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USCA1 Opinion
July 6, 1992 ____________________
No. 91-2325
GLENDA CAROLE DESENNE,
Plaintiff, Appellant,
v.
JAMESTOWN BOAT YARD, INC.,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Raymond J. Pettine, Senior U.S. District Judge]
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Before
Aldrich and Coffin, Senior Circuit Judges,
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and Young,* District Judge.
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Susan M. Carlin for appellant.
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Amy Beretta with whom A. Lauriston Parks, Hanson, Curran, Parks &
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Whitman, and Standard, Weisberg, Heckerling & Rosow, PC, were on brief
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for appellee.
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*Of the District Of Massachusetts, sitting by designation.
COFFIN, Senior Circuit Judge. Plaintiff DeSenne suffered
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serious injury when the boat on which she served as a crew member
sank at sea. She filed this diversity action against Jamestown
Boat Yard, Inc. (Jamestown) alleging that its negligence in
making repairs caused her injuries. Prior to this lawsuit,
plaintiff settled her claims with the vessel's owners and insurer
and gave a release of all her rights. The appeal raises two
questions: was the release champertous and void under Rhode
Island law? and, if not, should the release nevertheless be
reformed so as to convey plaintiff's rights only to the extent
necessary to reimburse the boat's owners and insurers for monies
paid to her? The district court answered "No" to both, and so,
after reflection, do we.
The Facts
On November 7, 1987, the sailing vessel "Isle" sank in a
fierce storm in the Atlantic en route from Point Judith, Rhode
Island to the Azores. Plaintiff, on board as both passenger and
crew, suffered abrasions, a concussion, injuries to her teeth,
jaw, and toe, enduring pain, and the loss of wages and property
including navigation equipment. An insurance adjuster, one
Amato, represented the Isle's owners, the Beisers, and their
insurers. He maintained contact with plaintiff for nearly a year
and a half, took care of her medical bills, paid for her loss of
personal property, agreed to pay for dental work and for
treatment at a pain management clinic, and finally, on August 16,
1989, obtained a release from her.
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When plaintiff executed the release, Amato presented her
with a check for $20,000. In addition, further medical bills
(for dental work and pain management) were guaranteed up to a cap
of $7,500. Six thousand dollars had been paid for property loss.
The release, an eclectic borrowing from other forms devised by
Amato for his standard use, ran to the owners and underwriters,
and to the Isle itself. It would be difficult to contemplate a
document with a broader reach. It began by reciting that in
consideration of the sum of $20,000 the releasees were discharged
of all actions, including those under four specific statutes, but
extending to causes of action under all pertinent laws, state and
federal. It encompassed all remedies attributable to some 46
specified mental and physical injuries and ailments. It stated
that "all of my possible rights" under all "possible laws" had
been explained to plaintiff, and that she fully understood that
her disabilities might increase or that they might have been
misdiagnosed. It concluded by stating that, in addition to
"giving up every right" to releasees, plaintiff assigned "all
rights . . . to any and all . . . causes of action [present or
future]," empowered releasees "to make claim, file suit and to
take all other legal action necessary with the same force and
effect as [plaintiff]," and assigned "the express right . . . to
reassign, release or dismiss with prejudice any . . . causes of
action" connected with the accident.
One week after plaintiff executed this release, Amato wrote
his superiors, noting that plaintiff might be the Beisers' and
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their insurers' "best witness in the recovery against Jamestown
Boatyard," and explaining, "in approaching settlement, I did not
want to cause any negative feelings which might alter future
cooperation." He then referred to plaintiff's suffering "pain
that will be a permanent part of her life," and his side
agreement to pay an additional amount of $7,500 for subsequent
medical expenses "[t]o make her comfortable with a settlement."
He also noted a significant wage loss as a factor in the $20,000
settlement amount. He concluded, "I had her execute a Release
which covers Jones Act status and assigns all rights of recovery
to underwriters. As I understand from the facts uncovered to
date, our chances for recovery are excellent."
In his deposition testimony, Amato stated that he felt that
the release was solely to protect the Beisers and their insurers
against suit by plaintiff. The money paid plaintiff was for lost
wages, loss of personal property, pain and medical expenses.
Although he did not say so to plaintiff, he felt that she had not
waived any claims against Jamestown. He could not say that she
had read the release but described her as someone who "would not
sign a five-page document without reading it." Plaintiff, in her
testimony before the court, said that, although Amato had
suggested that she read the release and then "walked away," she
did not read it, being "a very trusting person." She asked Amato
if signing the document would prevent her from suing Jamestown at
some future date. Amato said, "No." As of the date of the
release, she was "contemplating looking into" filing a claim
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against Jamestown, but felt that she would not need a lawyer
because it would be a "joint suit" managed by the Beisers'
insurance company.
Nine months earlier, on November 17, 1988, the Beisers had
filed suit against Jamestown for the loss of the Isle and
personal injuries suffered during the sinking and rescue.
Jamestown cross-claimed for money allegedly owed for repair work.
Nine months after the release was executed, on May 17, 1990,
trial began and plaintiff in the instant case, DeSenne,
testified. On May 23, 1990, the action was settled and dismissed
with prejudice. Under the settlement agreement, Jamestown agreed
to pay the Beisers $300,000 and the Beisers were to pay Jamestown
$10,472.32, each party giving the other releases of all claims.
Legality of the Assignment
Jamestown moved to dismiss the instant action by reason of
plaintiff's assignment to the Beisers and the latters' release of
all claims as part of the settlement of May 23, 1990. Plaintiff
opposed dismissal on the ground that the release she gave the
Beisers was contrary to Rhode Island public policy forbidding
assignment of personal injury causes of action as champertous.
The district court, after reviewing the pertinent Rhode Island
cases, ruled:
The assignments were made in furtherance of settlement
and were not "the purchasing of personal-injury claims
by intermeddling volunteers for their own profit." As
there is no danger of champerty or maintenance, I see
no reason to allow Ms. DeSenne to evade the clear
agreement she entered into and thus upset the
settlement the parties have agreed upon.
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Memorandum and Order, April 24, 1991, at 6 (citation omitted).
We are in full agreement. The doctrine relied on by
plaintiff stems from general language in Tyler v. Superior Court,
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30 R.I. 107, 73 A. 467 (1909) addressing the evils of
maintenance.1 The court feared "the power of litigious persons,
whether rich or poor, to harass and annoy others, if they were
allowed to purchase claims for pain and suffering, and prosecute
them in courts as assignees." 30 R.I. at 109, 73 A. at 468. It
also observed that "there are no counterbalancing reasons in
favor of such purchases, growing out of the convenience of
business. . . ." Id. In the case before us, not only is the
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apprehended evil absent, but the practical requirements of
facilitating settlements in multi-party litigation provide a
weighty counterbalance.
As Justice Kelleher remarked in Hospital Service Corp. of
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R.I. v. Pennsylvania Ins. Co., 101 R.I. 708, 227 A.2d 105, 110
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(1967), "We have come a long way since the ruling in Tyler . . .
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." Like the district court, we find a recent dispositive case,
Etheridge v. Atlantic Mutual Ins. Co., 480 A.2d 1341 (R.I. 1984).
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In that case plaintiff had been injured in a motorboating
accident. The tortfeasors were insured by two companies. One,
Atlantic, was a primary insurer, with a policy limit of $50,000.
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1 The district court, quoting Black's Law Dictionary (4th ed.
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1968), defined maintenance as "maintaining, supporting, or
promoting the litigation of another" and champerty as a "bargain
by a stranger with a party to a suit, by which such third person
undertakes to carry on the litigation at his own cost and risk,
in consideration of receiving, if successful, a part of the
proceeds or subject sought to be recovered."
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Aetna, an umbrella carrier, covered losses in excess of $300,000,
and was made a third party defendant by Atlantic. Aetna settled
with the plaintiff, engaging in a structured settlement, agreeing
to pay plaintiff $10,000 a year for life, with some medical and
educational benefits. Plaintiff agreed to pay Aetna $50,000 plus
half of any additional judgment obtained from Atlantic or any
other party. The tortfeasors assigned to Aetna any proceeds
recovered from Atlantic or another party.
As appellee points out, it is clear that Aetna theoretically
could have recovered more than it paid out to plaintiff.
Plaintiff's recovery from Atlantic and third parties may have
been enough so that its required payment to Aetna might have
exceeded Aetna's payments, particularly if plaintiff did not long
survive; and the tortfeasors' claims, assigned to Aetna, also may
have produced a return for Aetna greater than its payments.
Notwithstanding these possibilities, the Rhode Island court ruled
that there was "no element of wagering or gambling involved in
this agreement." 480 A.2d at 1346. It referred to the frequent
situation where an insured person finds himself "the helpless
victim of a technical dispute between insurers . . . ." Id. at
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1345. The court reasoned:
Under such circumstances, a company that pays the loss
and absolves the insured from liability, except for the
right to proceed against the other carrier, has
performed a function that furthers rather than impedes
public policy. Such agreements ought not to be
rendered void or impeded by the simplistic maxim that
the common-law assignments of personal injury claims
were unenforceable.
Id.
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The Beisers' insurers were in precisely the position of
Aetna in Etheridge and the agreement at issue here furthered the
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same public policy. The insurers did not meet the definition of
those the Etheridge court declared to be prohibited from
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purchasing personal injury claims, i.e., "intermeddling
volunteers for their own profit," id.
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The court in Etheridge deemed it absurd to apply the rule
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against assignment of personal injury claims in a "context in
which it has no meaning," id., and thereby "obstruct an
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appropriate device" for facilitating payment of a claim while
preserving a right to pursue contribution. Id. That is, again,
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precisely the situation in this case. The Beisers and their
insurers knew that, in settling with plaintiff, so long as
Jamestown was not involved, there remained the possibility that
in a future suit by plaintiff against Jamestown, they faced the
possibility of a Jamestown claim for contribution. That this is
not idle speculation is revealed in the following commentary of
Professors Prosser and Keeton:
The effect of a settlement with the plaintiff by
the contribution defendant, who has received a release
or a covenant not to sue, has perhaps given more
difficulty than any other problem. The usual holding
has been that the defendant so relieved of liability is
not released from contribution. There has been much
dissatisfaction with this because it becomes impossible
for a defendant to settle the case, take a release, and
close the file, since the potentialliability for
contribution is still open.
W. Keeton, Prosser and Keeton on Torts 50, at 340 (5th ed.
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1984) (footnote omitted).
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It is true that Rhode Island has a statute which relieves
one settling tortfeasor from liability for contribution to
another tortfeasor if a release is given by the injured party
before such other tortfeasor has obtained the right to
contribution and if the release "provides for a reduction, to the
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extent of the pro rata share of the released tortfeasor, of the
injured person's damages recoverable against all the other
tortfeasors." R.I. Gen. Laws 10-6-8. But this device clearly
was less attractive to the Beisers and their insurers than the
all-purpose release they secured.
This, then, was the situation. During the suit brought by
the Beisers against Jamestown, the plaintiff testified.
Undoubtedly her testimony related in substantial part to her own
losses and injuries, for which she had received compensation from
the Beisers and their insurers. The Beisers possessed
plaintiff's release, giving them specific authority to release or
dismiss with prejudice all causes of action arising out of the
sinking of the Isle. Jamestown therefore was in a position, by
settling with the Beisers, to foreclose the possibility of any
additional lawsuits -- and, accordingly, made payment of
$300,000. Now, over two years later, plaintiff seeks to
unscramble what has not only been scrambled but digested.
It may be that plaintiff would have been better served by
filing claims contemporaneously against the Beisers and
Jamestown, but there is no issue of overreaching in this case.
Nor is this a case where an assignee paid for only a discrete
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segment of a putative plaintiff's claims and received an
assignment of all claims; here, plaintiff received payments
covering all facets of her losses and injuries, including pain
and suffering. And there is nothing in this record to indicate
that the Beisers or their insurers received a windfall. We
therefore hold that the district court did not err in its
original ruling, dismissing plaintiff's suit.
Reformation of the Release
After dismissal of her action plaintiff moved under Fed. R.
Civ. P. 59(e) to reconsider the ruling, again referring to the
legality of the assignment, but adding the allegation that
insurance agent Amato had induced her to execute the release
through false representations. The district court granted a
hearing solely to hear evidence and arguments concerning that
issue. After observing that the matters raised in the hearing
inexplicably had not been raised earlier, it concluded that
plaintiff had not been misled, having been advised by Amato to
seek legal advice. The court also rejected a new argument made
at the hearing in which plaintiff sought, based on mutual
mistake, to have the release reformed to assign her claims only
up to the amount the Beisers had paid. The court ruled that,
"[i]f there is any merit to this argument it is not addressed by
the present action, since the Beisers are not the defendants."
In reviewing the district court's decision on this post-
judgment motion under Rule 59(e), we look only for abuse of
discretion. United States v. Land at 5 Bell Rock Rd., 896 F.2d
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605, 611 (1st Cir. 1990). Clearly there was no abuse. The court
leaned over backward in granting a hearing on an issue that could
have been raised earlier. When this issue evaporated, it
patiently considered the contention that both plaintiff and Amato
had intended that the release not foreclose her from suing
Jamestown. Even though the written evidence strongly suggests
that Amato sought to secure for his client all possible
protection, it credited both plaintiff and Amato with so
intending.
What plaintiff seeks is most singular. In a suit against B,
she wishes to restructure a contract she entered into with A.
Were this to be allowed, an insurance adjuster could serve his
client to the maximum, and then come into court and say, "I
didn't mean what I drafted." In this case, such testimony would
open the door both to a lawsuit Jamestown had paid heavily to
avoid and to a substantial claim for contribution against the
Beisers and their insurers which they in turn thought they had
foreclosed by a substantial settlement. Plaintiff has not cited
any persuasive authority allowing contracts to be reformed in
this manner. Such authorities as McInnis v. Harley-Davidson
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Motor Co., 625 F. Supp. 943, 948-49 (D.R.I. 1986), City of
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Cleveland v. Cleveland Electric Illuminating Co., 538 F. Supp.
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1287, 1289 (N.D. Ohio, E.D. 1980), and Cram v. Northbridge, 410
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Mass. 800, 803, 575 N.E.2d 747 (1991), all deal with the
substantive question of how to interpret a release secured by a
single tortfeasor that purports "to acquit her and `all other
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persons, firms or corporations,'" McInnis, 625 F. Supp. at 948.2
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We have found no instances of contract reformation in the absence
of one party to the contract.
Plaintiff argues in her brief, "Boat Yard was not a party to
the Release in question, nor an intended beneficiary, nor has it
changed its position in reliance on the Release. Therefore,
reformation is in order." This reveals both an unrealistic view
of the facts and a simplistic view of the law. For there is
every reason to believe that Jamestown, in making payment of
$300,000, did rely on the comprehensiveness of the release
obtained from the Beisers. And reformation of contracts is not
so easily "in order" when the party against whom it is being
reformed is not present. See generally 3 A. Corbin, Corbin on
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Contracts 598, at 588; 614, 615 (1960) (discussion of
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reformation solely within context of litigation between the
parties to a document).
We see no abuse of discretion.
AFFIRMED.
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2 Judge Selya in McInnis noted three possible constructions of
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such a broad discharge: (1) that a party is barred from
proceeding against all tortfeasors, whether or not identified;
(2) that a party is barred only from proceeding against others
either named in the release or identifiable from the face of the
document; and (3) that the discharge releases those persons,
named or not, whom the parties intended to release. 625 F. Supp.
at 948-49.
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Document Info
Docket Number： 91-2325
Filed Date： 7/6/1992
Precedential Status： Precedential
Modified Date： 9/21/2015