In re Del Grosso
| Decision Date | 13 October 1989 |
| Docket Number | Bankruptcy No. 89 B 06606. |
| Citation | 106 BR 165 |
| Parties | In re Antonio DEL GROSSO, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
John V. Del Gaudio, Jr., Chicago, Ill., for debtor Antonio Del Grosso.
Harry Miller, Trustee, Chicago, Ill.
This matter comes to be heard on the application of Harry S. Miller as Trustee (the "Trustee") of the estate of Antonio Del Grosso (the "Debtor") to authorize settlement of a personal injury lawsuit. For the reasons set forth herein, the Court hereby approves the settlement.
The Court has jurisdiction to entertain this motion pursuant to 28 U.S.C. § 1334 and General Orders of the United States District Court for the Northern District of Illinois. The motion constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (O).
The Debtor filed a voluntary Chapter 11 petition on April 19, 1989. Pursuant to creditor allegations of fraud and mismanagement, the Court held a hearing on a motion for the appointment of a trustee or examiner. Thereafter, on June 27, 1989, the Court appointed an examiner. Subsequently, a report of the examiner's preliminary investigation was submitted to the Court. On July 13, 1989, after a hearing on the Debtor's motion to voluntarily dismiss the case and a creditor's motion to convert, the Court converted the case to Chapter 7. Harry Miller was appointed Interim Trustee on July 14, 1989.
Prior to the filing of the case, the Debtor retained attorney Thomas M. Breen ("Breen"), for the purpose of representing him in connection with a cause of action arising out of personal injuries he sustained on February 6, 1988. On that date, the Debtor and Robert W. Vink were involved in an automobile collision at the intersection of Stony Island and 186th Street in Thornton, Illinois.
The agreement between the Debtor and Breen provides that Breen is to be paid a contingent fee in the sum of one-third of any amount recovered on the personal injury claim by way of suit, settlement or otherwise. Moreover, the agreement provides that Breen is authorized to incur reasonable expenses in connection with the settlement, adjustment or prosecution of the cause of action and shall be reimbursed for the actual amount of those expenses. Breen maintains offices with the law firm of Walsh, Neville, Pappas & Mahoney (the "Mahoney firm"). Breen had an oral arrangement by which he referred the Debtor's personal injury case to that firm. Breen would receive a referral fee out of the contingent fee based on the work he performed in connection with the case.
Subsequently, in February 1988, Breen and the Mahoney firm filed a complaint on behalf of the Debtor in the Circuit Court of Cook County naming Robert W. Vink, Jr. and Telecommunications Contractors, Inc., Vink's employer. The complaint was amended on June 28, 1988. The amended complaint seeks damages in an amount in excess of fifteen thousand dollars. Substantial discovery has been completed and settlement negotiations have produced an offer of $125,000.00.
The Trustee has applied to the Court for approval of the settlement as in the best interest of the estate. The Debtor is the only party objecting. He contends that settlement is premature at this time, the amount offered is too low and that the Trustee should first marshal and liquidate other assets of the estate to pay allowed claims, perhaps in full, so that the personal injury action could be abandoned to the Debtor.
Terence J. Mahoney testified at the hearing in regard to the offer of settlement from the insurance company. He is a partner with the Mahoney firm. Most of his practice is limited to personal injury cases. He has had extensive trial experience in this area of practice.
According to Mahoney's review of the documentary evidence and related medical records, the Debtor sustained the following personal injuries as a result of the accident: concussion; multiple lacerations, contusions and abrasions; and a fractured right scapula, left second rib, and right distal tibia. In addition, the Debtor has suffered some residual injuries consisting of loss of memory regarding the facts of the occurrence, frequent dizziness and tires easily.
Mahoney testified that he received several offers from defense counsel responsive to the initial demand of $200,000.00. The last offer was initially made for $100,000.00 in cash plus an annuity for fifteen to twenty years for $50,000.00. This offer was modified, after consultation with the Debtor, to a cash settlement of $125,000.00. Mahoney recommended the settlement to the Debtor before he learned of the pending bankruptcy case. The bases for his continuing recommendation to the Trustee are numerous: 1) a review of the Debtor's medical records and reports from treating physicians indicated no permanent injuries; 2) the Debtor has had no further medical treatment from his orthopedic physician for over a year; 3) the current backlog of jury trials in the Circuit Court of Cook County would put the time of trial in 1994 or 1995; 4) investigation of the facts and circumstances of the accident indicated no corroborating occurrence witnesses; 5) in Mahoney's experience in the field of personal injury lawsuits, the offer was in the range of a probable favorable verdict; and 6) the Debtor approved the amount offered. Mahoney is of the opinion that if the case were tried, a probable favorable verdict would result ranging from under $100,000.00 to over $200,000.00. He further represented that the offer was final and could be withdrawn.
The Debtor substantially confirmed Mahoney's testimony as to the personal injuries he sustained. In addition, he testified that he was in a coma for two days post-accident; his right ankle is continually swollen; he received a lump on the right side of his head; he experiences dizziness approximately sixty percent of the time; he experiences some loss of vision in the right eye; and he must walk with a cane at all times due to the hip injury. Moreover, the Debtor testified that his lifestyle has changed because of his claim of traumatically induced arthritis which onset after the accident. He concluded that the settlement offer was inadequate considering the injuries he has sustained. He denied approving the offer of $125,000.00.
Bankruptcy Rule 9019(a) empowers the Court to approve a proposed compromise or settlement and provides in relevant part that: "on motion by the trustee and after a hearing on notice to creditors . . . and to such other persons as the Court may designate, the court may approve a compromise or settlement." Fed.R.Bankr.P. 9019(a). Rule 9019(a) is essential the same as former Rule 919(a). The Rule has been construed to give the Court broad authority to approve compromises. In re Sherman Homes, Inc., 28 B.R. 176, 177 (Bankr.D.Me. 1983). Courts generally recognize that compromises are favored. See In re New York, New Haven & Hartford Railroad Co., 632 F.2d 955 (2d Cir.1980), cert. denied, 449 U.S. 1062, 101 S.Ct. 786, 66 L.Ed.2d 605 (1980). The purpose of a compromise is to allow the Trustee and the creditors to avoid the expenses and burdens associated with litigating contested claims. Matter of Walsh Construction, Inc., 669 F.2d 1325, 1328 (9th Cir.1982).
In spite of the requirement of Court approval, the Trustee must initially determine whether litigation should be settled and whether the terms are in the best interest of the estate. The Trustee's power to compromise extends to all controversies affecting the estate and not merely those involved in pending suits. Florida Trailer and Equipment Company v. Deal, 284 F.2d 567, 569 (5th Cir.1960). The requirement that adequate information be set forth in sufficient detail to enable approval of a settlement parallels the same requirement applicable to consideration of settlements in class actions or derivative actions pursuant to Rules 23 and 23.1 of the Federal Rules of Civil Procedure. In re Lion Capital Group, 49 B.R. 163, 176 (Bankr.S. D.N.Y.1985).
The decision to approve an application to compromise is a matter within the discretion of the Court. In re Aweco, Inc., 725 F.2d 293, 297 (5th Cir.1984) cert. denied, 469 U.S. 880, 105 S.Ct. 244, 83 L.Ed.2d 182 (1984); In re Sherman Homes, Inc., 28 B.R. at 177. The decision will not be disturbed on appeal absent a clear showing of abuse of discretion. In re Patel, 43 B.R. 500, 504-505 (N.D.Ill.1984); In re Bell & Beckwith, 77 B.R. 606, 611 (Bankr.N.D. Ohio 1987) aff'd, 87 B.R. 472 (N.D. Ohio 1988). Generally, the Court will approve a settlement if it is in the best interest of the estate. In re American Reserve Corp., 841 F.2d 159, 161 (7th Cir.1987); In re A & C Properties, 784 F.2d 1377, 1380-1382 (9th Cir.1986), cert. denied, Martin v. Robinson, 479 U.S. 854, 107 S.Ct. 189, 93 L.Ed.2d 122 (1986); In re Heissinger Resources Ltd. 67 B.R. 378, 383 (C.D.Ill.1986); Patel, 43 B.R. at 505; In re Central Ice Cream Co., 59 B.R. 476, 487 (Bankr.N.D. Ill.1985) ( Id. at 487 (quoting In re Kearney, 184 F. 190, 192 (N.D.N.Y.1910)).
Prior to approving a settlement, the Court has the duty to review the merits of the agreement to ensure that the compromise is fair. Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424, 88 S.Ct. 1157, 1163, 20 L.Ed.2d 1 (1968). ("TMT Trailer").1 In exercising its discretion, the bankruptcy court must weigh all factors bearing...
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