Manuel Hidalgo v. Jeffrey Barker ( 2013 )

FILED
September 10, 2013
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DNISION THREE
MANUEL HIDALGO, f7k/a MANUEL )
HIDALGO RODRlGUEZ, individually, )
)
Appellant, ) No. 30544-9-III
)
v. )
)
JEFFREY BARKER, individually, )
BARKER AND HOWARD, PS, INC. a )
Washington corporation, and EDWARD )
STEVENSEN, )
)
Defendants, )
)
WESTPORT INSURANCE )
CORPORATION, ) PUBLISHED OPINION
)
Respondent and )
Cross Appellant. )
SIDDOWAY, A.C.J. Manuel Hidalgo was convicted of being a participant in the
much-publicized "Wenatchee sex ring" and served over four years in prison before his
judgment and sentence was reversed on the basis of the newly discovered evidence that
discredited the "sex ring" investigation and resulting charges. l Mr. Hidalgo then brought
I The allegations of improper and coercive investigation techniques are recounted
in Rodriguez v. Perez, 99 Wn. App. 439, 994 P.2d 874 (2000), among other decisions. A
total of 32 cases were filed between January 1994 and September 1995 as a result of the
"sex ring" investigation.
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Hidalgo v. Barker
this malpractice action against his public defenders and their law firm. The malpractice
case was settled, but since the law firm and its lawyers had exhausted their malpractice
insurance coverage, Mr. Hidalgo settled his case against Edward Stevensen, his principal
public defender, for Mr. Stevensen's agreement to a multimillion dollar judgment that
Mr. Hidalgo promised to collect only from Westport Insurance Corporation, Mr.
Stevensen's insurer. The trial court found the multimillion dollar settlement amount to be
excessive and that a reasonable settlement amount was $688,875, ultimately resulting in a
covenant judgment against Mr. Stevensen in that amount.
Mr. Hidalgo's appeal and Westport's cross appeal raise two questions of first
. .
ImpressIon.
The first, raised by Mr. Hidalgo, is whether a trial court that has conducted one
hearing at which it determines a reasonable settlement amount is statutorily required to
revisit that amount if the parties reach a new and different settlement agreement. We
hold that RCW 4.22.060 does not require that a reasonable settlement amount be
redetermined any time the settling parties modify the terms of their agreement. The trial
court did not abuse its discretion in refusing to reconsider its determination here.
The second, raised by Westport, is whether the reasonable settlement amount
should bear prejudgment interest. We hold that the trial court may provide for
prejudgment interest as a component of a reasonable settlement amount, as it did here.
Postjudgment interest was properly awarded at the contract rate.
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For those reasons, and because the trial court's determination of a reasonable
I settlement amount is supported by substantial evidence and did not require more detailed
findings, we affirm the trial court.
\ FACTS AND PROCEDURAL BACKGROUND
Mr. Hidalgo was charged with the first degree rape and first degree child
molestation ofM.E., the older of two sisters whose allegations of sexual abuse by their
parents and other family members ultimately led to broader allegations and charges
against several dozen adults in Chelan and Douglas counties. Mr. Hidalgo was married
to the girls' older half sister.
The law firm of Barker & Howard P.S., Chelan County's contract public defender,
was appointed to represent Mr. Hidalgo, who was indigent. The law firm assigned the
case internally to an associate attorney, Edward Stevensen. Jeffrey Barker supervised
Mr. Stevensen and participated to a limited extent in representing Mr. Hidalgo.
The theory of defense that ultimately proved successful in the Wenatchee sex ring
trials and postconviction challenges was to target improper interview techniques and
irregularities in the investigation, particularly on the part of Robert Perez, a detective
with the Wenatchee Police Department who became a foster parent ofM.E. and her
sister, D.E. The improper interview techniques cast doubt on the reliability of the girls'
allegations.
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Mr. Barker attended meetings of the lawyers representing defendants accused by
the girls at which a defense strategy of challenging the conduct of the investigation was
discussed. He did not embrace it for his firm's clients even though it proved successful
very shortly before Mr. Hidalgo's trial in the trial of Honnah Sims, a Sunday School
teacher who was the first of the alleged sex ring participants to be acquitted. Mr.
Stevens en defended Mr. Hidalgo relying on a different theory: he acknowledged the
girls' prior abuse by others, but argued that in an irrational response to it, they falsely
accused virtually every adult that they knew, including Mr. Hidalgo.
Mr. Hidalgo was initially charged in April 1995 and was tried less than four
months later, having agreed to one continuance but rejected Mr. Stevensen's
recommendation that they seek another. The day before Mr. Hidalgo's trial was to begin,
the State added charges that he had raped and molested M.E.'s younger sister, D.E. That
same day, Mr. Stevensen moved for a continuance of trial but his request was denied. On
the second day of trial, Mr. Stevens en informed the trial court that Mr. Hidalgo wished to
substitute a private lawyer, Mr. Tyler Firkins, and that Mr. Firkins requested a two-week
continuance. The request to allow the substitution of Mr. Firkins was also denied, with
the trial court observing that Mr. Stevensen was "doing a good job with this defense and
if [Mr. Firkins] wanted to be part of this case he had better have been here." Clerk's
Papers (CP) at 2388.
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At the conclusion of a three-day trial, Mr. Hidalgo was convicted of one count:
molesting D.E. The jury deadlocked on the five remaining counts. Mr. Hidalgo was
sentenced to 68 months in prison. This court upheld his conviction on appeal. State v.
Rodriguez, noted at 86 Wn. App. 1011, 1997 WL 1110380. 2
Postconviction Relief
About a year into Mr. Hidalgo's incarceration, M.E., who, with her sister, had
been placed through foster care in the home of Detective Perez, ran away from the Perez
home to the home of her grandparents. She told her grandparents that she had lied about
the sexual abuse, having been pressured by Detective Perez to make the accusations. Her
grandparents arranged for the recantation to be videotaped by a television reporter. Upon
being returned to the custody of the State, however, M.E. recanted her recantation.
Nonetheless, based on her initial recantation and other evidence, several
defendants filed for postconviction relief. In late 1997, personal restraint petitions
(PRPs) filed by M.E.'s and D.E.'s parents were referred by this court for fact-finding.
Following a seven-day reference hearing Judge Wallis Friel, to whom the fact-finding
was referred, concluded that M.E.'s recantation was believable and the State had used
improper techniques in interviewing the girls.
As reflected in the title of that decision, Mr. Hidalgo formerly used the surname
2
Rodriguez. We refer to him as Mr. Hidalgo based on his current preference.
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Following that determination and with the assistance of new lawyers-including
one from Mr. Firkins's firm, which would represent him in this malpractice action-Mr.
Hidalgo filed a PRP relying on newly discovered evidence and ineffective assistance of
counsel. In December 1998, this court ordered a reference hearing on Mr. Hidalgo's
PRP, which was referred to Judge Friel. Judge Friel found that the State had improperly
influenced the testimony ofM.E. and D.E. and that material evidence, sufficient to
change the result, was newly discovered.
This court adopted Judge Friel's conclusions, reversed Mr. Hidalgo's convictions,
and remanded the case for a new trial. In re Pers. Restraint ofRodriguez, noted at 98
Wn. App. 1025, 1999 WL 1314781. The State declined to retry the case and dismissed
the charges.
The Present Malpractice Lawsuit
Mr. Hidalgo then filed this action, asserting legal malpractice and other claims
against the Barker & Howard firm, Mr. Stevensen, and Mr. Barker. The law firm and its
two lawyers were insured by Westport, under a single professional liability policy with
aggregate liability limits of $500,000. The policy was subject to claims arising from
other lawsuits filed by defendants charged as a result of the sex ring investigation. It was
a "wasting" policy (coverage limits included defense costs), meaning that every dollar
spent on defending the malpractice case reduced coverage.
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Westport hired the law finn of Lee Smart3 to defend Barker & Howard and its
partners and associates, in this case and others. Efforts at a global settlement proved
unsuccessful, so the Lee Smart firm began entering into individual settlements with
plaintiffs on behalf of its several clients. Mr. Hidalgo made several decreasing offers to
settle with Mr. Stevensen, the last being for $75,000. The claims against Mr. Stevensen
were not settled. In May 2005, after the limits of the insurance policy were exhausted,
Lee Smart withdrew from representing Barker & Howard and its lawyers.
After Lee Smart withdrew, Mr. Stevens en proceeded pro se. He filed a motion for
summary judgment that was partially successful but Mr. Hidalgo's claim of professional
negligence survived.
Mr. Stevensen then reached an agreement with Mr. Hidalgo to settle for a $3.8
million covenant judgment. "Covenant judgment" is the tenn used to describe a type of
judgment commonly entered into by a plaintiff who intends to collect from an insurance
company that has refused, allegedly in bad faith, to settle the plaintiff s claim on behalf
of a defendant whom the company insures. Typical settlement terms include an agreed
judgment amount and a promise that the plaintiff will not collect its judgment from the
defendant but will instead take an assignment of claims against the defendant's insurer
and pursue those claims for its recovery. The Hidalgo/Stevensen settlement agreement
3 At the time, the finn was called Lee Smart Cook Martin & Patterson, P.S., Inc.
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included those terms and a provision-also common-that the settlement amount would
bear interest. It included a less typical provision that Mr. Stevensen would receive one-
half of any damages recovered by Mr. Hidalgo that were attributable to Mr. Stevensen's
aggravation and distress. The settlement was contingent on its being approved by the
court as reasonable; otherwise it was of no effect.
Mr. Hidalgo wanted to establish $3.8 million as the presumptive measure of
damages for his bad faith action against Westport, so he petitioned the trial court in this
malpractice case for a determination that the settlement amount was reasonable. An
insured who settles a claim that his insurance company should have covered and resolved
can recover damages in the amount paid to settle the claim if the settlement was
reasonable and entered into in good faith. This is so even if the amount of the settlement
exceeds the insured's contractual policy limits. Besel v. Viking Ins. Co. oj Wis. , 146
Wn.2d 730, 735, 49 P.3d 887 (2002). And it is well settled that a plaintiff can obtain a
judicial determination that the amount he paid in settlement was reasonable through a
hearing of the sort provided by RCW 4.22.060 for determining the value of a settlement
in the multiple defendant/contribution context. Id.; Chaussee v. Maryland Cas. Co., 60
Wn. App. 504, 509-10, 803 P.2d 1339,812 P.2d 487 (1991). Although the statutory
process exists to evaluate settlements in a different context, the criteria applied-which
were adopted in Glover v. Tacoma Gen. Hosp., 98 Wn.2d 708, 717, 658 P.2d 1230(1983), overruled on other grounds by Crown Controls, Inc. v. Smiley, 110 Wn.2d 695,
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756 P.2d 717 (1988)-are designed to assure the settlement amount is fair to any third
parties who are directly affected, in connection with their own liability, by the amount.
Washington courts have concluded that "[i]n both settings similar concerns exist
regarding the impact of a settlement on other parties and the risk of fraud or collusion."
Chaussee, 60 Wn. App. at 512. The amount that the court determines to be reasonable
following such a hearing constitutes a presumptive measure of damages in the bad faith
action.
The parties' written submissions in support and opposition to Mr. Hidalgo's
petition on the reasonableness of a $3.8 million settlement were voluminous. Mr.
Hidalgo submitted a 35-page petition along with a supporting declaration of counsel and
42 exhibits-all told, well over 600 pages of documentation. Westport submitted a 56­
page memorandum in response, supported by over 2,500 pages of additional exhibits.
Mr. Stevensen submitted over 500 pages of documents in reply. Mr. Hidalgo's opening
petition had addressed reasonableness against the Glover factors, so the parties' briefing
and later argument was presented within the framework of those factors.
A reasonableness hearing lasting almost three hours was conducted in February
2009. The trial court announced at the outset of the hearing that it had read all of the
briefs and had tried to read all of the exhibits that were testimonial in nature and
familiarize itself with all of the others. In announcing its decision, it stated that it had
considered the Glover factors.
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At the conclusion ofthe hearing, the court rejected the $3.8 million settlement
figure as unreasonable and disclosed how it had arrived at its own reasonable settlement
amount: $688,875. Although stating it had considered all of the Glover factors, it
explained that its conclusion ultimately "came down to a heavy emphasis on the merits of
Mr. Hidalgo's liability theory and the merits of the defense theory." Report of
Proceedings (RP) (Feb. 2, 2009) at 87. It found a probable range of damages that was
very substantial and a probability of Mr. Hidalgo's success at trial that was quite small.
From those, it performed the arithmetic. 4 It identified the ranges it had arrived at with
particularity:
As best I've been able to determine, a fair range for damages in this kind of
a case with prison incarceration would be somewhere between $1,000 a
day, which would be $365,000 a year, and $100,000 a month which would
be 1.2 million a year. I think that's basically the range in which these cases
tend to operate. Ifwe apply those ranges to Mr. Hidalgo's roughly five and
a half years of incarceration, we get on the low end of that scale 2,007,500
and at the upper end of the scale we get 6.6 million. A median figure
between those two, which is unsophisticated but the best way I have to
wrestle with them, is just about 4.6 million. It's actually 4,592,500. And
so I believe that that is a fair figure of damages if Mr. Hidalgo prevailed
entirely on his liability theory.
And then the question becomes, in weighing those theories, what is
the likelihood of success. Without boring you with any more detail, I will
tell you that ultimately, after a great deal of thought, I decided that the
liability chances are not very good, that I assessed them between 10 percent
and 20 percent of prevailing in what would have been a trial setting
4 In a later hearing, the trial court notified the lawyers that it had discovered a
minor mathematical error in its calculation, but one that did not justifY a departure from
the $688,875 figure.
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involving Mr. Hidalgo's claim against Mr. Stevensen. Well, 10 percent of
that median damages figure is 459,250 and 20 percent is, of course, twice
that number or 918,500. The best I could do for the purposes of this
hearing was to settle on a median between those two figures, which is
$688,875, and that will be the Court's conclusion as to what would be a
reasonable settlement in this case. Incumbent in that conclusion is the
Court's supporting conclusion that a settlement in this context of 3.8
million dollars is not reasonable.
Id. at 89-90.
The court went on to make several comments about matters it found significant in
concluding that Mr. Hidalgo had such a low prospect of success. "Probably the most
significant," it said, was the role that newly discovered evidence had played in securing
Mr. Hidalgo's release. Id. at 90. It commented on the "somewhat theoretical nature" of
Mr. Hidalgo's malpractice theory applied to only D.E. (the only victim found by the jury)
as opposed to how it would apply to charges that were made by both D.E. and M.E. Id.
It commented that at the time of Mr. Hidalgo's trial, three individuals had already been
convicted based on M.E.'s and D.E.'s accusations, something that would reasonably give
defense counsel pause about adopting the trial strategy that Mr. Hidalgo now argued was
"clearly" the proper strategy.5 Id. at 6. He observed that Mr. Stevensen had come close
5 Mr. Hidalgo's lawyer has pointed out that Ms. Sims was acquitted shortly before
Mr. Hidalgo's trial. Westport replies that by comparison, at least nine individuals had
admitted or been convicted of sexual abuse based on the girls' allegations by that time.
Br. of Resp't at 7.
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to acquittals. He commented on the fact that Mr. Stevensen had tried to get a
continuance, but without success.
The court did not ignore the defense case, observing that it did not find Westport's
defense theories of public defender immunity and the statute of limitations to be
persuasive.
At the conclusion of the hearing, the trial court directed Westport's attorneys to
circulate an order. They did, but the parties thereafter reached an impasse over whether
the order should contain findings and, ifso, what they should be. Because Mr. Hidalgo's
settlement with Mr. Stevensen was contingent on approval of the settlement amount, the
settlement was void by its terms and the parties were back on a trial track. An order
documenting the results of the February hearing remained in limbo.
More than a year later, in May 2010, Mr. Stevensen and Mr. Hidalgo entered into
a new settlement agreement. This time, the agreed settlement amount was $2.9 million
"or such amount as is found reasonable by the proper court." CP at 5333. The sharing of
emotional distress damages with Mr. Stevensen was eliminated. Otherwise, the
provisions largely remained the same.
Mr. Hidalgo filed a "Petition for Finding New Settlement Reasonable and/or
Motion for Reconsideration of Verbal Ruling," asking the trial court to find that the
agreed $2.9 million was a reasonable settlement amount. His petition was accompanied
by many new supporting materials: declarations from an insurance claims adjuster, an
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expert in lawyer conduct and ethics, an insurance defense lawyer, and a private
investigator; a supplemental declaration from Mr. Stevensen; and declarations of counsel
authenticating a number of additional exhibits.
Westport moved to strike the petition, arguing that as a motion for reconsideration
it was untimely, having been filed well over a year after the trial court's oral ruling. It
also argued that the petition did not identify a basis in fact and law for seeking
reconsideration as required by CR 59(b).
In replying, Mr. Hidalgo admitted that the new materials were submitted to
strengthen the showing made in support of his initial petition, stating that "plaintiffs
counsel realized that for [sic] they did their client and this Court a disservice after [they]
heard the Court's comments during the final reasonableness hearing that it had little
experience with complex civil cases." 6 CP at 5462. The petition continued that the
lawyers realized "[w]e should have supplied the Court more and better material and
expert analysis, rather than relying on the Court's experience." Id.
Westport's motion to strike was heard in October 2011. At the hearing, Mr.
Hidalgo's lawyer apologized for calling the petition and motion one for
6The trial court had stated:
I spend most of my time in criminal court because that has become the
nature of rural state court work and most of the complex civil litigation
happens other than in rural state courts.
RP (Feb. 2, 2009) at 85-86.
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"reconsideration," which he now argued was a misnomer. Because the original
settlement had failed, he argued that the more appropriate analysis was that the settlement
Mr. Hidalgo was now presenting was different-and by the plain language ofRCW
4.22.060 was required to be submitted anew. He argued alternatively that because no
written order had ever been entered following the February 2009 hearing, the trial court's
determination that $688,875 was a reasonable settlement amount was not final.
The court found no reason to revisit its reasonableness determination and granted
Westport's motion to strike. It again directed Westport to draft the orders. It ultimately
approved and signed an order on its February 2009 reasonableness determination that
included no findings of fact but did append and incorporate a transcript of its oral ruling.
With Mr. Hidalgo's and Mr. Stevensen's second settlement agreement being final
rather than contingent, a proposed judgment was also circulated and a new issue came to
light: Mr. Hidalgo took the position that the amount determined by the court to be
reasonable should bear prejudgment interest from the date of the agreement. He argued
that the parties had originally agreed that their settlement would bear interest and
Westport had not challenged the interest provision.
Westport argued that the principal amount of the judgment must be limited to
$688,875, since it was only that amount that the court had found to be reasonable. It
argued that if any interest were to be provided for by the judgment, it should be
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postjudgment interest at the market-based statutory rate for judgments on tort claims
provided by RCW 4.56.110(3)(b).
The trial court orally ruled that whether the settlement amount should bear
prejudgment interest was part of determining what was reasonable in settling the claim,
but a part that "[w]e simply did not address, nor was it reasonably contested." RP (Dec.
14,2011) at 6. It ruled that it was "appropriate" that the settlement amount bear interest
and provided in the judgment for prejudgment interest of$134,755 and postjudgment
interest at the statutory rate of 12 percent. Id.; CP at 6024-25.
Mr. Hidalgo appeals, contending that the trial court erred in refusing to conduct a
reasonableness hearing on the second settlement amount of$2.9 million. If that was not
error, he argues that the trial court abused its discretion when it earlier found that
$688,875 was a reasonable settlement amount. Westport cross appeals, arguing that the
trial court erred by entering a judgment that provided for prejudgment interest and for
postjudgment interest at the contract rate.
ANALYSIS
I
We first address Mr. Hidalgo's first and second assignments of error, which
challenge the trial court's order that both struck and denied his petition for a
reasonableness hearing on the second settlement. He argues that conducting the second
hearing was either mandatory-"require[d]" by "[t]he reasonableness statute-RCW
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4.22.060"-or, alternatively, that the court enjoyed the discretion to consider additional
submissions but abused its discretion by concluding, in error, that it was bound by its
initial determination. Br. of Appellant at 34 (boldface omitted). We reject both
arguments, addressing, first, Mr. Hidalgo's argument that a second hearing was
statutorily required.
A. How Many Hearings Does RCW 4.22.060 Require?
RCW 4.22.060(1) provides in relevant part that
[a] party prior to entering into a release, covenant not to sue, covenant not
to enforce judgment, or similar agreement with a claimant shall give five
days' written notice of such intent to all other parties and the court.... A
hearing shall be held on the issue o/the reasonableness o/the amount to be
paid with all parties afforded an opportunity to present evidence. A
determination by the court that the amount to be paid is reasonable must be
secured.
(Emphasis added.) As a matter of statutory construction, Mr. Hidalgo argues, "[t]he use
of 'shall' is mandatory and the trial judge has no discretion to refuse to conduct a
hearing." Br. of Appellant at 34 (citing State ex reI. Nugent v. Lewis, 93 Wn.2d 80, 82,
605 P.2d 1265 (1980) for the proposition that the use of "shall" in a statute generally
operates to create a duty).
The first problem with Mr. Hidalgo's argument is in invoking RCW 4.22.060(1)
as if this were a typical issue of statutory construction. The legislature was addressing
contribution among joint tortfeasors in enacting chapter 4.22 RCW, not assignment of
insurance bad faith claims. The' only consequences of a reasonableness determination
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that are provided by chapter 4.22 RCW are contribution claim consequences. 7 It is the
Washington Supreme Court, not the legislature, that has "approve[d] the application of
RCW 4.22.060" to covenant judgments assigning insurance bad faith claims, to which the
statute would otherwise not apply. Bird v. Best Plumbing Grp., LLC, 175 Wn.2d 756,
767,287 P.3d 551 (2012) (emphasis added). In the insurance bad faith assignment
context, then, we apply RCW 4.22.060, but with the Supreme Court's purpose in
approving its application in mind.
In invoking RCW 4.22.060 as requiring a second hearing, Mr. Hidalgo correctly
argues that the statute literally requires that notice be given of every settlement. It also
requires that "a" hearing be held. In construing how often the statute contemplates "a"
hearing, it is important to focus on what the hearing is supposed to address. The statute
does not speak of a hearing on all of the terms of the settlement agreement but, instead, of
a hearing "on the issue of the reasonableness of the amount to be paid." Case law,
including in the contribution context, has construed this language to narrowly confine the
7 A trial court's determination of a reasonable settlement amount caps the amount
that a defendant who settles all of a plaintiffs claims against multiple defendants can
seek to recover from other jointly and severally liable parties, protecting those other
defendants from having to bear a portion of an inflated settlement. See RCW
4.22.040(2). It also ensures that if a plaintiff reaches a "sweetheart deal" with one of
several jointly and severally liable tortfeasors, its recovery against the others will be
reduced by the judicially-determined reasonable amount, not some inadequate amount
that the plaintiff might have agreed to accept from the released party. See RCW
4.22.060(2).
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trial court's evaluation of a settlement agreement to a stand-alone reasonable settlement
amount. Glover, for example, identified factors that for the most part will not change
from one proposed settlement agreement to another, such as the released party's financial
exposure, comparative fault, and litigation risk. That decision also requires the trial court
to adjust the negotiated settlement amount for factors that could inflate or reduce the
amount in ways that are unfair to third parties such as evidence of bad faith, collusion, or
fraud. S If the court determines the settlement is unreasonable, RCW 4.22.060(2) has been
construed to require the court to then determine a reasonable amount. Meadow Valley
Owners Ass'n v. Meadow Valley, LLC, 137 Wn. App. 810, 817, 156 P.3d 240 (2007).
That stand-alone reasonable settlement amount will necessarily be independent of other
terms of the parties' agreement.
If two parties renegotiate the terms of a settlement agreement after the trial court
determines a reasonable settlement amount, then, no further hearing should be required
unless a different issue "of the reasonableness of the amount to be paid" is presented.
Developments in the lawsuit that affect the merits of the claims, the defenses, or other
Glover factors might result in a different issue of reasonableness. Westport's counsel
S The nine factors identified by Glover are (1) the releasing party's damages; (2)
the merits of the releasing party's liability theory; (3) the merits of the released party's
defense theory; (4) the released party's relative fault; (5) the risks and expenses of
continued litigation; (6) the released party's ability to pay; (7) any evidence of bad faith,
collusion, or fraud; (8) the extent of the releasing party's investigation and preparation;
and (9) the interest of the parties not being released. Glover, 98 Wn.2d at 717.
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provided an example when it argued the motion to strike:
It would be one thing if, on Day 1, the parties settled for X amount;
the Court found that unreasonable, and they went back to a trial track, and,
somewhere along the line, some witness' testimony changed, some fact
changed, concerning the merits of the case, and then the Court-the parties
reached a new settlement, and now, all of a sudden, that new settlement's
reasonable, because the facts have changed.
RP (Oct. 18,2011 Motion Hearing) at 24. Here, though, it argued:
None of those facts have changed, with respect to the merits of the
case, from February 2nd, 2009, to today's date. The only, quote, unquote,
"new evidence," is just a bunch of attorneys opining that the same facts
should have led this Court to reach a different result.
Id.We hold that short of a material change in one or more Glover factors, a new
settlement agreement entered into by two parties does not require a court that has already
conducted a reasonableness hearing and determined a reasonable settlement amount for
those parties to entertain evidence and argument in support of revising that amount.
Here, there was no showing of a material change in any Glover factor. One
reasonableness hearing on the parties' settlement was enough.
B. Did the Trial Court Have Discretion to Consider
Additional Evidence, But Fail to Recognize It?
If the trial court was not required to conduct a second reasonableness hearing, Mr.
Hidalgo argues, it was at least not bound by its oral ruling until formally incorporated
into an order, and it abused its discretion by concluding otherwise. See Doe I v. Wash.
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State Patrol, 80 Wn. App. 296, 304-05, 908 P.2d 914 (1996) ("A court's oral ruling is not
a final decision, and is not binding unless it is formally incorporated into the written
findings, conclusions, andjudgment."), abrogated in part on other grounds in Yousoufian
v. Office o/King County Exec., 152 Wn.2d 421,98 P.3d 463 (2004). A court's oral
decision "is necessarily subject to further study and consideration, and may be altered,
modified, or completely abandoned." Ferree v. Doric Co., 62 Wn.2d 561, 566-67, 383
P.2d 900 (1963).
While it is true that an oral decision is not final and may be reconsidered or
changed before it is made the subject of a final order, that does not mean that between the
time a court makes and announces a decision and the time it signs an order, it is obliged
to entertain whatever additional evidence or argument the parties wish to submit. See In
re Estate o/Leith, 42 Wn.2d 223, 226,254 P.2d 490 (1953) (noting that a court could
have reconsidered its oral decision, had it decided to do so, "[blut the court was not
required to reconsider it. Decision of the question of reconsideration rested within the
discretion of the court.").
Mr. Hidalgo argues that the trial court failed to recognize this discretion, but we
disagree with his characterization of the court's position. As we read the trial court's
ruling, it had the law right: it concluded that it was not bound by its prior determination
of a reasonable settlement amount but that it had no obligation to revisit it. Although the
court spoke a couple of times of "the parties" being bound by the court's oral decision,
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No. 30544-9-111
Hidalgo v. Barker
we read those statements, in context, to mean only that the decision whether to revisit the
reasonable settlement figure was the court's to make, not Mr. Hidalgo's or Mr.
Stevensen's. RP (Oct. 18,2011 Oral Decision) at 4.
Mr. Hidalgo also misconstrues the trial court's comment that "on a fresh look," it
could possibly "find a different amount to be reasonable." Id. We read this as no more
than the court's commonsense recognition that determining a reasonable settlement
amount is never an inquiry that leads, ineluctably, to a single figure. Mr. Hidalgo's
claims presented such substantial potential damages that the reasonable settlement figure
arrived at from one day to another-looking at the same information, applying the same
analysis, and with the same attitude about the conduct ofjuries-could lead to figures
that were, at a minimum, many tens of thousands of dollars apart.
Mr. Hidalgo also argues that it was error for the court to impose CR 59 standards
because, he argues, no written order had been entered, and CR 59 did not apply. Yet it
was Mr. Hidalgo who framed his petition for the second hearing as "Petition for Finding
New Settlement Reasonable and/or Motionfor Reconsideration of Verbal Ruling" in
which he stated, "Should it somehow be technically necessary plaintiff also seeks
reconsideration ofthe Court's verbal ruling regarding reasonableness of the first
settlement." CP at 5291-92 (emphasis added).
Mr. Hidalgo was right in initially invoking CR 59 as a potential basis for relief.
While CR 59(b) states that the deadline for filing a motion for reconsideration is 10 days
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Hidalgo v. Barker
following entry of the order, CR 59(a) states that "any . .. decision or order may be
vacated and reconsideration granted," and provided Mr. Hidalgo with an avenue for
requesting reconsideration even before entry of a final order. (Emphasis added.)
In any event, while Mr. Hidalgo introduced "reconsideration" as an alternative
basis for his motion and Westport argued CR 59 standards in response, the trial court
never mentioned CR 59 at alL Accordingly, whether Mr. Hidalgo's petition for a second
reasonableness hearing is analyzed as having CR 59 as an alternative basis or as having
identified no basis in the civil rules at all, the gist of the trial court's comments was that it
saw nothing in the parties' submissions that would cause it to revisit its prior
determination. This was not an abuse of discretion. 9
II
Mr. Hidalgo's third assignment of error is that the trial court abused its discretion
when it found his first settlement unreasonable and determination that $688,875 was a
reasonable settlement amount. He argues that the trial court (1) failed to explain how it
applied the individual Glover factors; (2) ignored the eighth factor, consideration of the
9 Mr. Hidalgo also contends throughout his briefing that the trial court might have
gotten the ruling wrong because it had little civil litigation experience, hence the need for
supplemental briefing. He misconstrues the trial court's statements about the greater
amount of time it spends on criminal matters, such as the case in which Mr. Stevensen
was alleged to have inadequately represented Mr. Hidalgo. At no point did this veteran
trial judge question his ability to conduct the reasonableness hearing. He was highly
qualified.
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No. 30544-9-111
Hidalgo v. Barker
releasing party's investigation and preparation; and (3) abused its discretion by using a
"rigid calculation" and selecting a figure that was the mean of the probable range of
recovery rather than a higher figure. Br. of Appellant at 45. He provides no legal
authority suggesting that any of the three matters he relies upon is a reversible abuse of
discretion and his arguments are unpersuasive.
A. Was the Trial Court's Explanation Inadequate?
We first address the court's alleged failure to explain its application of the Glover
factors. We are not mystified by the trial court's oral ruling, as Mr. Hidalgo claims to
be,lo but regardless, Washington decisions do not require trial courts to explain their
application of the factors.
A trial court abuses its discretion if it applies an incorrect legal standard, Dix v.
ICTGrp., Inc., 160 Wn.2d 826,833,161 PJd 1016 (2007), but the parties in this case
briefed and argued the Glover factors and the trial court announced that it had applied
them. Absent some showing that an incorrect standard may have been applied, we do not
review a trial court's reasonableness determination for a sufficient explanation, but for
substantial evidence. Water's Edge Homeowners Ass 'n v. Water's Edge Assocs., 152
10 Although, as Westport points out, Mr. Hidalgo's lawyer stated after the trial
court announced its oral ruling at the conclusion of the reasonableness hearing, "[A]s a
big loser, Your Honor, let me say even though I'm not happy with the ultimate
conclusion the Court reached, it's hard to find fault with everything you've done." RP
(Feb. 2, 2009) at 93.
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No.30544-9-III
Hidalgo v. Barker
Wn. App. 572, 585,216 P.3d 1110 (2009) (a trial court is not required to specifically list,
cite, or comment on the evidence it relied upon); Sharbono v. Universal Underwriters
Ins. Co., 139 Wn. App. 383,400, 161 P.3d 406 (2007). "Washington courts have found a
trial court's reasonableness determination to be valid even when the trial court fails to list
any of the [GloverlJChaussee factors and instead simply mentions that the parties
addressed the factors in their briefs and the trial court considered the briefs." Water's
Edge, 152 Wn. App. at 585 (citing Martin v. Johnson, 141 Wn. App. 611, 620, 170 P.3d
1198 (2007).
Green v. City of Wenatchee, 148 Wn. App. 351, 369, 199 P.3d 1029 (2009), relied
upon by Mr. Hidalgo, is inapposite. This court vacated and remanded the reasonableness
determination in that case for fact-finding by the trial court but it was not because written
findings are ordinarily required. Rather, the trial court had erroneously treated stipulated
findings between the releasing and released parties as binding. Id. at 368-69.
B. Did the Court Fail to Consider Mr. Stevensen's
Inadequate Trial Preparation?
Mr. Hidalgo next complains specifically that the trial court failed to consider the
eighth Glover factor: Mr. Stevensen's lack of investigation and preparation to defend the
malpractice case. Mr. Stevensen had missed witness and exhibit disclosure deadlines and
failed to retain an expert witness, leaving him largely at the mercy of the far better-
prepared Hidalgo legal team, according to Mr. Hidalgo. He makes this argument for the
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No.30544-9-III
Hidalgo v. Barker
first time on appeal. In the trial court, his only written submission on the eighth Glover
factor was, "Experienced insurance defense counsel for Westport performed significant
discovery and investigation prior to withdrawing after exhausting the declining limits.
The chances there was some 'winning' defense that might yet be unearthed after this
settlement are minimal if not nil." CP at 588.
Mr. Hidalgo's present approach of arguing that Mr. Stevensen was unprepared to
defend the malpractice case is difficult to reconcile with his application of other Glover
factors. For instance, he argued that the sixth Glover factor-Mr. Stevensen's ability to
pay-was "either not operative or of little importance," because "any payment of the
agreed judgment will ultimately come from the insurer [and] there is little doubt the
insurer is fully solvent." CP at 587. In other words, he applies the sixth factor as ifall of
the resources of the insurance company are available to him and Mr. Stevensen. When it
comes to the eighth, trial preparation, factor, though, Mr. Hidalgo wants it evaluated from
the perspective of Mr. Stevensen's inadequately financed defense. We do not suggest
how these factors should be analyzed, except to observe that the trial court is entitled to
analyze them consistently or even discount them. In determining the reasonableness of a
settlement, the trial court "must have discretion to weigh each case individually," Glover,
98 Wn.2d at 718, and all of the factors are not necessarily relevant in every case.
Werlinger v. Warner, 126 Wn. App. 342, 351, 109 P.3d 22 (2005) (citing Besel, 146
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No. 30544-9-III
Hidalgo v. Barker
Wn.2d at 739 n.2). Even Glover was decided without assessing all nine factors. Adams
v. Johnston, 71 Wn. App. 599, 605 n.4, 860 P.2d 423,869 P.2d 416 (1993).
Mr. Hidalgo has not demonstrated that the trial court committed a reversible abuse
of discretion by failing to consider or misapplying the eighth Glover factor.
C. Was the Trial Court's Method of Calculation an Abuse of Discretion?
Mr. Hidalgo's last challenge to the trial court's exercise of its discretion in arriving
at a reasonable settlement amount is that it used a rigid calculation and selected a figure
that was the mean of the probable range of recovery rather than a higher figure. "By [the
court's] own determinations," Mr. Hidalgo argues, "higher amounts were in fact
reasonable" and "[h]is computational method just eliminated the upper half of the
reasonable range." Br. of Appellant at 45.
The trial court's approach eliminated the lower half of the reasonable range at the
same time it eliminated the upper half. Its approach was rational and presumably a
common approach to arriving at the reasonable settlement amount that RCW 4.22.060
requires be determined. As Westport points out, it is the approach identified by at least
one treatise. 1 ALLAN D. WINDT, INSURANCE CLAIMS & DISPUTES: REPRESENTATION OF
INSURANCE COMPANIES AND INSUREDS § 5:1, at 5-12 (6th ed. 2013) (explaining that the
settlement value of a case can be determined by multiplying the "mid-point of the
expected verdict range" by the perceived chance of a favorable verdict). There was no
abuse of discretion.
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No. 30544-9-111
Hidalgo v. Barker
III
Westport's cross appeal challenges the trial court's inclusion of prejudgment
interest in the judgment, at a rate of 12 percent, for a total of $134,755. It also challenges
the trial court's provision in the judgment that it would bear postjudgment interest at
12 percent per annum. The trial court based the 12 percent postjudgment rate on RCW
4.56.11 O(4), which provides the default postjudgment rate for judgments that are not
founded on the tortious conduct of individuals or other entities. Schrom v. Bd. for
Volunteer Fire Fighters, 153 Wn.2d 19,36, 100 P.3d 814 (2004) held that RCW
19.52.010 mandates 12 percent prejudgment interest when the parties have not agreed on
some other rate.
Westport argues that no prejudgment interest should have been awarded at all, and
that postjudgment interest should have been limited to the market-based rate for
judgments founded on tortious conduct of individuals provided by RCW 4.56.110(3)(b).
That market-based rate-two percentage points above the prime rate-would have been
5.25 percent at the time judgment was entered. I I
The settlement agreement ultimately binding Mr. Hidalgo and Mr. Stevensen was
entered into in April 2010 and, with respect to interest, provided that the judgment to be
11 Historical Judgment Rates Archivefor RCW 4.56.110(3)(a) and (b), WASH. ST.
TREASURER, http://www.tre. wa.govIresourceslhistoricaDudgementRatesArchive.shtml
(last visited Sept. 3,2013).
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No.30544-9-II1
Hidalgo v. Barker
entered "shall ... include prejudgment interest on the unsatisfied judgment amount to run
from the date of this agreement until entry and post-judgment interest from date of
entry." CP at 5333. The agreement originally signed by the parties in May 2007 had
included identical language. Neither settlement agreement provided for a rate of interest.
The identical issue of what posdudgment interest rate a covenant judgment should
bear was addressed in Jackson v. Fenix Underground, Inc., 142 Wn. App. 141, 146, 173
P.3d 977 (2007), whose reasoning we find persuasive. While the underlying claim in
Jackson was a tort claim as was the underlying malpractice claim here, the court in
Jackson reasoned that the covenant judgment was not based on a determination of tort
damages by a trier of fact but on the parties' agreement to settle the claim: a contract.
"Once parties have agreed to settle a tort claim, the foundation for the judgment is their
written contract, not the underlying allegations of tortious conduct." Id. We agree. The
court properly awarded postjudgment interest at the 12 percent rate.
We then tum to the award of prejudgment interest, which we review for an abuse
of discretion. Scoccolo Constr., Inc. v. City ofRenton, 158 Wn.2d 506, 519,145 P.3d
371 (2006).
A party's entitlement to prejudgment interest as a question of substantive law turns
on whether a claim is "liquidated." Unigard Ins. Co. v. Mut. ofEnumclaw Ins. Co., 160
Wn. App. 912,925,250 PJd 121 (2011). "A liquidated claim is one where the evidence
furnishes data 'which, if believed, make it possible to compute the amount due with
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No. 30544-9-111
Hidalgo v. Barker
exactness, without reliance on opinion or discretion.'" Id. (quoting Weyerhaeuser Co. v.
Commercial Union Ins. Co., 142 Wn.2d 654, 685, 15 P.3d 115 (2000)). Mr. Hidalgo's
malpractice claim against Mr. Stevensen was not a liquidated claim. The $688,875 figure
reduced to judgment was not an assessment of damages for malpractice but it, too, was
required to be computed relying on opinion and discretion.
We do not regard the trial court as including prejudgment interest as a part of Mr.
Hidalgo's judgment amount on the basis of any entitlement under substantive law,
however. Rather, the trial court viewed Mr. Hidalgo's request for prejudgment interest as
a component of a reasonable settlement amount. It viewed its own determination whether
to award it as part and parcel of its reasonableness determination. Since the issue of
interest in the event of delay had not been raised or considered at the time of the original
hearing, the trial court addressed it in connection with presentment of the order and
judgment, which it was free to do. Ferree, 62 Wn.2d at 566-67.
RCW 4.22.060(1) provides for a hearing on the issue of the reasonableness of the
"amount to be paid" in a settlement agreement. Trial courts retain broad discretion in
determining reasonableness and we review a trial court's determination for an abuse of
discretion. Bird, 175 Wn.2d at 774 (citing Mut. ofEnumclaw Ins. Co. v. T&G Constr.,
Inc., 165 Wn.2d 255,261, 199 P.3d 376 (2008)). A trial court might analyze a settlement
with a view to arriving at a figure that is reasonable without the payment of interest for
the period before judgment is entered. But a trial court might just as easily arrive at a
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No.30S44-9-III
Hidalgo v. Barker
settlement amount that is reasonable as long as it bears interest from the date of
determination. Either approach is sound and either is permissible.
In this case, the trial court was presented with a settlement agreement under which
Mr. Stevens en had agreed to pay prejudgment interest. Even though that initial
agreement failed and was of no effect, it was still within the trial court's discretion to
arrive at a reasonable settlement amount that was premised on prejudgment interest being
paid from the date a binding agreement was reached. That is what the trial court
announced it was doing here. It did not abuse its discretion.
Affirmed.
WE CONCUR:
Brown, 1.
Kulik, 1.
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