Opinion ID: 71311
Heading Depth: 2
Heading Rank: 3

Heading: The Dollar-for-Dollar Offset

Text: Finally, the nonsettling defendants argue on appeal that the dollar-for-dollar reduction based on VRC's settlement amount against any judgment rendered jointly against nonsettling defendants does not sufficiently protect their interest. When determining whether to enter a bar order against nonsettling defendants, the court must make a reasoned determination that the bar order is fair and equitable. U.S. Oil & Gas Litigation, 967 F.2d at 496. In making such a determination, courts consider the interrelatedness of the claims that the bar order precludes, the likelihood of nonsettling defendants to prevail on the barred claim, the complexity of the litigation, and the likelihood of depletion of the resources of the settling defendants. U.S. Oil & Gas Litigation, 967 F.2d at 493-96. The nonsettling defendants contend that VRC's solvency opinion gave them an assurance that Munford, Inc. would survive the LBO transaction and that they reasonably relied on the opinion in approving the LBO transaction. They therefore assert that VRC's $350,000 settlement amount constitutes an inequitable settlement because it represents only one-half of a percent of the $68,000,000 Munford, Inc. seeks to recover from the nonsettling defendants. Instead, the nonsettling defendants argue, the court should have reserved its approval of the settlement agreement to include a credit based on the relative fault of VRC and not the dollar-for-dollar settlement credit. The nonsettling defendants also argue that the dollar-for-dollar settlement credit deprives them of their substantive rights of contribution and indemnification, noting that but for the settlement agreement they would receive a dollar-for-dollar credit and retain the right to pursue actions for contribution and indemnity against VRC under state law. See O.C.G.A. § 51-12-32. The nonsettling defendants therefore assert that the reasonable price for taking away their rights to contribution and indemnification is to allow a credit against any subsequent judgment based on the proportionate fault of VRC. In response, VRC and Munford, Inc. contend that the district court's application of a dollar-for-dollar credit against any subsequent judgment entered against nonsettling defendants constitutes a fair and equitable judgment offset. They assert that the record demonstrates that the settlement affords nonsettling defendants a far greater benefit than they would receive from their prospective contribution and indemnity claims. VRC and Munford, Inc. base this assertion on several facts. First, VRC asserts that its greatest asset is a $400,000 insurance policy, and without the settlement it will exhaust this policy in litigation costs in defending itself in this action. Second, it asserts that it is unlikely that the nonsettling defendants would prevail against VRC in a contribution or indemnity action based on an allegation that the nonsettling defendants relied on VRC's solvency opinion because: (1) the solvency opinion included disclaimers which stated the solvency opinion was limited in scope and only intended to be relied upon by Citibank, the LBO lender; and (2) none of the [nonsettling] defendants saw or reviewed the opinion prior to consummation of the LBO. In re Munford, Inc., 172 B.R. 404, 413 (N.D.Ga.1993). Finally, VRC and Munford, Inc. assert that the offset as provided in the bankruptcy court's order ensures that Munford does not enjoy a double recovery against nonsettling defendants in any subsequent litigation. We agree. In this case, VRC's settlement offer constitutes $350,000 of its $400,000 insurance liability coverage. The remaining $50,000 is reserved for attorney's fees and other litigation cost related to this action. On appeal, the nonsettling defendants do not argue that VRC has the ability to pay more than the $350,000 it offered in settlement. Rather, they argue that VRC may obtain assets in the future increasing its net worth. It is more likely, however, that the LBO litigation will deplete the assets VRC presently owns and any future assets they obtain. This viewed together with the fact that VRC included disclaimers in its solvency opinion supports the finding that the bankruptcy court's dollar-for-dollar credit constitutes a fair and equitable offset. We therefore conclude that the bankruptcy court did not abuse its discretion in ruling that a dollar-for-dollar credit will be applied against judgment subsequently rendered against the nonsettling defendants. Accordingly, we affirm the bankruptcy court's grant of a dollar-for-dollar reduction against any judgment ultimately rendered against the nonsettling defendants. In reaching this holding today, we decline to adopt a per se method for offsetting settlement amounts.