Court Opinion

ID: 9000033
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:58:57.505266+00
Date Added: 2024-06-11T17:11:08.916478
License: Public Domain

FLETCHER, Circuit Judge,
dissenting:
I dissent. A careful assessment of the relevant documents and the facts belies the majority’s position.
The majority fails to examine the negotiating positions of Paymaster and American Bankers as a backdrop to the settlement they reached. Paymaster had a judgment against American Bankers, UCIS and the Raydens. Paymaster was awarded $5.5 million in compensatory damages from UCIS, American Bankers and the Raydens, $3.0 million in punitive damages from UCIS and $2.36 million in punitive damages from American Bankers.
Paymaster agreed to accept a payment of $1.7 million from UCIS and its insurers as full settlement of its judgment against UCIS and the Raydens. This made sense to Paymaster for two reasons: it removed any uncertainty as to the soundness of its judgment to the extent of $1.7 million and *859it secured such payment from credit risk. To obtain this settlement, Paymaster had to persuade American Bankers to waive its claims against UCIS. American Bankers, for its part, was faced with a potential $2.36 million liability for punitive damages, which its insurance would not cover. Because it did have coverage for its compensatory damage liability, any reduction in such a sum was not of nearly as great significance to American Bankers. However, the reduction in punitive damages liability was very important to it and thus American Bankers entered into a settlement with Paymaster whereby the $1.7 million UCIS had agreed to pay would be credited towards punitive damages.
In light of these facts, the majority’s scenario does not have the ring of truth. It would have Paymaster agree to forego the possibility of recovering $3.4 million from American Bankers, a solvent, well-insured defendant, simply to obtain $1.7 million from UCIS, without any concession from American Bankers that it would fore-go its appeal of Paymaster’s judgment against it.
Nothing in the various settlement agreements supports the majority’s version of the settlement. At the outset, nothing suggests Paymaster would credit American Bankers with a double settlement. Nowhere do the settlement agreements state that the $1.7 million Paymaster credited towards the punitive damages owed it by American Bankers was in addition to a separate $1.7 million setoff against American Bankers’ compensatory damages liability. The majority relies on the notion that Paymaster had an affirmative obligation to include in the settlement documents a statement to the effect that the $1.7 million punitive damages reduction obviated the need for the court to apply the general rule of law that a settlement with one defendant reduces the liability of the remaining defendants by an equivalent amount. But there exists no reason, and certainly no support in California law, for placing such a burden on Paymaster here.
The purpose of the general rule of law is simply to ensure that a settling plaintiff does not recover twice for her injuries. A party cannot obtain damages from one defendant through a settlement agreement and expect to recoup those same damages again from the remaining defendants. The Paymaster-American Bankers agreement to set off dollar-for-dollar against punitive damages any amounts received from UCIS ensured that this would not happen. Rather than representing a deviation from the normal rule, as the majority contends, it fulfilled the very purpose of that rule. Paymaster stated that it would not attempt to collect from American Bankers the $1.7 million it had already received from UCIS. It did not then have to tell the court not to worry about a double recovery the possibility of which it had already eliminated.
The district court and the majority both go outside the settlement agreements and read unwarranted meaning into a passage added by Paymaster’s counsel, at American Bankers’ insistence, to a letter dated November 11 which accompanied the parties’ partial satisfaction of judgment. The passage states as follows:
In consideration of ABIC entering into its contingent settlement agreement and mutual release with UCIS, Burt, Eileen, Jeff and Joel Rayden and contingent releases with their insurers, Paymaster yesterday delivered to you a partial satisfaction of judgment against ABIC signed by me.
It is difficult to see how this passage supports American Bankers’ position that it had negotiated an agreement to receive $3.4 million from Paymaster in return for waiving its cross-claims against UCIS. The passage has nothing to do with the nature of the consideration American Bankers was to receive from Paymaster, but instead concerns the nature of the consideration it had provided to obtain a credit against its punitive damages liability. American Bankers was understandably worried that its insurance companies would question an agreement that was to reduce its punitive rather than its compensatory damages exposure, and it apparently sought to bolster the validity of this agreement by receiving an express declaration of the consideration it had given in order to secure it.
Indeed, the November 11 letter contains strong support for Paymaster’s position. *860The letter provides that if Paymaster does not receive its expected payment of $1.7 million from UCIS and the other settling parties, “Paymaster will execute and ABIC [American Bankers] may file a satisfaction of judgment identical in form to that of the $1.7 million satisfaction referred to above providing for satisfaction in such amount as is actually retained by Paymaster from the insurance carriers or settling parties.” The actual size of the credit against punitive damages American Bankers was to receive from Paymaster was thus entirely dependent upon the amount of money Paymaster ultimately recovered from UCIS. Far from constituting an independent credit of an additional $1.7 million to American Bankers, then, the punitive damages credit was viewed by the parties as embodying the normal rule of law and operating pursuant to it. By no means did the parties see their agreement as an entirely separate promise by Paymaster to credit American Bankers with an additional and absolute sum of $1.7 million no matter how much UCIS actually paid.
I note three other points. First, it is too much of a “coincidence” that the amount of the additional compensation Paymaster and American Bankers supposedly negotiated was identical in amount to that provided by operation of law. It seems far more reasonable to conclude that the parties saw their agreement as embodying the normal rule but crediting the payment against punitive damages instead of compensatory damages.
Second, the scenario the majority presents would make sense only if American Bankers had agreed not to appeal the judgment against it. Paymaster would then have been giving up $1.7 million of a judgment that was still subject to appeal, in exchange for a certain, sure, payment. This was not the case, however. The Paymaster-American Bankers settlement did not restrict American Bankers’ right to appeal; indeed, American Bankers pursued an appeal to this court and petitioned for certiorari, albeit unsuccessfully.
Finally, had American Bankers really sought and received a $3.4 million credit for facilitating Paymaster’s receipt of $1.7 million from UCIS, it presumably would have insisted that $2.36 million worth of this credit be allocated towards eliminating the punitive damages award for which it, rather than its insurance companies, was solely responsible. American Bankers has evidenced no intent in the actions leading up to these proceedings to make money for its insurance companies. To the contrary, it has sought all along to protect its own pocketbook at their expense. That is why it requested and received a punitive, rather than a compensatory, damages credit from Paymaster. To hold that it should receive an additional $1.7 million setoff that redounds only to the benefit of its insurers would be to ignore the intent of the parties and to render senseless, from Paymaster’s standpoint, the settlement agreement entered into between Paymaster and UCIS.
Thus, I dissent.