Copper Mountain, Inc. v. Poma of America, Inc.

• Decision Date: 06 February 1995
• Docket Number: No. 93SC439,93SC439
• Citation: 890 P.2d 100
• Parties: COPPER MOUNTAIN, INC., Petitioner, v. POMA OF AMERICA, INC., Respondent.
• Court: Colorado Supreme Court

Page 100

890 P.2d 100

63 USLW 2526

COPPER MOUNTAIN, INC., Petitioner, v. POMA OF AMERICA, INC., Respondent.

No. 93SC439.

Supreme Court of Colorado En Banc.

Feb. 6, 1995.

Holland & Hart, Scott S. Barker, Marcy G. Glenn, Denver, for petitioner.

Gallo & Godfrey, Brett Marshall Godfrey, Laura E. David, Denver, for respondent.

Justice SCOTT delivered the Opinion of the Court.

We granted certiorari in Stubbs v. Copper Mountain, Inc., 862 P.2d 978 (Colo.App.1993), to determine whether a violation of the good faith requirement of section 13-50.5-105, 6A C.R.S. (1987), discharging a settling tortfeasor from liability for contribution to nonsettling tortfeasors, requires collusive conduct. ¹ Because we conclude that it does, we affirm the judgment of the court of appeals.

I

Laura Stubbs, the plaintiff below, initiated this action against Copper Mountain, Inc., ("Copper") seeking damages for severe spinal injuries that rendered Stubbs a paraplegic when she fell from a chairlift at the Copper Mountain ski resort. The injuries occurred on February 24, 1990, when Stubbs attempted to board the American Flyer chairlift, a high-speed lift operated by Copper to transport skiers up the ski slopes. A novice skier, Stubbs had difficulty boarding the lift. According to testimony at trial given by Stubbs and other witnesses, she never was properly seated in the chairlift and, as a consequence, was dangling from the lift during the ride up the mountain slope. Several employees of Copper disagreed, testifying that Stubbs was correctly assisted onto the lift but later slipped out of her chair while airborne. There is no dispute, however, that Stubbs hung from the airborne chair for a period of time before the chairlift was stopped by the lone lift attendant working at the base. Shortly after the lift was stopped, the ski patrol arrived by snowmobile below the point where Stubbs remained suspended in the air. Unfortunately, however, before the ski patrol was able to take any action, Stubbs fell to the ground and was seriously injured.

In March of 1990, Stubbs filed a negligence action against Copper. In her complaint Stubbs alleged that Copper was negligent in its hiring, training, supervising, and staffing of lift attendants, and in its unsuccessful attempt to rescue Stubbs.

Subsequently, Stubbs and Copper initiated settlement discussions regarding Stubbs' claims. In the course of settlement negotiations, Copper requested that Stubbs add as a defendant Poma of America, Inc. ("Poma"), the manufacturer and designer of the American Flyer chairlift. Stubbs declined, explaining that her investigations uncovered insufficient evidence to justify filing a lawsuit against Poma. In September of 1990, Copper designated Poma as a nonparty with fault pursuant to section 13-21-111.5, 6A C.R.S. (1987 & 1994 Supp.), ² and ultimately Stubbs amended her complaint to add Poma as a defendant. ³

Soon after the addition of Poma as a defendant, Stubbs and Poma began settlement negotiations. They reached an agreement in April of 1991, which provided that Poma would loan Stubbs $75,000 in cash in exchange for Stubbs' promise not to execute upon any portion of a judgment entered against Poma. ⁴ The agreement also provided that in the event Stubbs did not prevail against Copper, she would not be required to repay the loan from Poma. Stubbs and Poma also informally agreed that initially they would reveal their settlement to Copper only if asked, that Poma would withdraw its motion for a continuance, that Poma would remain a named party defendant in the case, and that Poma would provide expert witnesses at trial to respond to any claims by Copper that Poma was at fault.

Meanwhile, unaware of the nature of the settlement discussions between Poma and Stubbs, Copper continued settlement negotiations with Stubbs. A joint settlement conference was held on May 2, 1991, which both Poma and Copper were originally scheduled to attend. Poma did not attend however, and neither Stubbs nor Poma provided any explanation to Copper during the settlement conference for Poma's absence. Poma asserts that it assumed Copper understood Poma's failure to appear at the joint settlement conference to mean that it had settled with Stubbs. ⁵

A little over a month after the joint settlement conference, Copper and Stubbs reached an oral agreement to settle Stubbs' claims for approximately $4.5 million. Under the original agreement, Stubbs would release both Copper and Poma from liability so that Copper would be free to pursue an action for contribution against Poma. In a letter confirming the proposed terms of settlement with Copper, Stubbs formally advised Copper of the settlement agreement it had reached with Poma. Copper immediately responded by letter, stating its belief that Stubbs' failure to disclose the agreement with Poma was a "material misrepresentation of fact." Copper's letter stated that it was a "clearly understood condition precedent" to Copper's offer that Stubbs "had done and would do nothing by way of a separate settlement which would inhibit [Copper's] contribution right against Poma."

In a written reply, Stubbs stated that she would not seek to enforce the settlement if Copper desired to rescind the agreement, and that the parties could then proceed to trial. Copper elected, however, to continue working towards a settlement. After further discussions, on June 27, 1991, Copper and Stubbs agreed to settle under substantially the same terms as were previously negotiated. Pursuant to their settlement agreement, Stubbs executed a release of all claims against Copper and Poma, and Copper paid Stubbs the amount under the settlement agreement in full.

Anticipating Copper's forthcoming claim for contribution, on July 21, 1991, Poma filed a motion for dismissal, contending that contribution was barred by its settlement with Stubbs under the provisions of section 13-50.5-105, 6A C.R.S. (1987 & 1994 Supp.). That section provides that when a covenant not to enforce judgment is executed in "good faith," it discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor. On August 5, 1991, Copper moved to realign the parties and for leave to file a cross-claim against Poma for contribution. Copper also initiated discovery regarding the settlement agreement between Poma and Stubbs.

On August 7, 1991, Poma filed a motion for a protective order barring all discovery. That motion was granted and, after considering evidence presented during a two-day hearing, the trial court denied Copper's motion to realign the parties and dismissed the action with prejudice. ⁶ In reaching its ruling, the trial court found that the agreement between Stubbs and Poma was executed in good faith and that the existence of the agreement was not concealed or misrepresented. The court particularly emphasized the fact that Copper knew of the terms of the Poma-Stubbs settlement before it finalized its own settlement with Stubbs.

The court of appeals affirmed the decision of the trial court, holding that the test for whether a settlement is made in good faith is based on whether the parties engaged in "collusive" conduct intended to prejudice the interests of the nonsettling defendants. Stubbs v. Copper Mountain, 862 P.2d 978, 982-84 (Colo.App.1993). The court of appeals found no evidence of collusive conduct either in the structure of the settlement between Stubbs and Poma, or in the circumstances surrounding the disclosure of the agreement. Id. at 984-86. That court also found that the trial court did not abuse its discretion in deciding the issue of good faith without permitting further discovery or testimony on the contribution claim. Id. at 986.

We affirm the judgment of the court of appeals and conclude that for purposes of section 13-50.5-105, a settlement is reached in "good faith" in the absence of collusive conduct. Because of our resolution of the first issue for which we granted certiorari, we decline to address the remaining issues.

II

A

Initially we examine the court of appeals' determination as to whom section 13-50.5-105's duty extends. ⁷ Section 13-50.5-105 provides as follows:

Release or covenant not to sue. (1) When a release or a covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death:

(a) It does not discharge any of the other tortfeasors from liability for their several pro rata shares of liability for the injury, death, damage, or loss unless its terms so provide; but it reduces the aggregate claim against the others to the extent of any degree or percentage of fault or negligence attributable by the finder of fact, pursuant to section 13-21-111(2) or (3) or section 13-21-111.5, to the tortfeasor to whom the release or covenant is given; and

(b) It discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor.

§ 13-50.5-105, 6A C.R.S. (1987). Our statutory provision includes a verbatim enactment of section 4(b) of the Uniform Contribution Among Tortfeasors Act of 1955, 12 U.L.A. 98 (1975) ("UCATA"), the comment to which posits that "the requirement that the release or covenant be given in good faith gives the court occasion to determine whether the transaction was collusive, and if so there is no discharge." UCATA § 4 (1975) (Commissioner's Comment to subsection (b)). This interpretation by the drafters of the UCATA indicates an intent that the good faith obligation extend to the nonsettling defendant--the only party that could be the victim of such collusion. See, e.g., Owen v. United States, 713 F.2d 1461, 1464 (9th Cir.1983) (applying California's statutory bar to contribution claims only if settling parties acted in good faith with respect to nonsettling defendant); Commercial Union Ins. Co. v. Ford Motor Co., 640 F.2d 210, 213 (9th Cir.) (same), cert. denied, 454 U.S. 858,...