Opinion ID: 160773
Heading Depth: 4
Heading Rank: 1

Heading: Summary judgment on collusion

Text: In the instant case, the federal district court ruled as a matter of law that the parties to the state court lawsuit had engaged in collusion. See Continental 21 Casualty Co. v. Westerfield , 961 F. Supp. 1502, 1507-09 (D.N.M. 1997). In support of this ruling, it cited several characteristics of the state court proceeding: (1) the fact that “the presiding judge did not perceive the commonality of interest in the supposedly adverse parties appearing before him and that failing to actively defend could actually serve to benefit [Mr.] Westerfield financially;” id. at 150708; (2) Mr. Cheney’s failure to present various colorable defenses; (3) the fact that Mr. McKetta negotiated settlements with the remaining defendants other than Mr. Westerfield, thereby “eliminat[ing] any chance that Judge Ashby would hear any evidence or argument contrary to that presented by [Mr.] Hempel in his prima facie case on liability and as to damages;” id. at 1508; and (4) the fact that Mr. McKetta submitted proposed findings and conclusions (ultimately adopted by Judge Ashby) that assessed damages for the period from 1964 to 1983, thus eliminating the possibility of that any of Mr. Hempel’s damages would be attributed to the period after 1983—when one of the settling insurers had provided coverage. Accordingly, the court concluded: “To fail to find collusion in fashioning an unreasonable settlement under these circumstances would be to authorize manipulation which compromises the integrity of the adversary system.” Id. at 1509. Nevertheless, in this ruling, the district court stopped short of finding that the collusive state court judgment relieved the insurers of all obligations. Instead, 22 it said, the import of its summary judgment ruling on the collusion issue was that Messrs. Hempel and Westerfield “were not entitled to any res judicata or collateral estoppel effect as to the state court proceeding.” Id. Thus, the duty to defend the state court lawsuit and the duty to indemnify the judgment remained at issue in the case.