Court Opinion

ID: 4710913
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:35:58.253706+00
Date Added: 2024-06-11T08:07:05.808749
License: Public Domain

Talmadge, J.
(dissenting) — I dissent. The majority agrees with the trial court that a settlement between the Brewers71 and the Manville Trust for $175,000 was reasonable, Majority, at 520, but then declines to allow an offset to the nonsettling defendants for the amount of the reasonable settlement, determining instead that $21,000, the sum the Manville Trust actually paid to the Brewers, constitutes the offset in this case. Majority, at 517-18. This is contrary to RCW 4.22.060.
Analysis
Framework Under 1981 Act for Reasonableness Hearings
In adopting the 1981 Product Liability and Tort Reform Act (1981 Act), the Legislature decided to make significant changes to the tort system to ensure fairness in the operation of the system. Laws of 1981, ch. 27, § 1. In the 1981 Act, the Legislature adopted comparative fault, contribution among joint tortfeasors, and the unique process of a reasonableness hearing to establish the amount of an offset for settlements against any judgment entered against the nonsettling defendants. To effectuate Washington’s long-standing policy of encouraging settlement of cases, the 1981 Legislature provided that a settlement *538would discharge the settling defendant from any liability to the plaintiff and any liability to nonsettling defendants for contribution authorized by the 1981 Act. Nonsettling defendants, however, would be protected insofar as any settlement entered into by the plaintiff with defendants would be made public and, if reasonable, would be an offset against any final judgment entered against nonsettling defendants. This unique reasonableness hearing would forestall "sweetheart deals” between a plaintiff and a defendant that would adversely affect nonsettling defendants.72 Senate Journal, 47th Legislature (1981), at 636 (hereinafter "1981 Senate Journal”).
RCW 4.22.060(1) required that nonsettling defendants be given five days’ notice of any settlement between a plaintiff and a defendant. The nonsettling defendant would have the opportunity to request a hearing on the reasonableness of a settlement. If the court found the settlement to be reasonable, the amount of the reasonable settlement would generally constitute an offset to any judgment against the nonsettling defendants. RCW 4.22.060(2). The court, however, could determine that a settlement was unreasonable and set another amount for the offset. RCW 4.22.060(2). The risk of a settlement rested with the plaintiff.73 An unreasonable settlement would still be valid; only the amount of the offset to the judgment rendered against nonsettling defendants would be affected. Glover v. Tacoma Gen. Hosp., 98 Wn.2d 708, 716, 658 P.2d 1230 (1983). In fact, the statute barred any adjustment of the settlement amount if it was found to be unreasonable. RCW 4.22.060(3).
The factors pertaining to the reasonableness of a settlement were left to elaboration by the courts. The Glover court set forth a number of factors to be analyzed in determining whether or not a settlement was reasonable:
*539[T]he releasing person’s damages; the merits of the releasing person’s liability theory; the merits of the released person’s defense theory; the released person’s relative faults; the risks and expenses of continued litigation; the released person’s ability to pay; any evidence of bad faith, collusion, or fraud; the extent of the releasing person’s investigation and preparation of the case; and the interests of the parties not being released.
Glover, 98 Wn.2d at 717. No one factor controls. Glover, 98 Wn.2d at 718. Those factors were explicitly approved in a report of the Senate Judiciary Committee dated April 1984. In that report, the Senate Judiciary Committee recommended that the courts adopt rules for the conduct of reasonableness hearings under RCW 4.22.060.74 See also Schmidt v. Cornerstone Invs., Inc., 115 Wn.2d 148, 795 P.2d 1143 (1990); Adams v. Johnston, 71 Wn. App. 599, 860 P.2d 423 (1993), review denied, 124 Wn.2d 1020 (1994).
Five-Day Notice Under RCW 4.22.060(1)
In the present case, the Brewers plainly did not comply with the five-day notice provisions of RCW 4.22.060(1). Although a nonsettling defendant may waive written notice of the reasonableness hearing, Zamora v. Mobil Oil Corp., 104 Wn.2d 211, 222-23, 704 P.2d 591 (1985); Fraser v. Beutel, 56 Wn. App. 725, 785 P.2d 470, review denied, 114 Wn.2d 1025 (1990); Pickett v. Stephens-Nelsen, Inc., 43 Wn. App. 326, 717 P.2d 277 (1986), the statute requires notification. As the Fraser court noted at 731: "The importance of notice of the reasonableness hearing to the [nonsettling defendant] cannot be overemphasized.” In the ordinary case where a hearing on the reasonableness of the settlement was held upon proper notice to the parties who received the settlement documents, nonsettling defendants would not be prejudiced by the mere tardiness of the scheduling of the hearing itself. The tardy convening of the hearing did have a prejudicial impact on the parties in this case, however, when the trial court appeared to *540analyze the reasonableness of the settlement as of the time of the hearing, rather than as of November 7, 1991, the date of the settlement itself. The parties have compounded that problem in their arguments to this court by focusing on post-November 7, 1991 events.
Reasonable Settlement
The record in the present case suggests that the trial court had three values before it as to the settlement between the Manville Trust and the Brewers. The Brewers received only $21,000 in actual payments. Br. of Appellant, at 13. There was testimony before the trial court that the present value of the settlement between the Brewers and the Trust was $48,125.75 Clerk’s Papers, at 163. The declaration of one of the attorneys for the Brewers, to which an economist’s letter was attached, supported the $48,125 figure. Clerk’s Papers, at 161-67. That declaration specifically indicates, however, that the declarant obtained the information for evaluation of the settlement in a meeting and a subsequent telephone conversation with the acting executive director of the Trust on September 1, 1992, nearly one year after the settlement agreement. Clerk’s Papers, at 162-63. Finally, there is the $175,000 face value of the November 7, 1991, settlement. Clerk’s Papers, at 147.
In the ordinary case, the Legislature contemplated that monies would pass between the plaintiff and the settling defendant on a relatively immediate basis.76 Structured settlements, such as the one at issue here, where funds *541are paid out over time, involve more complex considerations, and are vulnerable to postsettlement contingencies in the settling defendant’s ability to make future payments.77 The plaintiffs here received twelve percent of the settlement within twenty days of the receipt and approval of the General Release, and were to receive the remainder of the settlement amount at a time in the future according to the bankruptcy court’s Class Action Payment Plan. Clerk’s Papers, at 147-48. It bears emphasis that the Brewers knew or should have known upon their execution of the General Release that eighty-eight percent of the ostensible settlement amount was payable under the terms of the Class Action Payment Plan approved by the United States District Court for the Southern District of New York in Findley, et al. v. Blinken, et al. Clerk’s Papers, at 147. The Brewers had to know that a rather large contingency loomed in the Manville Trust’s future ability to pay.
A careful reading of RCW 4.22.060(2) suggests that a trial court must analyze the reasonableness of the settlement at the time the parties enter into it.78 In this case, the majority errs in analyzing the reasonableness of the settlement based on information generated after the date of the settlement upon the motion on August 21, 1992, by one of the nonsettling defendants to determine the reasonableness of the settlement. Clerk’s Papers, at 142-49. The court should have determined reasonableness based only on information generated no later than November 7, 1991, the date the Brewers entered into a settlement agreement with the Manville Trust. This court should not permit hindsight to govern an analysis of whether or not a settle*542ment is reasonable. The parties are confined to an analysis of the reasonableness of the settlement as of November 7, 1991.
The second problem with the majority’s analysis here is its emphasis on the amount actually paid in the settlement as the focal point for establishing the amount of the offset. Ordinarily, the dollar amount paid by the defendant to the plaintiff will be the actual value of the settlement as that amount will actually reflect the amount paid by the defendant to the plaintiff. Here, where there is a structured, settlement, the court should consider in its reasonableness determination any down payment plus the present value of payments to be received in the future. To adopt the majority’s view that the offset will be the amount the plaintiff actually received in the settlement is contrary to the legislative policy underpinning RCW 4.22.060 and the actual wording of the statute.79 The majority view contradicts the intent of the Legislature, which placed the risk of an unreasonable settlement on the plaintiff. It violates the principle that the offset would be established once and for all in the reasonableness hearing. It requires the court to monitor implementation of settlements to determine how much the plaintiff is actually paid. Finally, from a practical standpoint, it is substantially unfair to plaintiffs who settle on the basis of a structured settlement.
For these reasons, the sounder approach is to analyze settlements for purposes of the RCW 4.22.060 offset on the basis of their actual present cash value as of the date of the settlement agreement.80
*543Conclusion
The majority found the $175,000 settlement between the Brewers and the Manville Trust was reasonable, but did not use the amount of the reasonable settlement to calculate the offset to any judgment entered against the nonsettling defendants. This approach is contrary to RCW 4.22.060(2).81 Instead, the majority has found that the offset in this case should be an amount different from the amount of the settlement it determined to be reasonable, that is, $21,000 in monies actually received from the Trust, because of problems that long postdated the November 7, 1991 settlement.
The actual value of a reasonable settlement in this case should be the present cash value of this settlement on November 7, 1991, taking into consideration any contingencies in the settlement known as of that date. As the trial court heard evidence of the reasonableness of the settlement that postdated November 7, 1991, the judgment of the trial court should be reversed and the case remanded to the trial court for a new hearing on the reasonableness of the settlement as of November 7, 1991.82
Guy and Madsen, JJ., concur with Talmadge, J.

Both Pierce Brewer and LaJeanne Brewer signed the General Release of the Manville Trust on November 7, 1991. They are referred to hereinafter as "the Brewers.”

Thomas V. Harris, Washington’s Unique Approach to Partial Tort Settlements: The Modified Pro Tanto Credit and the Reasonableness Hearing Requirement, 20 Gonz. L. Rev. 69,106 (1984-85).

Indeed, the settling defendant’s discharge from liability to the plaintiff or to the nonsettling defendants for contribution is unaffected. RCW 4.22.060(3).

Harris, supra note 2, at 126-27.

This number consists of the $21,000 the Brewers actually received plus the total of $27,125 in seven annual payments of $3,875 that could be expected from the Manville Trust, given its uncertain future. Clerk’s Papers, at 165. Brewer’s brief incorrectly refers to this total of $48,125 as the "present value” of the Manville settlement. Br. of Appellant, at 27-28. In fact, the economist the Brewers hired properly discounted the stream of $3,875 payments and calculated the present value of that stream to be $17,172. Clerk’s Papers, at 165. Thus, the correct actual cash present value of the Manville settlement was not $48,125, but $21,000 plus $17,172, for a total of $38,172.

The 1986 Tort Reform Act substantially limits the number of cases in which a reasonableness hearing will be held. RCW 4.22.070. See also Thomas V. *541Harris, Washington’s 1986 Tort Reform Act: Partial Tort Settlements After the Demise of Joint and Several Liability, 22 Gonz. L. Rev. 67 (1986-87).

In a structured settlement, an annuity is often purchased that pays out funds over a number of years. Such a settlement must be analyzed in terms of the dollars paid for the annuity, or if that number is not available, in terms of the present value of the annuity, and not the total dollars paid over the entire duration of the settlement. See, e.g., Vasilios B. Choulos, Structured Settlements: Cure or Curse Trial, Nov. 1980, at 73, 75.

The 1981 Senate Journal states at 636-37: "the section requires that the amount paid for the release must be reasonable at the time the release was entered into.” (Italics mine.)

"A determination by the court that the amount to be paid is reasonable must be secured.” (Italics mine.) RCW 4.22.060(1). The implication is clear that the statute contemplates future payments as well as a current payment.

The Brewers argue that the better approach to handling any future problems associated with the settlement is to provide for an assignment of rights under the settlement agreement to the nonsettling defendants. The trial court was correct in concluding that this would violate the principle that the plaintiff bore the risk of any settlement. Clerk’s Papers, at 221. In effect, such an approach would impose upon the nonsettling defendants the risks associated *543with, any settlement entered into by the plaintiff and the settling defendant. This is contrary to the policy of RCW 4.22.060.

". . . the claim of the releasing person against other persons is reduced by the amount paid pursuant to the agreement unless the amount paid was unreasonable at the time of the agreement in which case the claim shall be reduced by an amount determined by the court to be reasonable.” (Italics mine.) RCW 4.22.060(2).

The trial court should be free to analyze the settlement in light of the Glover factors governing reasonableness. The trial court would also be free to determine that the settlement of $175,000 was reasonable or that it did not reflect the actual present cash value of the settlement as of November 7, 1991, in light of contingencies about collection.