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Unruh v. James D. Vandever Trucking, Inc.

United States District Court, D. New Mexico

May 25, 2018

LINDA UNRUH as Personal Representative of the Wrongful Death ESTATE OF ROBERT L. UNRUH, JR., Deceased, and as next friend on behalf of Robert L. Unruh's minor children, Destiny Unruh, Robert Lee Unruh and Leland Merle Unruh, Plaintiff,
v.
JAMES D. VANDEVER TRUCKING, INC., and EARL ROGER GARRETT, Defendants.

          MEMORANDUM OPINION AND ORDER

         This matter is before the Court on the question of whether the proposed settlement of the case is fair and in the best interests of the minors. The Court has reviewed the complete record in this case, though of particular relevance are the parties' Fourth Joint Motion to Approve Minors' Settlements [Doc. 78], filed on April 25, 2018, as well as the Proposed Findings and Recommended Disposition [Doc. 74] of United States Magistrate Judge Stephan M. Vidmar regarding the motion to approve, the objections thereto filed by The Garrett Law Firm, P.A. [Doc. 75], and the various Reports of Guardian Ad Litem [Docs. 29, 42, and 70].

         On March 27, 2018, Judge Vidmar conducted a fairness hearing regarding the proposed settlement, which at that time was set forth in the Joint Motion to Approve Minors' Settlements [Doc. 69], and which set forth Mr. Garrett's fee at 27.5%, or $275, 000.00, not including Gross Receipts Tax. After the hearing, Judge Vidmar recommended that the Court approve the settlement, with the exception of the amount of attorney's fees awarded to The Garrett Law Firm. Judge Vidmar stated, “I believe the upper limit of reasonableness for Mr. Garrett's fee would be 25%.” Doc. 74 at 17. Accordingly, the parties revised the amount of fees to be awarded to Mr. Garrett to 25% plus Gross Receipts Tax, and the parties' current motion to approve the settlement [Doc. 78] reflects that amount.[1]

         On May 8, 2018, the undersigned held a hearing on the matter at which counsel for Plaintiff Linda Unruh and Defendants James D. Vandever Trucking, Inc. and Earl Roger Garrett were present. Also present were the court-appointed guardian ad litem (“GAL”), Donald Schutte; Plaintiff's former counsel, Michael Garrett (“Mr. Garrett”); and Mr. Garrett's own attorney, Stephen Hamilton. All current counsel as well as Mr. Garrett were given the opportunity to address the Court.

         BACKGROUND

         This case stems from a February 19, 2017 accident in which Robert Unruh (“decedent”) was hit and killed by a tractor trailer driven by Earl Roger Garrett, an employee of James D. Vandever Trucking, Inc. The decedent left behind three minor children, but no spouse. The main underlying factual and legal issues in the case are whether decedent was at fault for standing in the roadway, or whether Earl Roger Garrett[2] was negligent in his operation of the tractor trailer. Under New Mexico law, the decedent's three minor children are the sole beneficiaries of his wrongful death estate. N.M. Stat. Ann. § 41-2-3(C). They are represented in that capacity by their grandmother (and decedent's mother), Linda Unruh.

         On June 1, 2017, Mr. Garrett and counsel for the Defendants filed a perfunctory motion to dismiss [Doc. 14] on the grounds that they had reached a settlement. On June 7, 2017, this case was assigned to the undersigned United States District Judge. The joint motion to dismiss caught the Court's attention because it was unusual in that it contained no request for appointment of a GAL or for a fairness hearing to protect the interests of the minors. The Court did not grant the motion to dismiss, but instead on June 8, 2017, the Court issued an order to show cause [Doc. 18] before June 22, 2017 why it should not appoint a GAL and conduct a fairness hearing to determine whether the settlement was in the best interest of the minors. Surprisingly, the Court received no response from either party. As a result, on June 26, 2017, the Court ordered the parties to file a joint motion to appoint guardian ad litem and a motion to approve the settlement by certain deadlines. [Doc. 20] The parties did not perform either task on time, nor did they move for an extension of time, causing the Court to issue a second order to show cause [Doc. 24][3] on August 22, 2017. At this point, the Court was concerned that this case was not proceeding upon a normal path.

         FINDINGS OF FACT

         In his Proposed Findings and Recommended Disposition [Doc. 74], Judge Vidmar did an excellent job setting forth the procedural and factual history of this case. Therefore, rather than repeating that discussion [Doc. 74 at 2-6] here, the Court incorporates and adopts it as though set forth herein. The Court makes the following additional findings of fact:

         1. In his initial proposed settlement agreement, Mr. Garrett proposed that 25% of the net settlement proceeds, or $137, 512.06, be distributed to Linda Unruh in her personal capacity, despite the fact that she had not asserted a legal claim against Defendants in this or any other lawsuit. Doc. 28 at 1. In doing so, he took a position that was directly adverse to those of his clients, the children, as represented by Linda Unruh in her capacity as representative of the wrongful death estate. Linda Unruh in her personal capacity was not Mr. Garrett's client, and any claim to a share of the insurance proceeds made by her in her personal capacity would reduce the recovery by his clients.[4] As Judge Vidmar put it, “any attorney representing the estate would have an ethical obligation to try to defeat Plaintiff's loss-of-consortium claim.” Doc. 74 at 15 n.13. But rather than trying to defeat Linda Unruh's claim, Mr. Garrett advocated for it in the original settlement agreement. This is a violation of Rule16-107 of the Rules of Professional Conduct, which states that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.” Rule 16-107(A), N.M. Rules Ann. 1978.

         2. It appears unlikely that Linda Unruh had a viable claim for loss of consortium of her son in any case.[5] In this case, when the GAL challenged the proposed $137, 512.06 payment to Linda Unruh personally for her alleged loss of consortium with her son, see Doc. 29, Mr. Garrett defended the payment not with citation to any legal authority or any facts showing the required mutual dependence between mother and adult son, but rather with an emotional argument about “the load placed on Linda Unruh by having to be appointed as the permanent guardian and conservator for Robert Lee Unruh and Leland Merle Unruh.” Doc. 31 at 4. In other words, he was unable to demonstrate any factual or legal basis for a payment to Linda Unruh individually, but nevertheless he was willing to distribute to her 25% of the money due to his clients under the Wrongful Death Act.

         3. Mr. Garrett also initially advocated for payments to three other third parties-bystander Chad Becerra ($5, 000) and the two towing companies ($2, 500 each) with tow trucks at the scene of the accident-for a total of $10, 000 deducted from the monies to be paid to his clients. Mr. Garrett did this, it appears, at the behest and insistence of Defendants' insurer and defense counsel so that the insurer would settle with his clients for policy limits.[6] Transcript of May 8, 2018 hearing at 37 (Mr. Garrett: “I must tell you, that for this agreement to be concluded, Mr. Sedillo required that I acquire the releases from the two wrecking companies, from Chad, and also from Mrs. Unruh. Those were the requirements to get the million dollars.”). In exchange, those third parties (who were not Mr. Garrett's clients, and whose claims to the $1 million policy limits were adverse to his own clients' claims) released their claims against Defendants. See Transcript of May 8, 2018, hearing at 35-36 (Mr. Garrett stated, “I want the Court to know that the reason the payment was made to Chad was that Chad was injured. Chad wasn't only injured physically, he was injured mentally. And he was so incapacitated after all of this that he finally was discharged from employment by Mrs. Unruh because he couldn't operate a tow truck anymore. I did not feel that I could go to him and ask him to give a release of his claims without paying him some money.”).[7] Mr. Garrett does not seem to recognize, even at this point, that it is not his place as counsel for the minor beneficiaries of the wrongful death estate to seek out parties with adverse claims, persuade them to release those claims, and then arrange for payment from the wrongful death estate as consideration for their release. Although this arrangement presents clear conflicts of interest, both Mr. Garrett and his counsel insist on characterizing it as a mere “cost” of litigation, akin to fees one would pay to an expert. See Transcript of May 8, 2018 hearing at 60 (Mr. Hamilton stated: “I would suggest the Court look at that as not-as something like a payment to facilitate a settlement. There's no problem with the-with Mr. Garrett paying $2, 500 to an accident investigator in order for him to do his work. That's not considered taking it from the children. And I suggest that these payments are pretty much the same way. It's just what had to be done in order to get the settlement done.”). However, one pays an expert for his or her work in reviewing in materials and preparing an opinion in an effort to advance the merits one's case-not as a type of payoff to clear the way for a settlement.

         4. While the initial Joint Motion to Dismiss was filed on June 1, 2017, it appears that the settlement proceeds had been deposited in Mr. Garrett's trust account almost two weeks earlier, on May 17, 2017. Doc. 45-3 at 5 (billing statement from Garrett Law Firm to Linda Unruh). By June 8, 2017, when Mr. Garrett finally communicated with a structured settlement broker regarding the establishment of an annuity for the minors, he had had possession of the funds for several weeks. Doc. 29 at 15-16.[8] Mr. Garrett has not specified when, precisely, he intended to get around to obtaining court approval of the settlement or when he intended to set up an annuity-both tasks that typically are completed prior to distribution of funds.

         5. Furthermore, it appears that by August 25, 2017, when the parties filed their first joint motion to approve the settlement, Mr. Garrett had already distributed the proceeds without first seeking court approval, either in this court or in the state court. See Doc. 29 at 7, 15-16. Yet, in the motion [Doc. 28] Mr. Garrett failed to mention that funds already had been distributed.

         6. On June 8, 2017, the structured settlement broker informed Mr. Garrett that there could be no structured settlement constructed for the children because the settlement proceeds already had been placed in Mr. Garrett's trust account. See Email from Sara VanFleet to Michael Garrett, Doc. 29 at 15-16. Despite this knowledge, he made no ...


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