Opinion ID: 445258
Heading Depth: 2
Heading Rank: 2

Heading: Settlement Deterrent.

Text: 27 We turn now to an analysis of the district court's additional ground for voiding the settlement: its deterrent effect on settlements with Crown Rig and Branham. The district court noted two aspects of the agreement that purportedly deter settlements: (1) because of the rebate provision, Bass does not receive the full value of settlement dollars paid by other defendants until $251,000 has been recouped; thus, Bass is likely to demand at least $251,000 to compromise his remaining claims against the non-settling defendants, which may artificially inflate the settlement value of the case and (2) because of the veto provision, Branham and Crown Rig are faced with more than Bass' economic disincentive to settle for less than $251,000: Phoenix will likely prevent Bass from settling for any amount less than that needed for Phoenix to obtain a full rebate of $178,000. Although its holding is less than clear, the court implies that the economic settlement deterrent built into the agreement would not itself justify abrogation of the settlement; it is the veto provision that, in the district court's opinion, renders the agreement unenforceable on settlement deterrent grounds. 18 28 We certainly agree with the district court's initial premise: public policy favors voluntary settlements which obviate the need for expensive and time-consuming litigation. See, e.g., Miller v. Republic National Life Ins. Co., 559 F.2d 426, 428 (5th Cir.1977). We also recognize, however, that, in multi-party law suits, complete settlement is often not possible: Likewise, an omnipresent characteristic of modern maritime litigation is its multiparty nature. Settlements with some, but not all, are frequently made--and should be even more encouraged. Cates v. United States, 451 F.2d at 415-16 (footnote omitted) (rejecting unity of release rule in maritime personal injury cases). 29 While we do not doubt that, in proper circumstances, a district court may refuse to enforce provisions of a settlement agreement that burden the rights of non-settling parties who remain in the lawsuit, see Dunn v. Sears, Roebuck & Co., 639 F.2d at 1173, we are not convinced that this is such a case. In Dunn, plaintiff settled with some, but not all, of the defendants before trial. As part of the agreement, the settling defendants agreed not to make their employees, whose deposition testimony was damaging to plaintiff, available to the non-settling defendants. At trial, plaintiff argued that the terms of the settlement agreement rendered the depositions inadmissible. The trial court disagreed, and we affirmed its decision to void the portions of the settlement agreement which purported to deprive the non-settling defendants of relevant, otherwise admissible evidence. 30 We think this case is fundamentally different from Dunn. In Dunn, the settlement purported to deprive the non-settling defendants of their legal right to present admissible evidence. In this case, the settlement agreement does not prejudice the rights of Branham or Crown Rig. Bass is under no obligation to settle his claims; in fact, he has an absolute right to refuse to settle and to submit his case to a trier of fact. The fact that this agreement makes it factually less likely that Bass will settle with Crown Rig and Branham, in our view, does not justify setting it aside. 31 The Seventh Circuit has recently considered the circumstances under which a court is justified in abrogating a partial settlement because of prejudice to non-settling parties. In Quad/Graphics, Inc. v. Fass, 724 F.2d 1230 (7th Cir.1983), the court held: 32 Therefore, we do not believe that a court should inquire into the propriety of a partial settlement merely upon a showing of factual injury to a non-settling party. Some disadvantage to the remaining defendants is bound to occur and may, in fact, be the motivation behind the settlement. But just as a court has no justification for interfering in the plaintiff's initial choice of the parties it will sue (absent considerations of necessary parties), the court should not intercede in the plaintiff's decision to settle with certain parties, unless a remaining party can demonstrate plain legal prejudice. This standard should strike the proper balance between the policy consideration of encouraging voluntary resolutions of litigation and the court's duty to protect the rights of the parties before it. 33 Id. at 1233. 34 Although we have not expressly adopted such a standard, we think that it has much to recommend it and, moreover, that it comports with the jurisprudence of this circuit. See, e.g., In re Beef Industry Antitrust Litigation, 607 F.2d at 172 (non-settlor generally lacks standing to attack settlement agreement; non-settlor may attack settlement that purports to deprive him of right to seek indemnification from settlor); Dunn v. Sears, Roebuck & Co., 639 F.2d at 1173 (non-settlor successfully attacks settlement that attempts to deprive him of right to present relevant evidence at trial); Holiday Queen Land Corp. v. Baker, 489 F.2d 1031 (5th Cir.1974) (applying plain legal prejudice standard in Rule 41 voluntary dismissal case; tactical disadvantage alone will not suffice). A defendant who loses the race to settle with the plaintiff, or who simply decides to take his chances at trial, should not suffer any substantive or procedural disadvantage when other defendants do settle. We fail to see, however, why a plaintiff should be foreclosed from voluntarily settling with one defendant on mutually agreeable terms simply because those terms remove plaintiff's economic incentive to settle with the other defendants. That, it seems to us, is a consequence that may well flow from any settlement with less than all defendants. The fact that such a consequence is assured when the settlement agreement includes a Mary Carter provision, assuming no additional terms which purport to deprive the non-settlors of substantive or procedural rights to which they are entitled, does not disturb us. Cf. Leger v. Drilling Well Control, 592 F.2d at 1251 (If a party decides to try a case, it must be prepared to accept whatever benefits or burdens flow from its decision.). 35 In sum, we find no basis for setting aside the veto and rebate provisions of the agreement. Accordingly, we reverse that portion of the district court's judgment which voids those provisions of the agreement. 19 36