Court Opinion

ID: 9787361
Source: CourtListenerOpinion
Date Created: 2023-08-31 00:15:13.793007+00
Date Added: 2024-06-11T07:36:45.365991
License: Public Domain

Judge TAUBMAN
specially concurring.
While I agree with the majority's analysis, I write separately to express my agreement with Kingston that, as a matter of public policy, this action should be precluded because under the settlement agreement between Serna and the passengers, the passengers control all aspects of this litigation on behalf of Serna, and Serna's lawyer also represents the passengers, who are third-party defendants here.
*382I am troubled by a number of ethical issues presented by the settlement agreement and believe that it extends beyond what was deemed acceptable by the court of appeals and the supreme court in Bashor v. Northland Insurance Co., 29 Colo.App. 81, 480 P.2d 864 (1970), affd, 177 Colo. 463, 494 P.2d 1292 (1972). The trial court was similarly troubled. In its summary judgment, it indicated that representation of different clients with different interests here was contrary to the Rules of Professional Conduct. The trial court concluded that although parties on opposite sides of a lawsuit conceivably could have common interests in a second lawsuit, such was not the case here. Indeed, the trial court stated that it was referring its opinion to "the Office of Disciplinary Counsel," now the Office of Attorney Regulation Counsel. See C.R.C.P. 251.1 to 251.34.
According to Kingston, "the adversarial process has been disfigured to the point that the original plaintiffs are now defendants, a settling defendant is now the plaintiff, and the attorneys representing the original plaintiffs are now representing the settling defendant acting as the new plaintiff as well as the original plaintiffs who are now defendants." Indeed, the passengers, who were plaintiffs in the first lawsuit, are now third-party defendants here. Serna, the settling defendant in the first lawsuit, is now the plaintiff here, and she is represented by the passengers' original attorney, who continues to represent the passengers as third-party defendants.
As summarized in the majority opinion, the agreement between the passengers and Ser-na included the following terms:
(1) Serna stipulated to an entry of a judgment against her in the amount of $1.5 million, an amount based upon the previously vacated default judgment in the first lawsuit;
(2) Serna would pursue her claims against Kingston to recover the full amount of the $1.5 million stipulated judgment against her, and the passengers would have the right to select the attorney to represent her either in the first lawsuit or in a new lawsuit;
(3) The passengers agreed to pay all of Serna's attorney fees, costs, and expenses in the additional litigation and further agreed to indemnify her from any costs or attorney fees that might be awarded against her;
(4) Serna agreed to the selection of the passengers' present attorneys to represent her;
(5) Serna agreed not to settle her lawsuit against Kingston without the consent of the passengers, and Serna further agreed to accept any settlement in this lawsuit which is approved by the passengers;
(6) Serna agreed to pursue and exhaust all legal remedies she might have against Kingston, including appeal, without an independent right to determine whether an appeal is appropriate;
(7) The passengers agreed not to execute any of the confessed $1.5 million judgment against Serna (except for $40,000 paid by her insurer), as long as she pursued the action against Kingston;
(8) In the event of settlement or judgment, the passengers would receive all sums up to $1 million, with any excess shared equally with Serna;
(9) The passengers would have sole discretion to pursue, settle, or appeal the litigation brought by Serna.
This agreement was entered into after the passengers had settled the first lawsuit against Kingston for $850,000. Initially, the passengers had obtained a default judgment in the amount of $2,350,000 against Kingston, which was vacated when the claim against Kingston was settled. Nevertheless, the difference between the default judgment, $2,350,000, and the settlement amount, $850,000, was the amount of the judgment to which Serna confessed as part of the agreement at issue here.
The parties here dispute the validity of the settlement agreement. Kingston asserts that it contains the same evils as a traditional "Mary Carter" agreement, but is even more damaging to the integrity of the judicial process. Under a Mary Carter agreement, a settling defendant typically agrees to guarantee the plaintiff a minimum payment, the plaintiff agrees not to enforce a judgment against the settling defendant, and the settling defendant's exposure is reduced in pro*383portion to any liability found against other codefendants. Often, this agreement is not revealed to the nonsettling defendant. See Booth v. Mary Carter Paint Co., 202 So.2d 8 (Fla.Dist.Ct.App.1967).
The Colorado Supreme Court has expressly declined to rule on the permissibility of Mary Carter agreements. See Copper Mountain, Inc. v. Poma of America, Inc., 890 P.2d 100, 108 n. 183 (Colo.1995). Nevertheless, courts in Florida, Nevada, New Mexico, Oklahoma, Texas, and Wisconsin have declared such agreements to be contrary to public policy and do not permit them. See Dosdourian v. Carsten, 624 So.2d 241 (Fla.1993); Lum v. Stinnett, 87 Nev. 402, 488 P.2d 347 (1971); Watson Truck & Supply Co. v. Males, 111 NM. 57, 801 P.2d 689 (1990); Cox v. Kelsey-Hayes Co., 594 P.2d 354 (Okla.1978); Elbaor v. Smith, 845 S.W.2d 240 (Tex.1992); Trampe v. Wisconsin Tel Co., 214 Wis. 210, 252 N.W. 675 (1984).
Serna asserts that these cases are inappo-site because no Mary Carter agreement is involved here, particularly because a second lawsuit was filed and the agreement was revealed to Kingston. Instead, Serna asserts that the agreement here was based upon the supreme court's opinion in Bashkor, and therefore was proper.
Although the supreme court held the Bo-shor agreement was not illegal, void, or contrary to public policy, it did not consider whether the agreement contravened the then-existing ethical rules.
As the majority opinion notes, Baskor has been applied only in the context of bad faith insurance litigation. Additionally, a comparison of the cireumstances in Bashor with those here reveals significant differences.
In Bashor, the injured party entered into an agreement with Bashor, whose negligence had caused a car accident. The injured party received an assignment from Bashor, thereby permitting her to sue Bashor's insurer for part of the amount of the judgment she had already obtained against Bashor. Here, in contrast, Serna was effectively prosecuting a second lawsuit on behalf of the passengers, under which the passengers stood to gain a substantial amount of money (up to $1,250,000) in addition to the $850,000 settlement they had already achieved.
Although the Bashor agreement provided that the injured party would select the attorney for Bashor with Bashor's consent, there is no indication that the attorney for both parties was the same. Here, however, the same attorney represented both Serna as plaintiff and the passengers as third-party defendants in the same litigation. This arrangement appears to violate Colo. RPC 1.7(a). See Colo. RPC 1.7 emt. ("(a) prohibits representation of opposing parties in litigation").
Serna asserts that this arrangement is permissible because her interests coincide with those of the passengers, but that is not nee-essarily so. While Serna has an interest in obtaining a judgment against Kingston so that the $1.5 million judgment against her will be released, she has no interest in litigating the applicability of the settlement between the passengers and Kingston, which is disputed by those parties.
Additionally, while Bashor agreed to prosecute fully his lawsuit, including appeal, if he was unsuccessful in the trial court, here it appears that Serna was required to prosecute an appeal regardless of whether she independently believed there was a legitimate basis for pursuing an appeal. Indeed, her attorney has an irreconcilable conflict of interest, because the passengers' interest in pursuing an appeal is different from Serna's interest.
Another ethical concern is that the agreement here may run afoul of Colo. RPC 1.2(a), which provides in pertinent part that "(al lawyer shall abide by a client's decision whether to accept an offer of settlement of a matter." A client's right to settle a case is absolute and unqualified. Any provision in a fee agreement that would deprive a client of the right to control settlement is unenforceable as against public policy. See Jones v. Feiger, Collison & Killmer, 903 P.2d 27 (Colo.App.1994), rev'd on other grounds, 926 P.2d 1244 (Colo.1996).
Here, Serna gave her right to settle this litigation to the passengers, and the same attorney represented both them and Serna. It is not difficult to imagine a circumstance where Kingston might make a sizeable offer to settle, which Serna herself might be in-*384dined to accept, but could not do so under the agreement, because either the passengers or the lawyer concluded that the proposal was insufficient.
Further, because the attorney here was proceeding under a contingent fee agreement, his interest was in achieving the highest possible settlement. Accordingly, from that perspective, he might have conflicting loyalties to the passengers and Serna.
In short, the agreement between Serna and the passengers here resulted in real or apparent conflicts of interest and possible violations of the Rules of Professional Conduct, and it allowed the passengers to seek further remuneration from Kingston after they had already fully and finally settled their initial lawsuit against it.
For these reasons, I would also affirm the trial court because the agreement between Serna and the passengers contravenes public policy.