Opinion ID: 2584095
Heading Depth: 3
Heading Rank: 4

Heading: The totality of the circumstances approach

Text: Other courts have adopted a totality of the circumstances approach to determining whether a settlement has been reached in good faith for purposes of their CATAs. The determination of good faith is left to the discretion of the trial court, based on all relevant facts available at the time of the settlement, and is not disturbed in the absence of an abuse thereof. See Johnson v. United Airlines, 203 Ill.2d 121, 271 Ill.Dec. 258, 784 N.E.2d 812, 821 (2003) (whether a settlement satisfies the good-faith requirement as contemplated by [740 Ill. Comp. Stat. Ann. 100/2 (West 2002) [27] ] is a matter left to the discretion of the trial court based upon the court's consideration of the totality of the circumstances (citing Dubina v. Mesirow Realty Development, Inc., 197 Ill.2d 185, 258 Ill.Dec. 562, 756 N.E.2d 836, 840 (2001), and In re Guardianship of Babb, 162 Ill.2d 153, 205 Ill.Dec. 78, 642 N.E.2d 1195, 1199-1200 (1994))); Ballweg v. City of Springfield, 114 Ill.2d 107, 102 Ill.Dec. 360, 499 N.E.2d 1373, 1380 (1986) (the entire circumstances surrounding a settlement must be taken into account); Velsicol Chemical Corp. v. Davidson, 107 Nev. 356, 811 P.2d 561, 563 (1991) (determination of good faith for purposes of Nev. Rev. Stat. § 17.245 (2001) [28] should be left to the discretion of the trial court based upon all relevant facts available, and... in the absence of an abuse of that discretion, the trial court's findings should not be disturbed); Brooks, 535 S.E.2d at 62 (instructing trial courts to consider the totality of the circumstances in determining whether a settlement is given in good faith for purposes of N.C. Gen.Stat. Ann. § 1B-4 (LexisNexis 2001) [29] ); Mahathiraj, 617 N.E.2d at 742 (a totality of the circumstances test should be applied in determining whether or not a settlement in a joint tortfeasor case is reached in `good faith' for purposes of [Ohio's CATA [30] ]); Smith, 429 S.E.2d at 651 (instructing the trial court to consider, in its discretion, aspects of both the non-tortious conduct test and the Tech-Bilt standard in determining whether a settlement is in good faith). Although some of the courts adopting the totality of the circumstances approach have focused on the 1955 UCATA, § 4 and concluded, like the courts adopting the non-tortious conduct test, that the drafters of the 1955 UCATA favored the tortious conduct approach because [t]he Commissioners clearly placed precedence upon the goal of furthering settlements, rather than equitably apportioning the burdens of liability, Smith, 429 S.E.2d at 651; accord In re Babb, 205 Ill.Dec. 78, 642 N.E.2d at 1199, these courts acknowledge the concerns that motivated the California Supreme Court in Tech-Bilt. In In re Babb, 205 Ill.Dec. 78, 642 N.E.2d at 1205, for example, the Illinois Supreme Court noted that, in addition to encouraging settlements, its CATA sought equitably [to distribute] among all joint tortfeasors the burden of compensating an injured plaintiff. Accord Johnson, 271 Ill.Dec. 258, 784 N.E.2d at 821; Dubina, 258 Ill.Dec. 562, 756 N.E.2d at 841. The Illinois Supreme Court reasoned that the totality of the circumstances approach allows trial courts to give effect to the strong public policy favoring the peaceful settlement of claims[ ] and at the same time allows trial courts to be on guard for any evidence of unfair dealing, collusion, or wrongful conduct by the settling parties. Dubina, 258 Ill.Dec. 562, 756 N.E.2d at 840 (citing Babb, 205 Ill.Dec. 78, 642 N.E.2d at 1199). Similarly, in Smith, the West Virginia Supreme Court concluded that the tortious conduct approach best reflects our commitment to the strong public policy favoring out-of-court settlements and best furthers the objectives of finality of judgments and judicial economy. But in view of experiences elsewhere and legal commentary, this court remains concerned that a bald tortious conduct approach might pose a burden so great as to impair substantially the right of a non-settling joint tortfeasor to receive a fair trial. 429 S.E.2d at 651 (footnotes omitted). Therefore, the Smith court incorporated aspects of both approaches. Id. The Ohio court in Mahathiraj, 617 N.E.2d at 742, also acknowledged the importance of preventing liability from being allocated in an inequitable manner, but believed that a standard of good faith that relies too heavily on the proportion of liability borne by each party deters settlement because it enables non-settling parties to attack settlements by alleging that a settlement allocates liability disproportionately, while a standard that ignores proportionate liability runs the risk of purchasing certainty in settlements at the expense of tolerating collusive activity. In any event, all of the courts adopting the totality of the circumstances approach, even those that have not expressly echoed Tech-Bilt's concern regarding disproportionately low settlements, have included the settlement amount among the factors that the trial court, in its discretion, may consider in determining the good faith of a settlement. Thus, in Mahathiraj, the Ohio court explained that a totality of the circumstances standard enables the trial court to consider the potential proportionate liability of the parties in cases where such determinations are appropriate, but does not require the court to consider it in every case or in cases where such calculations would be of little value in good faith determinations. As a result, parties have a greater incentive to settle than they would under a standard which forces them to defend their settlements whenever the mere allegation of a disproportionate settlement is made. At the same time, courts are free to police collusive settlements that unfairly saddle one tortfeasor with a disproportionate share of liability. .... ... Other factors courts may consider include, but are not limited to, whether the challenging party has demonstrated evidence indicating collusion, fraud or other tortious or wrongful conduct on the part of the settling parties. Id. at 741-42. Likewise, in Smith, the West Virginia Supreme Court held that courts may consider: (1) the amount of the settlement in comparison to the potential liability of the settling tortfeasor at the time of settlement, in view of such considerations as (a) a recognition that a tortfeasor should pay less in settlement than after an unfavorable trial verdict, (b) the expense of litigation, (c) the probability that the plaintiff would win at trial, and (d) the insurance limits and solvency of all joint tortfeasors; (2) whether the settlement is supported by consideration; (3) whether the motivation of the settling plaintiff and settling tortfeasor was to single out a non-settling defendant or defendants for wrongful tactical gain; and (4) whether there exists a relationship, such as family ties or an employer-employee relationship, naturally conducive to collusion. 429 S.E.2d at 652 (emphasis in original); accord Brooks, 535 S.E.2d at 62 (a trial court may, without being specifically obligated to do so, consider any of the factors delineated in Tech-Bilt, or examine whether the settlement was collusive ... if such inquiry is warranted by the facts of the individual case). Thus, the totality of the circumstances approach permits the court to ferret out collusive settlements in which the settlement amount may not be the prime badge of bad faith. In In re Babb, 205 Ill.Dec. 78, 642 N.E.2d at 1204, for example, the Illinois Supreme Court held that loan-receipt agreements, whereby a settling defendant provides a plaintiff with a loan to be repaid out of any damages recovered from a non-settling defendant, are collusive, because they allow a settling tortfeasor to indirectly obtain a contribution from a non-settling tortfeasor and deprive a non-settling tortfeasor of a set-off, in contravention of the Illinois CATA. For the same reason, the Babb court also disapproved settlement agreements that grant a settling defendant control over the plaintiff's right to settle with other tortfeasors. Id. Similarly, in Dubina, the Illinois Supreme Court held that the assignment of the plaintiffs' claims to the settling defendants in a separate transaction from the settlement agreement violated the terms and policies of the state's CATA, because the amount paid for the assignment would not be included in the set-off that the non-settling defendants would be able to seek if they were subsequently found liable for damages; surveying the totality of the circumstances, the Dubina court concluded that the settlement agreement would not have been reached but for the assignment of the plaintiffs' claims. 258 Ill.Dec. 562, 756 N.E.2d at 842-43. Accordingly, the Dubina court held that the settlement agreements were collusive and not given in good faith. Id. 258 Ill.Dec. 562, 756 N.E.2d at 843. In International Action Sports, Inc. v. Sabellico, 573 So.2d 928 (Fla.Dist.Ct.App.1991), the Florida appellate court held that a settlement that was clearly intended solely to shield the plaintiff's family member from liability did not constitute a good faith settlement pursuant to Fla. Stat. ch. 768.31(5) (2003). [31] Finally, in Sobik's Sandwich Shops, Inc. v. Davis, 371 So.2d 709 (Fla.Dist.Ct.App. 1979), the Florida appellate court concluded that [i]f [the] good faith condition is to have any meaning at all consistent with the underlying purposes of the contribution act, we believe that it prevents a claimant from arbitrarily deciding how much each tortfeasor will pay on the basis of which tortfeasor has been more cooperative with claimant. There must be some reasonable basis for the amount of the settlement with the tortfeasors beyond the claimant's express desire to have those who appeal pay and those who do not appeal be relieved of responsibility. Id. at 711-12.