only one full recovery while at the same time it protects the plaintiff from the application of amounts received in settlement of unrelated claims. 59 We note that our conclusion is in substantial agreement with the position of the Court of Appeals for the Tenth Circuit, albeit in a federal securities law context. See U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1262-63 (10th Cir.1988). Nor does the rule we adopt do a disservice to the antitrust enforcement scheme. This rule does not deter a plaintiff from incorporating a good-faith allocation of the settlement proceeds among multiple claims. What it does do is prevent a plaintiff from waiting for the jury's verdict to allocate the settlement in a way that reduces the remaining defendants' credit. McDermott, Inc. v. Clyde Iron, 979 F.2d 1068, 1080 (5th Cir.1992). To the extent other circuits can be said to have taken a different position, e.g., I.T.O. Corp. v. Sellman, 967 F.2d 971 (4th Cir.1992), we conclude that their rulings do not fully serve the purposes of meaningful predictability and certainty. Thus, we find no error in the refusal of the district court to allocate the amounts of the settlements of the six codefendants among all three claims for setoff purposes. 10 60