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Lopez v. Oil Field Outfitters, LLC

United States District Court, D. New Mexico

September 13, 2019

TODD LOPEZ, As Personal Representative of the Estate of Michael Ponce, et al., Plaintiffs,
OIL FIELD OUTFITTERS, LLC, et al., Defendants, And LEE HUNT, As Personal Representative of the Estate of Fernando M. Garcia, et al., Intervenor-Plaintiffs,



         This case is before the Court on the motion to approve settlement on behalf of the minor Plaintiff Izaiah Ponce (doc. 97, the “Motion”), the report of the guardian ad litem (“GAL”) for Izaiah, Matthew Vance (doc. 95, “GAL Report”), and a supplemental report from Mr. Vance (doc. 104, “Supplemental GAL Report”). For reasons stated in the Court's order of August 26, 2019, the Court required the supplemental report to address several factual issues. Doc. 101. In the same order, the Court set a deadline for an amended motion to approve settlement. The deadline passed on September 10, 2019 without any party filing an amended motion. Accordingly, the motion is now ripe for resolution.

         The Ponce Plaintiffs[1] and the settling Defendants[2] jointly filed the Motion. Doc. 97, pp. 1-2. The deadline for any response to the Motion has passed without the Court receiving any opposition from the Garcia Plaintiffs[3] or the non-settling Defendant Ramon Fabelo.

         I. Legal Framework

         Under New Mexico law, a federal court sitting in diversity must review the fairness of a settlement for any minor or incapacitated litigants because New Mexico has no statutes or rules requiring the state's probate courts to review settlements for minor or incapacitated litigants. See, e.g., Mares-Moreno v. Singh, 278 F.Supp.3d 1223, 1236-42 (D.N.M. 2017). Therefore, “[t]he general rule is that the court must give approval to a settlement when minor children are involved. The court ‘has a special obligation to see that [children] are properly represented, not only by their own representatives, but also by the court it[]self.'” Landavazo v. Hearne, No. 03-1184, 2004 WL 7338237, at *1, n.2 (D.N.M. Feb. 18, 2004) (quoting Garcia v. Middle Rio Grande Conservancy Dist., 99 N.M. 802, 808, 664 P.2d 1000, 1006 (Ct. App. 1983), overruled on other grounds by Montoya v. AKAL Sec., Inc., 114N.M. 354, 357, 838 P.2d 971, 974 (1992)). See also Salas v. Brigham, No. 08-1184, 2010 WL 11601205 (D.N.M. Dec. 22, 2010). The New Mexico federal district court locates this duty in both state substantive law and Federal Rule of Civil Procedure 17(c)(2).

         “A court is required to reject a settlement when it is presented to the court for approval and the information before the court indicates that the settlement is not fair to the minor or incapacitated person.” Salas, 2010 WL 11601205, at *2. “The Court's role is not to review the adequacy of the performance of the minor's attorney in reaching the agreement. Rather, it is reviewing the fairness of the agreement itself.” Mares-Moreno, 278 F.Supp.3d at 1241 (internal quotation marks omitted).

         The Court will review the GAL's recommendation and determine the proposed settlement's fairness to Izaiah under New Mexico common law. Landavazo, Salas and Mares-Moreno and other New Mexico cases rely heavily on the recommendations of the GAL but nonetheless review proposed settlements in detail to determine if they are fair to the minor or incapacitated person. These opinions address for instance the terms of the settlement agreement, the claims and the risks of trial, the apportionment of total settlement funds among the plaintiffs, the reasonableness of attorneys' fees to be deducted from the settlement pool, the reasonableness of costs and sales taxes to be deducted, the testimony of the minor or incapacitated person's guardian or parent with responsibility under a trust agreement, and whether the terms of a trust (if one is proposed) are sufficiently protective and yet flexible enough to properly benefit the minor or incapacitated person.

         II. Analysis of Proposed Settlement for Izaiah Ponce A. Overall Settlement and Allocation Between Ponce Plaintiffs and Garcia Plaintiffs

         In this case, the GAL Report explains the overall settlement between the Ponce Plaintiffs, Garcia Plaintiffs, and Settling Defendants. The overall settlement provides for a combined total of $4, 825, 000. Of that amount, 65% is allocated to Ponce Plaintiffs and 35% to Garcia Plaintiffs. Doc. 95. The Supplemental GAL Report explains the division of funds between the Ponce Plaintiffs and Garcia Plaintiffs which was arrived at in a mediated agreement. Doc. 104-1 (Ex. 7). In this agreement, the two sets of Plaintiffs agree to a division of all settlement funds and common costs of the litigation, 65% to Ponce Plaintiffs, 35% to Garcia Plaintiffs. The Plaintiffs agreed to this division based on the economic damages analysis of M. Brian McDonald, Ph.D. (doc. 104-2, Ex. 8, doc. 104-3, Ex. 9). The two sets of plaintiffs also took into account the risks of pursuing the litigation through trial. The GAL found this division of the overall settlement to be fair and reasonable.

         For the amount allocated to Ponce Plaintiffs ($3, 135, 250), the GAL Report reflects 33.33% of that amount will go to their counsel for attorney fees ($1, 045, 312), $55, 195 for reimbursable costs (after deducting from total costs $90, 080 the common costs of $18, 327 and waived costs of $16, 557), and $16, 463 for New Mexico gross receipts taxes. In addition, another $30, 028 will be “held in trust” for a potential claim for workers compensation reimbursement.

         B. Attorney Fees, Costs and Potential Workers Compensation Subrogation Withheld from Ponce Plaintiffs' Settlement Funds

         Regarding the attorneys' fees to Ponce Plaintiffs' counsel, the Supplemental GAL Report notes “the contingency fee agreement in this case was in writing and clearly expressed the method by which the fee was to be determined.” Doc. 104, p. 10; Doc. 104-11 (Ex. 17, fee agreement). The GAL notes under New Mexico law contingency fee agreements are generally enforceable so long as they are in writing, signed by the client, and state the method by which the fee is to be determined, including several details that the GAL notes were contained in the Ponce Plaintiffs' agreement with counsel. Id. The GAL further notes that Angelina Ponce, who reached the age of majority while this case was pending, signed a codicil regarding this contract. Doc. 104, p. 10; Doc. 104-12 (Ex. 18). The GAL finds the attorney fees to Ponce Plaintiffs' counsel are reasonable in this case and customary in New Mexico.

         The GAL refers to as a “potential” claim the Ponce Plaintiffs' lawyers may bring against a workers compensation insurer. “FCHC [Counsel for the Ponce Plaintiffs] also reports that they do not have any type of resolution of the potential claim for reimbursement by the workers' compensation carrier. However, FCHC is showing the total potential reimbursement to be held in trust until final resolution.” Doc. 95. The GAL's summary of the settlement disbursal then deducts from the funds to Ms. Dominguez, ...

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