Opinion
Case No.: 19cv1402-JM-AGS
12-10-2020
ALLSTATE INSURANCE COMPANY, an Illinois Corporation, Plaintiff, v. DOE 1; DOE 2; DOE 3, a minor, through his guardian ad litem; and JANE DOE, a minor, through her guardian ad litem JOHN DOE Defendants.
REPORT AND RECOMMENDATION GRANTING JOINT MOTION FOR APPROVAL OF MINOR'S COMPROMISE
[ECF No. 22]
This Report and Recommendation is submitted to United States District Judge Jeffrey T. Miller pursuant to 28 U.S.C. § 636(b)(1) and Local Civil Rule 72.1(c) of the United States District Court for the Southern District of California. For the reasons set forth herein, the Court RECOMMENDS the parties' Joint Motion for Approval of Minor's Compromise be GRANTED.
I. FACTUAL BACKGROUND
Allstate Insurance Company ("Plaintiff") brought this Declaratory Relief and Reimbursement Action in this Court to determine its obligations to defend and indemnify Does 1, 2, and 3 in an underlying state court action in San Diego Superior Court (the "Underlying Action"). (ECF No. 22 at 2). The Underlying Action arose from an alleged assault of Jane Doe, a minor, on February 23, 2018 at the residence of Does 1, 2, and 3. (ECF No. 30 at 2). Jane Doe alleged that the parents (Doe 1 and Doe 2) of a minor (Doe 3) were negligent in their supervision, allowing a sexual assault to occur at their home against Jane Doe. (ECF No. 22 at 2). Specifically, Jane Doe alleged that she was awakened at 3:00 a.m. by Doe 3 sexually assaulting and raping her. (ECF No. 22 at 6). She alleged that Doe 1 and Doe 2 failed to provide proper care for her after she informed them of the incident. (Id.).
Through her Guardian ad Litem, John Doe, Jane Doe brought claims against Doe 3 for sexual assault and battery, intentional infliction of emotional distress, and negligence, and against Doe 1 and Doe 2 for negligence and statutory parental liability for willful misconduct of a minor under California Civil Code Section 1714.1. (ECF No. 1 at 4). She alleged that as a result of the incident, she suffers from "extreme depression, Post-traumatic stress disorder, overwhelming amounts of anxiety, panic attacks, nightmares, attempts and thoughts of suicide, fear of people and going outside, physical disgust in self and extreme lack of self-confidence, lack of trust in people and loved ones, paranoia and delusions that everyone is out to get and/or hurt her." (ECF No. 22 at 6). Additionally, she was admitted for inpatient psychological treatment due to suicidal thoughts and had to withdraw from school. (Id.).
Plaintiff insured Does 1, 2, and 3 and agreed to pay for their defense in the Underlying Action, subject to a reservation of rights. (ECF No. 30 at 1). Allstate alleged that it owed no duty to defend Doe 1, Doe 2, and/or Doe 3 in the Underlying Action because the policy excludes coverage for intentional and/or criminal acts and because Insurance Code section 533 precludes coverage for "willful" acts. (ECF No. 1 at 7).
The proposed settlement for Jane Doe is $100,000, with $25,000 being directed to Jane Doe's counsel for his work. (ECF No. 22 at 2). Plaintiff agreed to pay $42,000 of the settlement payment, and Does 1, 2, and 3 agreed to pay $58,000. (ECF No. 30 at 2). No costs were retained, nor were there any medical liens asserted. (ECF No. 22 at 2). Jane Doe, therefore, would receive a net settlement of $75,000.
II. RELEVANT PROCEDURAL HISTORY
On July 29, 2019, Plaintiffs filed a complaint against Defendants for declaratory relief and reimbursement regarding Jane Doe v. DOES 1, 2, & 3, Case No. 37-2018-00061160-CU-NP-NC, the Underlying Action. (ECF No. 1). At a Continued Early Neutral Evaluation Conference held before Magistrate Judge Andrew G. Schopler on January 10, 2020, both this case and the Underlying Action were settled. (ECF No. 30 at 2). Though Jane Doe has since turned eighteen, this settlement agreement was made contingent upon court approval of the minor's compromise in both the Underlying Action and this Declaratory Relief Action. (ECF No. 30 at 3); see, e.g., Anthem Life Ins. Co. v. Olquin, No. 1:06-CV-1165 GSA, 2008 WL 1366103 (E.D. Cal. Apr. 9, 2008) (requiring minor's compromise where minor turned eighteen following the settlement agreement, but prior to adjudication of the minor's compromise).
On September 25, 2020, Superior Court Judge Timothy M. Casserly issued an order approving the compromise as to the Underlying Action. (ECF No. 22 at 20-23). On October 28, 2020, the parties filed a joint motion with this Court for approval of the minor's settlement. (ECF No. 22). In light of Judge Schopler's involvement in the settlement discussions at the Early Neutral Evaluation Conferences, the matter was referred to United States Magistrate Judge Mitchell D. Dembin for Report and Recommendation. (ECF No. 23). On December 1, 2020, the parties provided supplemental information as directed by this Court. (ECF No. 30). The parties request the Court approve a settlement providing Jane Doe with a sum of $100,000, with $25,000 of that sum to be retained by her counsel as fees. (ECF No. 22 at 2).
III. LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 17(c), district courts have a special duty to safeguard the interests of litigants who are minors. See Robidoux v. Rosengren, 638 F.3d 1177, 1179 (9th Cir. 2011); Fed. R. Civ. P. 17(c). Rule 17(c) provides, in relevant part, that a district court "must appoint a guardian ad litem—or issue another appropriate order—to protect a minor or incompetent person who is unrepresented in an action." Fed. R. Civ. P. 17(c). Accordingly, under Civil Local Rule 17.1, a court order or judgment is required for any action in which a minor has an interest to be settled, compromised, voluntarily discontinued, dismissed or terminated. Civ. L.R. 17.1(a).
This special duty requires district courts to "conduct [their] own inquiry to determine whether the settlement serves the best interests of the minor." Dacanay v. Mendoza, 573 F.2d 1075, 1080 (9th Cir. 1978); see also Salmeron v. United States, 724 F.2d 1357, 1363 (9th Cir. 1983). The district court considers "whether the net amount distributed to each minor plaintiff in the settlement is fair and reasonable in light of the facts of the case, the minor's specific claim, and recovery in similar cases . . . without regard to the proportion of the total settlement value designated for adult co-plaintiffs or plaintiff's counsel...." Robidoux, 638 F.3d at 1182.
The Robidoux court expressly limited its holding to evaluation of a minor's federal claims and did "not express a view on the proper approach for a federal court to use when sitting in diversity and approving the settlement of a minor's [or incompetent's] state law claims." Id. at 1179 n.2. District courts are split on whether the Robidoux standard applies to the evaluation of a minor's compromise regarding state law claims. Some district courts have simply applied the Robidoux standard when exercising diversity jurisdiction over state law claims, finding it persuasive in that "it provides a framework for evaluating the reasonableness and fairness of Plaintiff's settlement." DeRuyver v. Omni La Costa Resort & Spa, LLC, No. 3:17-CV-0516-H-AGS, 2020 WL 563551, at *2 (S.D. Cal. Feb. 4, 2020); see also Mugglebee v. Allstate Ins. Co., No. 14-CV-2474 JLS (JMA), 2018 WL 1410718, at *2 (S.D. Cal. Mar. 21, 2018) ("District courts, however, have found Robidoux applicable in state law claims.").
Other district courts have reviewed settlements of state law claims "with an eye towards the state standard, which focuses on the 'best interests of the minor,'" yet still also applied the Robidoux standard to ensure consideration of all potentially relevant factors. Doe v. Lincoln Military Prop. Mgmt. LP, No. 320CV00224GPCAHG, 2020 WL 5587488, at *4 (S.D. Cal. Sept. 18, 2020), report and recommendation adopted, No. 320CV00224GPCAHG, 2020 WL 5810168 (S.D. Cal. Sept. 30, 2020). Still others limit their analysis to California state law. See e.g., Del. Life Ins. Co. v. Moore, No. 18cv944-L (MSB), 2019 U.S. Dist. LEXIS 27968, at *8 (S.D. Cal. Feb. 21, 2019); Primerica Life Ins. Co. v. Cassie, 2013 U.S. Dist. LEXIS 56707, at *3 (E.D. Cal. Apr. 18, 2013).
IV. DISCUSSION
The underlying claims and resulting settlement before this court are based solely on state substantive law. The settlement agreement at issue has already been approved in state court; therefore, this Court finds application of the Robidoux standard to be sufficient in further ensuring the reasonableness and fairness of the minor's settlement.
To determine whether the net recovery of a minor's settlement is in the best interests of the minor, a district court should look to "the facts of the case, the minor's specific claim, and recovery in similar cases." Robidoux, 638 F.3d at 1182. This Court has carefully reviewed the facts of the case and the minor's specific claims. The parties have not identified any similar cases to support the approval of this minor's compromise. The Court has reviewed recoveries received in other similar actions to the extent feasible, given that the terms of such settlements are often kept confidential. See, e.g., Doe No. 59 v. Santa Rosa City Sch., No. 3:16-cv-01256-WHO, 2017 U.S. Dist. LEXIS 125422 (N.D. Cal. Aug. 8, 2017) (keeping terms of the settlement confidential where court granted petition for minor's compromise regarding the alleged sexual assault of fifteen-year-old girl who was then diagnosed with post-traumatic stress disorder, and suffered ongoing physical, psychological, and emotional injuries).
Further, the parties explain that this matter has been "heavily argued and contested at two separate Early Neutral Evaluation Conferences." (ECF No. 22 at 2). In their joint supplemental brief regarding this minor's compromise, they elaborate that the proposed settlement "reflects a recognition that DOES 1, 2, and 3 were sued over an alleged sexual assault upon a minor girl, and that Allstate's complaint for declaratory relief raised plausible reasons why it potentially owed no coverage obligations whatsoever." (ECF No. 30 at 2-3).
The settlement agreement provides that the respective payments by Plaintiff and Does 1, 2, and 3 were to be made by February 29, 2020 and held in escrow pending the approval of the minor's compromise by this Court and the state court presiding over the Underlying Action. (ECF No. 30 at 3). Additionally, Jane Doe agreed to file a Request for Dismissal of the Underlying Action in its entirety with prejudice, and Plaintiff agreed to file a Stipulation of Dismissal of this case in its entirety with prejudice. (Id.). Upon review of these terms of settlement and in consideration of the net amount of $75,000 which is to be recovered by Jane Doe, the Court finds that this compromise is fair, reasonable, and in her best interest.
V. CONCLUSION
For the foregoing reasons, IT IS HEREBY RECOMMENDED that the District Court issue an Order: (1) Approving and Adopting this Report and Recommendation; and (2) GRANTING the parties' Joint Motion for Approval of Minor's Compromise.
IT IS HEREBY ORDERED that any written objections to this Report must be filed with the Court and served on all parties no later than December 24 , 2020 . The document should be captioned "Objections to Report and Recommendation."
IT IS FURTHER ORDERED that any reply to the objection shall be filed with the Court and served on all parties no later than December 31 , 2020 . The parties are advised that the failure to file objections within the specified time may waive the right to raise those objections on appeal of the Court's order. See Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998).
IT IS SO ORDERED. Dated: December 10, 2020
/s/_________
Hon. Mitchell D. Dembin
United States Magistrate Judge