Bass v. Phoenix Seadrill/78, Ltd.

• Decision Date: 10 January 1985
• Docket Number: No. 83-2360,83-2360
• Parties: Ronnie Gene BASS, Plaintiff-Appellee, v. PHOENIX SEADRILL/78, LTD., Defendants, Third-Party Plaintiffs-Appellants, v. CROWN RIG BUILDING SERVICES, INC., and Branham Industries, Inc., Third-Party Defendants-Appellants, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1154

749 F.2d 1154

Ronnie Gene BASS, Plaintiff-Appellee, v. PHOENIX SEADRILL/78, LTD., Defendants, Third-Party Plaintiffs-Appellants, v. CROWN RIG BUILDING SERVICES, INC., and Branham Industries, Inc., Third-Party Defendants-Appellants, Appellees.

No. 83-2360.

United States Court of Appeals, Fifth Circuit.

Jan. 10, 1985.

Tom Hanna, Robert A. Black, Beaumont, Tex., for Crown.

Gilpin, Maynard, Parsons, Pohl & Bennett, John D. Gilpin, Houston, Tex., for Branham Industries, Inc.

Hubert Oxford, III, Mary Ellen Blade, Beaumont, Tex., for Phoenix.

Crawford Parker, Jr., Eric S. McPherson, Carthage, Tex., for Bass.

Appeals from the United States District Court for the Eastern District of Texas.

Before WISDOM, RANDALL and JOLLY, Circuit Judges.

RANDALL, Circuit Judge:

This appeal presents important questions with respect to the scope and timeliness of judicial review of partial settlements executed in multi-party lawsuits. Following a bench trial, the district court voided portions of the plaintiff's settlement agreement with one of three defendants but nonetheless enforced the plaintiff's release of the settling defendant. 562 F.Supp. 790. Although we uphold the district court's liability and damage findings, we reverse that portion of its opinion which partially abrogates the settlement agreement.

I. FACTUAL AND PROCEDURAL BACKGROUND.

Ronnie Gene Bass (Bass) sought compensation below from three defendants for personal injuries suffered while performing seaman's duties aboard a newly commissioned Jones Act vessel. Bass was employed by Phoenix Seadrill/78 Ltd. (Phoenix) as a roughneck on an offshore drilling rig known as Big Foot I. Contractors hired by Phoenix completed construction of Big Foot I in early 1980. Branham Industries, Inc. (Branham) designed and fabricated the rig's derrick; Crown Rig Building Services, Inc. (Crown Rig) erected the derrick. Upon completion of Big Foot I, a Phoenix crew, of which Bass was a member, commenced drilling operations aboard the rig in the Gulf of Mexico. On May 8, 1980, after only five days of drilling, Bass suffered severe injuries when a forty-pound jack handle fell from a work platform eighty feet above the rig's floor and struck him on the head. The jack handle, which was used to raise and lower the work platform (known as a "monkey board"), pivoted on a steel pin to which it was supposed to be attached by a cotter key. The cotter key was not located after the accident; the parties devoted much time below to assigning responsibility for its installation and inspection.

Predictably, Bass' tragic accident spawned much litigation. Initially, Bass sought compensation from Phoenix ¹ under the Jones Act and the general maritime law. Phoenix, in turn, brought third-party actions for indemnity against Branham and Crown Rig. Finally, Bass amended his original complaint to assert negligence and strict liability claims directly against Branham and Crown Rig.

Long before trial, Bass compromised his claims against Phoenix in a settlement that the parties and the district court label a "Mary Carter" agreement: ² for $210,000, Bass forever released Phoenix from all liability arising from the jack handle accident; Bass assigned to Phoenix, however, up to $178,000 of any funds recovered from Branham and Crown Rig. ³ Moreover, Bass agreed not to settle his claims against third parties without the consent of Phoenix.

Bass and Phoenix disclosed their agreement to the court and opposing counsel six months before trial. On the first day of trial, Crown Rig and Branham moved the court to void the settlement agreement on the grounds that it "is against public policy, abuses the judicial form and processes, and fosters champerty and maintenance." Record Vol. II at 309. The district court, however, did not rule on the motion at that time. Instead, the court tried the case without a jury. Phoenix participated, notwithstanding Bass' release, to prosecute its third-party actions for indemnity against Branham and Crown Rig. In a post-trial memorandum opinion, the court awarded Bass $650,000 in damages apportioned, as follows, according to the comparative fault of the defendants: Phoenix--40 percent; Branham--40 percent; and Crown Rig--20 percent. In the same opinion, the court, with the benefit of perfect hindsight, finally ruled on the motion to void the settlement: the court abrogated the rebate and veto provisions of the agreement because of grossly inadequate consideration and a perceived deterrent effect on compromise with the non-settling defendants; the court found, however, that, absent the rebate and veto provisions, the agreement was supported by ample consideration. Accordingly, the court enforced the agreement as a straight cash-for-release settlement and entered judgment that Bass recover $260,000 from Branham and $130,000 from Crown Rig. The release provisions of the settlement agreement, in the court's view, discharged Phoenix's liability for the remaining $260,000 of Bass' damages. The court's partial abrogation of the agreement relieved Bass of the obligation to rebate $178,000 to Phoenix. In a supplemental order, the court denied Phoenix's claim to complete indemnity from Branham and Crown Rig for the amount paid to Bass in settlement.

II. CONTENTIONS ON APPEAL.

The parties take various positions with respect to the district court's partial abrogation of the Bass-Phoenix settlement. Phoenix argues that we have previously sanctioned the use of Mary Carter settlement techniques and that the district court lacked the authority to void the rebate provision of this agreement. Seizing on a chance to save $178,000, Bass argues, for the first time on appeal, that he in fact received grossly inadequate consideration for the rights he relinquished in the settlement agreement. Branham and Crown Rig also claim that the agreement should have been voided, but take the argument one step further: the court deprived them of a fair trial by failing to void the agreement before trial. Knowledge of the agreement, according to Branham, undoubtedly colored the court's perception of the evidence and influenced the court to assign a large percentage of fault to parties other than Phoenix and to inflate the damage award.

The parties also challenge the district court's allocation of fault for the jack handle accident. Phoenix asserts that, notwithstanding any negligence on its own part, it is entitled to Ryan ⁴ indemnity from Branham and Crown Rig because they both breached a warranty of workmanlike performance implicit in their respective contracts with Phoenix. Branham and Crown Rig, on the other hand, argue that the district court's liability findings are clearly erroneous. They both claim as an initial matter that the evidence conclusively demonstrates that Phoenix's negligence was the sole proximate cause of the accident; alternatively, Branham and Crown Rig both argue that, as between themselves, the other party is responsible for any fault not assigned to Phoenix. Crown Rig argues that, at any rate, it is entitled to complete indemnity from Branham because of a difference in the degree of fault for which Branham and Crown Rig are liable: Branham is strictly liable to Bass on a products liability theory; Crown Rig's liability, if any, is premised on passive negligence.

Finally, Crown Rig claims that the district court's damage finding is excessive. Bass, naturally, argues that the court's damage award is amply supported by the evidence.

III. THE SETTLEMENT AGREEMENT.

The district court analyzed four deleterious effects that allegedly flow from the Bass-Phoenix settlement agreement: (1) the agreement fosters champerty and maintenance; (2) it deters Bass from settling with the other defendants; (3) the agreement falsely aligns the parties before the trier of fact; and (4) it overreaches Bass who, as a seaman, is a ward of admiralty. ⁵

The court found that, because the settlement was fully disclosed and the case was not tried to a jury, the agreement's economic realignment of the parties did not impugn the fact-finding process. ⁶ The court concluded, however, that the rebate and veto provisions of the settlement agreement are champertous and that they effectively deprived Branham and Crown Rig, in degradation of the strong policy favoring settlements, of a chance themselves to compromise Bass' claims against them. Moreover, the court found, despite Bass' professed satisfaction with the deal, that the settlement agreement is grossly unfair to Bass: $210,000 is manifestly insufficient consideration, in the court's view, for a release, an assignment of $178,000 of potential recovery, and a veto power over settlements with other defendants. The court determined, however, that $210,000 constitutes fair consideration, on these facts, for a release of liability. Therefore, the district court voided the rebate and veto provisions of the agreement, assigned all of the consideration paid by Phoenix to support the agreement's release, and simply enforced the agreement as if the parties had executed a straight settlement.

The propriety of Mary Carter settlement techniques has received much attention in recent cases and commentaries. See, e.g., Note, Mary Carter Agreements in Maritime Personal Injury Suits, 22 S.Tex.L.J. 545 (1983). We note at the outset that, while we have yet to conduct a plenary analysis of the subject, we have implicitly approved of the use of Mary Carter settlement agreements. See, e.g., Wilkins v. P.M.B. Systems Eng'g, 741 F.2d at 798 n. 2; Leger v. Drilling Well Control, Inc., 592 F.2d 1246 (5th Cir.1979) (affirming decision by district court, after it ordered a new trial because of undisclosed Mary Carter settlement, to grant non-settlor proportionate, not dollar-for-dollar credit, for amount paid to plaintiff by settlor); Reichenbach v. Smith, 528 F.2d at 1072 (finding no prejudicial error in failure to disclose Mary Carter settlement to jury). Despite some broad...