Shen v. Club Med SAS ( 2019 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 MILA SHEN, by and through her Case No.: 3:19-cv-00349-BEN-BGS guardian ad litem Peggy Shen Brewster; 12 EDWIN SHEN, an individual; JOYCE REPORT AND 13 SHEN, an individual; ZOE SHEN and RECOMMENDATION FOR ORDER VESPER SHEN, by and through their GRANTING MINORS 14 guardian ad litem Peggy Shen Brewster, COMPROMISE PETITIONS 15 Plaintiffs, (ECF No. 40) 16 v. 17 CLUB MED SAS, a corporation; CLUB 18 MED SALES, INC.; CLUB MED MANAGEMENT SERVICES, INC.; and 19 DOES 1 to 50, 20 Defendants. 21 22 Before the Court are the petitions of guardian ad litem Erik Brewster to approve the 23 compromise of the pending action on behalf of minor Plaintiffs Mila Shen, Zoe Shen, and 24 Vesper Shen (“minor Plaintiffs”). (ECF No. 40.) This Report and Recommendation is 25 submitted to United States District Judge Roget T. Benitez pursuant to 28 U.S.C. 26 § 636(b)(1) and Local Civil Rule 17.1 of the United States District Court for the Southern 27 District of California. After reviewing the Petitions and all supporting documents, and for 28 1 the reasons discussed below, the Court RECOMMENDS that the Petitions (ECF No. 40) 2 be GRANTED. 3 I. BACKGROUND 4 Plaintiffs Mila Shen, Zoe Shen, and Vesper Shen are minors appearing by and 5 through their court appointed guardian ad litem, Erik Brewster. (ECF No. 21.) On August 6 8, 2018, Plaintiffs Mila, Zoe, Vesper and their parents, Plaintiffs Edwin and Joyce Shen, 7 attended a performance at Club Med hotel in Tomamu Hokkaido, Japan. (ECF No. 1-2 at 8 4.) General manager Merlin Chelliah gathered the children to the front of the stage to have 9 them partake in a sake barrel breaking ceremony. During the ceremony, Ms. Chelliah’s 10 wooden mallet slipped out of her hand and hit Mila in the center of her forehead. (Id. at 11 5.) She suffered a nondisplaced frontal skull fracture and today has a prominent scar across 12 her forehead. (ECF No. 40-1 at 3.) She received emergency treatment, imaging, 13 neurological examination, plastic surgery, and therapy for emotional trauma. (Id.) Mila 14 was seven years old at the time of the injury. (ECF No. 1-2 at 5.) Her parents and sisters 15 Zoe and Vesper witnessed Mila’s injury causing them emotional distress. (Id.; ECF No. 16 40-2 at 3; ECF No. 40-3 at 3.) 17 This action was initially filed in California Superior Court and was removed to this 18 Court on February 20, 2019. (ECF No. 1.) Plaintiffs alleged claims of negligence, 19 negligent infliction of emotional distress, and negligent misrepresentation. (ECF No. 1-2.) 20 Defendants filed motions to dismiss for lack of personal jurisdiction. (ECF Nos. 21–22.) 21 The undersigned judge held an Early Neutral Evaluation and Case Management 22 Conference on September 4, 2019. (ECF No. 29.) The case did not settle, and a scheduling 23 order was issued. (Id.; ECF No. 30.) On September 30, 2019, Plaintiffs filed their 24 opposition to Defendants’ Motion to Dismiss. (ECF Nos. 32–33.) On October 18, 2019, 25 the parties filed a joint notice of settlement informing the Court they reached a settlement. 26 (ECF No. 37.) On November 1, 2019, guardian ad litem Erik Brewster filed petitions for 27 approval of the minor’s compromise of claims. (ECF No. 40.) Exhibits were attached 28 1 containing petitions for Mila (ECF No. 40-1), Zoe (ECF No. 40-2), and Vesper (ECF No. 2 40-3). 3 II. LEGAL STANDARD 4 It is well settled that courts have a special duty to safeguard the interests of litigants 5 who are minors in the context of settlements proposed in civil suits. Robidoux v. 6 Rosengren, 638 F.3d 1177, 1181 (9th Cir. 2011); see also Fed. R. Civ. P. 17(c) (district 7 courts “must appoint a guardian ad litem—or issue another appropriate order—to protect 8 a minor or incompetent person who is unrepresented in an action.”). This duty “requires a 9 district court to ‘conduct its own inquiry to determine whether the settlement serves the 10 best interests of the minor.’” Robidoux, 638 F.3d at 1181 (quoting Dacanay v. Mendoza, 11 573 F.2d 1075, 1080 (9th Cir. 1978)); see also Salmeron v. United States, 724 F.2d 1357, 12 1363 (9th Cir. 1983) (“a court must independently investigate and evaluate any 13 compromise or settlement of a minor’s claims to assure itself that the minor’s interests are 14 protected, even if the settlement has been recommended or negotiated by the minor’s parent 15 or guardian ad litem.”). Accordingly, Local Rule 17.1(a) provides that “[n]o action by or 16 on behalf of a minor or incompetent will be settled, compromised, voluntarily discontinued, 17 dismissed or terminated without court order or judgment.” CivLR. 17.1(a). This requires 18 the Court to question if the settlement is in the best interests of the minor and consider not 19 only the fairness of the settlement, but the structure and manner of the plan for the payment 20 and distribution of the assets for the benefit of the minor. 21 Ordinarily, “in considering the fairness of a minor’s state law settlement, federal 22 courts generally require that claims by minors . . . be settled in accordance with the 23 applicable state law.” Lobaton v. City of San Diego, No. 3:15-cv-1416-GPC-DHB, 2017 24 WL 2610038, at *2 (S.D. Cal. June 16, 2017) (internal quotation marks and citation 25 omitted). California law requires court approval of a settlement for a minor and attorney’s 26 fees to represent a minor. Cal. Prob. Code § 3601; Cal. Fam. Code § 6602. Under 27 California state law, the Court is tasked with evaluating the reasonableness of the 28 settlement and determining whether the compromise is in the best interest of the minor. 1 Espericueta v. Shewry, 164 Cal. App. 4th 615, 619–20 (2008). Furthermore, California 2 Probate Code Section 3601 authorizes the court approving a compromise of a minor’s 3 disputed claim to “make a further order authorizing and directing that reasonable expenses, 4 medical or otherwise[,] ... costs, and attorney’s fees, as the court shall approve and allow 5 therein, shall be paid from the money or other property to be paid or delivered for the 6 benefit of the minor.” Cal. Prob. Code § 3601(a). This “bestows broad power on the court 7 to authorize payment form the settlement—to say who and what will be paid from the 8 minor’s money—as well as direct certain individuals to pay it.” Goldberg v. Superior 9 Court, 23 Cal. App. 4th 1378, 1382 (1994). 10 In cases involving the settlement of a minor’s claims, the Ninth Circuit has stated 11 that district courts should “limit the scope of their review to the question of whether the net 12 amount distributed to each minor plaintiff is fair, in light of the facts of the case, the minor’s 13 specific claim, and recovery in similar cases.” Robidoux, 638 F.3d at 1181–82. This 14 inquiry should be made “without regard to the proportion of the total settlement value 15 designated for adult co-plaintiffs or plaintiffs’ counsel – whose interests the district court 16 has no special duty to safeguard.” Id. at 1182. “So long as the net recovery to each minor 17 plaintiff is fair and reasonable in light of their claims and average recovery in similar cases, 18 the district court should approve the settlement as proposed by the parties.” Id. 19 Here, the instant complaint was filed in San Diego County Superior Court and 20 alleges state law claims for negligence, negligent infliction of emotional distress, and 21 negligent misrepresentation. (ECF No. 1-2.) The Court, therefore, will apply California 22 law and focus on whether “the compromise is sufficient to provide for the minor’s injuries, 23 care and treatment.” Goldberg, 23 Cal. App. 4th at 1382. Additionally, the Court will 24 consider the guidelines set forth in Robidoux because they provide a “framework for 25 evaluating the reasonableness and fairness of Plaintiff’s settlement.” Lobaton, 2017 WL 26 2610038, at *2. 27 III. DISCUSSION 28 A. Proposed Settlement 1 Based on a review of the petitions and applicable law, the Court finds that the terms 2 of the settlement are fair and reasonable as to the minor Plaintiffs. Under the terms of the 3 settlement, Plaintiffs agree to accept $500,000 in exchange for dismissing their claims 4 against Defendants. (ECF No. 40 at 2.) The settlement is apportioned according to the 5 following percentages: Mila is to receive 76.94%; Zoe is to receive 11.53%; and Vesper is 6 to receive 11.53%. (ECF No. 40-1 at 13.) The gross proceeds are to be apportioned 7 accordingly, with Mila receiving $384,700 and each of her sisters receiving $57,650. (ECF 8 Nos. 40-1 at 7, 40-2 at 7, 40-3 at 7.) After attorney’s fees and costs, Mila will receive 9 $299,707.18, Zoe will receive $45,091, and Vesper will receive $45,091 to be paid into 10 structured annuities. (Id.) The minors’ parents are not taking any settlement funds and 11 Plaintiffs’ counsel reduced their fee from 33 1/3% to 20% to ensure adequate compensation 12 for Mila. (Id.; 40-1 at 19.) 13 This action was initiated in state court December 6, 2018 (ECF No. 1-2 at 2) and 14 removed to federal court on February 20, 2019 (ECF No. 1.) Over the course of the 15 litigation, Plaintiffs’ counsel conducted an extensive investigation into the events 16 surrounding Mila’s injury, and the facts of the case were thoroughly investigated in 17 response to Defendants’ Motions to Dismiss on basis of lack of personal jurisdiction and 18 via participation in an Early Neutral Evaluation with the undersigned judge. Based upon 19 consideration of the facts, the minor Plaintiffs’ claims, and the risks associated with trial, 20 the Court concludes the proposed settlement is fair and reasonable under both California 21 and federal law standards. 22 B. Method of Disbursement 23 Courts can use a variety of methods for the disbursement of settlement funds to a 24 minor. See Cal. Prob. Code § 3600 et seq. Here, the Petitions request that the minor 25 Plaintiffs’ net settlement be used to purchase three structured settlement annuities through 26 Sage Settlement Consulting using rates from Pacific Life Insurance Company. (ECF Nos. 27 40-1 at 25, 40-2 at 25, 40-3 at 25.) 28 1 The Court has considered the structured annuity quotes provided by Sage Settlement 2 Consulting and the methods of disbursement chosen by the minor Plaintiffs’ guardian ad 3 litem. These methods provide that the balance of the settlement be placed in an account 4 for each of the minor Plaintiffs with disbursements to be made over a period of years. 5 Specifically, Defendants or their insurers are to pay $ 299,707.18 for Mila and $45,091 6 each for Zoe and Vesper to fund three single-premium deferred annuities subject to 7 withdrawal only upon authorization of the Court as set forth in the Petitions. (ECF Nos. 8 40-1 at 10, 40-2 at 10, 40-3 at 10.) This would provide Mila with guaranteed lump sum 9 payments of approximately $92,050.73, $95,992.78, $98,999.17, and $101,834.82 at ages 10 18 through 21. (ECF No. 40-1 at 25.) It would also provide Zoe and Vesper each with 11 guaranteed lump sum payments of approximately $12,963.06, $13,387.28, $13,904.99, and 12 $14,690.18 at ages 18 through 21. (ECF No 40-1 at 25; ECF No. 40-2 at 25.) The terms 13 of the annuities protect the minor Plaintiffs as they provide that the bulk of the settlement 14 be released after they have reached the age of majority. The Court finds the methods of 15 disbursements to be fair, reasonable, and within the bounds of applicable law. See Cal. 16 Prob. Code § 3602(c)(1) (providing as option that funds be deposited into a single-premium 17 deferred annuity). 18 C. Attorney’s Fees, Costs, and Medical Liens 19 Attorney’s fees to be paid for representing the minor Plaintiffs must also be approved 20 by the Court. Cal. Fam. Code § 6602. Attorney’s fees and costs are typically controlled 21 by statute, local rule, or local custom. Generally, fees in minors’ cases have historically 22 been limited to twenty-five percent (25%) of the gross recovery. Napier by & through 23 Quiroz v. San Diego Cty., No. 315CV00581CABKSC, 2017 WL 5759803, at *3 (S.D. Cal. 24 Nov. 28, 2017.) In California, courts are required to approve the attorney’s fees to be paid 25 for representation of a minor. See Cal. Prob. Code § 2601; Cal. Rule of Ct. 7.955. To 26 determine whether the fee is reasonable courts consider a myriad of factors including: the 27 amount of the fee in proportion to the value of the services performed; the novelty and 28 difficulty of the questions involved and skills required; the amount involved and the results 1 obtained; and the experience and ability of the attorney. Cal. Rule of Ct. 7.955(b). When 2 a contingency fee has been proposed, “most courts require a showing of good cause to 3 award more than 25% of any recovery” whereas a greater reward is “rare and justified only 4 when counsel proves that he or she provided extraordinary services.” Schwall v. Meadow 5 Wood Apts., No. CIV. S-07-0014 LKK, 2008 WL 552432, at *1–*2 (E.D. Cal. Feb. 27, 6 2008) (internal quotation marks omitted). 7 Here, minor Plaintiffs’ counsel seeks $76,940 based on Mila’s portion of the 8 settlement (ECF No. 40-1 at 7) and $11, 530 each from Zoe and Vesper’s portions of the 9 settlement. (ECF Nos. 40-2 at 7, 40-3 at 7.) This represents 20% of the $500,000 gross 10 settlement. (ECF Nos. 40-1 at 19, 40-2 at 19, 40-3 at 19.) Counsel has provided no 11 documentation in support of their request. Nonetheless, the Court finds that in 12 consideration of the duration of this case, the amount of work performed by Plaintiff’s 13 counsel, the fee request’s adherence to the historically applied limit in cases involving 14 minors, and the fact that counsel reduced their fees in order to facilitate settlement and 15 ensure adequate compensation for Mila, the amount of attorney’s fees is reasonable and 16 does not suggest that the settlement was unfair. 17 Additionally, in the instant petitions, minor Plaintiffs’ counsel set forth costs accrued 18 over the course of the litigation totaling $8,928.38, with $6,869 to come from Mila’s 19 settlement proceeds and $1,029 to come from both Zoe and Vesper’s settlement proceeds. 20 (ECF Nos. 40-1. 40-2, and 40-3 at 7.) Counsel attaches an advanced detail of all costs 21 which, amongst other costs, represent $2,500 in expert fees, $3,019.45 in translation costs, 22 $1,443 in focus group costs. (ECF Nos. 40-1 at 21, 40-2 at 21, and 40-3 at 21.) This 23 litigation, which was initiated December 2018 in state court, settled after minor Plaintiffs’ 24 counsel conducted an extensive investigation into the events surrounding Mila’s injury and 25 the facts of the case were thoroughly investigated in response to Defendants’ Motions to 26 Dismiss on basis of lack of personal jurisdiction. (ECF Nos. 40-1, 40-2, 40-3 at 16–17.) 27 The Court finds that the costs incurred are fair and reasonable under the circumstances. 28 1 Finally, the petition on behalf of Mila sets forth $1,183.82 in medical expenses that 2 are to be paid from the proceeds of the settlement. (ECF No. 40-1 at 6–7.) Payment of 3 such medical expenses from settlement proceeds is permissible. See Cal. Prob. Code 4 § 3601(a) (“authorizing and directing that reasonable expenses, medical or 5 otherwise . . . shall be paid from the money or other property to be paid or delivered for the 6 benefit of the minor . . . .”). 7 IV. CONCLUSION 8 After reviewing the Petitions for Approval of Minor’s Compromise of Claims, the 9 Court finds that the proposed settlement of minor Plaintiffs’ claims in the amount of 10 $500,000 fair and reasonable. For the reasons discussed above, IT IS HEREBY 11 RECOMMENDED that the District Court issue an Order: (1) adopting this Report and 12 Recommendation; (2) GRANTING the Petitions (ECF No. 40); and (3) requiring the 13 following: 14 (1) Defendants should prepare and deliver the settlement fund proceeds. The 15 settlement funds should be disbursed as follows: (i) attorney’s fees in the 16 amounts of $76,940, $11,530, and $11,530 (or collectively $100,000) shall be 17 paid to Plaintiffs’ counsel, The McClellan Law Firm; (ii) costs in the amount of 18 $8,928.38 shall be paid to Plaintiffs’ counsel, The McClellan Law Firm; and 19 (iii) medical expenses in the amount of $1,183.82 shall be paid directly to 20 provider Conduent (Cigna Medical Lien) via P.O. Box 30114, Salt Lake City, 21 Utah 84130. The balance of the settlement will be distributed to each of the 22 minor Plaintiffs as set forth in the Petitions. 23 (2) The remaining amounts designated for each of the minor Plaintiffs ($299,707.18 24 for Mila, $45,091 each for Zoe and Vesper) shall be invested into three structured 25 settlement annuities comporting with the options selected by the minor Plaintiffs’ 26 guardian ad litem for the benefit of minor Plaintiffs. The funds will be held in the 27 structured annuities until the minor Plaintiffs reach the age of eighteen (18) and 28 then be disbursed based on the proposals selected by the guardian ad litem. (See 1 ECF Nos. 40-1 at 25, 40-2 at 25, 40-3 at 25.) Until that time, no withdrawals 2 may be made from the structured annuity without a written order from this Court. 3 (3) All proceeds are to be paid within thirty (30) days after approval of the minors 4 compromise. Interest shall accrue at 7% per annum on any amounts not paid 5 within 30 days of this Order. 6 (4) Any annuity payments remaining to be paid after the death of Mila Shen will be 7 made payable in equal shares to her primary beneficiaries: Zoe Shen, Vesper 8 Shen, and Axel Shen. If one of Mila’s primary beneficiaries is no longer living, 9 then that person’s payments will be distributed in equal shares to the remaining 10 beneficiaries listed here. 11 (5) Any annuity payments remaining to be paid after the death of Vesper Shen will 12 be made payable in equal shares to her primary beneficiaries: Zoe Shen, Mila 13 Shen, and Axel Shen. If one of Vesper’s primary beneficiaries is no longer 14 living, then that person’s payments will be distributed in equal shares to the 15 remaining beneficiaries listed here. 16 (6) Any annuity payments remaining to be paid after the death of Zoe Shen will be 17 made payable in equal shares to her primary beneficiaries: Vesper Shen, Mila 18 Shen, and Axel Shen. If one of Zoe’s primary beneficiaries is no longer living, 19 then that person’s payments will be distributed in equal shares to the remaining 20 beneficiaries listed here. 21 IT IS ORDERED that no later than January 2, 2020, any party to this action may 22 file written objections with the Court and serve a copy on all parties. The document should 23 be captioned “Objections to Report and Recommendation.” The parties are advised a 24 failure to file objections within the specified time may waive the right to raise those 25 objections on appeal of the Court’s Order. See Martinez v. Ylst, 951 F.2d 1153, 1156 (9th 26 Cir. 1991). 27 IT IS FURTHER ORDERED that any reply to the objections shall be filed with 28 the Court and served on all parties no later than January 9, 2020. 1 IT IS SO ORDERED. 2 ||Dated: December 19, 2019 7 2 p / / 3 on. Bernard G. Skomal 4 United States Magistrate Judge 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28