First American Title Insurance Company v. Allen-Cook et al

Filing 47

REPORT AND RECOMMENDATION Recommending to grant 30 Motion for Determination. FURTHER RECOMMENDED that the claims against Defendants J. Scott MacDonald and MacDonald & Associates, Ltd. be dismissed with prejudice. Objections to R&R due by 9/11/2017. Signed by Magistrate Judge Carl W. Hoffman on 8/28/2017. (Copies have been distributed pursuant to the NEF - JM)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 7 8 9 10 11 12 FIRST AMERICAN TITLE INSURANCE ) COMPANY, ) ) Plaintiff, ) ) vs. ) ) LORI ALLEN-COOK, et al., ) ) Defendants. ) ____________________________________) Case No. 2:16-cv-01272-GMN-CWH REPORT AND RECOMMENDATION 13 Presently before the court is Defendants J. Scott MacDonald (“MacDonald”) and 14 MacDonald & Associates, Ltd.’s (“M&A”) Motion for Determination of Good Faith Settlement 15 (ECF No. 30), filed on February 27, 2017. The court ordered supplemental briefing on this motion, 16 which was filed on March 23, 2017. (Order (ECF No. 32); Supp. Briefing (ECF Nos. 33, 34).) 17 Plaintiff First American Title Insurance Company (“First American”) does not oppose the motion. 18 (Notice of Non-Opp’n (ECF No. 31).)1 19 The parties are familiar with the facts of the case and the court will repeat them only as 20 necessary.2 This cases arises out of a real estate transaction involving property located at 5302 21 Mountain Foliage Drive in Las Vegas, Nevada. The property, which was encumbered by two deeds 22 of trust, was purchased in a short sale transaction in 2013. Title to the property was transferred to 23 the buyer although the banks holding the deeds of trust were not paid. The property was sold again 24 in late 2013. The bank holding the first deed of trust subsequently began foreclosure proceedings. 25 26 27 1 After the motion for determination of good-faith settlement was fully briefed, non-party Fidelity National Title Insurance Company moved to intervene (ECF No. 36) in this case. The court will enter a separate order on Fidelity’s motion to intervene. 28 2 These facts are drawn from the complaint (ECF No. 1) and Defendants’ supplemental briefing (ECF Nos. 33, 34) in support of their motion for determination of good faith settlement. 1 First American, which issued a title insurance policy in connection with the second sale, ultimately 2 paid a title insurance claim related to the outstanding encumbrances. First American subsequently 3 brought this case alleging subrogation claims based on theories of negligence, among others, 4 against M&A, MacDonald,3 Lori Allen-Cook,4 Spencer Judd, MacDonald & Judd, Ltd., and 5 Nevada Short Sale Services, LLC,5 who were involved in the short sale transaction. 6 This is not the only case against MacDonald and M&A related to short-sale activities. 7 Wells Fargo sued MacDonald, M&A, and Ms. Allen-Cook in a separate state court case. The state 8 court case was jointly mediated with this case with a private mediator, resulting in a combined 9 settlement that implicates the policy limits of M&A’s applicable insurance policy. MacDonald and 10 M&A now seek a determination that their settlement with First American in this case is made in 11 good faith under Nevada Revised Statutes § 17.245(1)(b) and in satisfaction of the factors set forth 12 in In re MGM Grand Hotel Fire Litigation, 570 F. Supp. 913 (D. Nev. 1983). 13 Section 17.245 states in relevant part: 14 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: ... (b) It discharges the tortfeasor to whom it is given from all liability for contribution and for equitable indemnity to any other tortfeasor. 15 16 17 18 Nev. Rev. Stat. § 17.245(1). Equitable indemnity is “a right of indemnity that is created by the 19 court rather than expressly provided for in a written agreement.” Id. at § 17.245(2). The purpose 20 of the statute is “to encourage settlements by discharging all liability for contribution by a settling 21 22 3 23 24 25 26 27 28 M&A is a law firm that performed services in connection with real estate short sales. MacDonald is an attorney. 4 Defendant Lori Allen-Cook’s answer (ECF No. 15) was stricken. (Mins. of Proceedings (ECF No. 26).) Ms. Allen-Cook filed a notice of bankruptcy. (Notice (ECF No. 20).) The claims against Ms. Allen-Cook were not settled at the mediation. (Mot. for Determination of Good-Faith Settlement (ECF No. 30) at 2.) 5 Defendants Spencer Judd, MacDonald & Judd, Ltd., and Nevada Short Sale Services, LLC have not appeared in this case. 2 1 tortfeasor to others upon a finding that the settlement was entered in ‘good faith.’” In re MGM 2 Grand Hotel Fire Litig., 570 F. Supp. 913, 926-27 (D. Nev. 1983). The statute also protects non- 3 settling defendants “because the non-settling defendant receives a credit in the amount contributed 4 by the settling defendant in any subsequent verdict against that defendant.” Id. at 927; Nev. Rev. 5 Stat. § 17.245(1). 6 It is within the court’s discretion “to consider the fairness and overall appropriateness of the 7 proposed settlement” under § 17.245. Duk v. MGM Grand Hotel, Inc., 320 F.3d 1052, 1060 (9th 8 Cir. 2003). Factors to be considered by the court in making this assessment include “the amount 9 paid in settlement, the allocation of the settlement proceeds among plaintiffs, the insurance policy 10 limits of settling defendants, the financial condition of settling defendants, and the existence of 11 collusion, fraud or tortious conduct aimed to injure the interests of non-settling defendants.” Otak 12 Nevada, LLC v. Eighth Jud. Dist. Ct., 312 P.3d 491, 496 (Nev. 2013); In re MGM Grand Hotel 13 Fire Litig., 570 F. Supp. at 927. 14 Having reviewed and considered the parties’ arguments, and weighing the In re MGM 15 Grand Hotel Fire Litigation factors, the court in its discretion makes the following findings and 16 recommendations: 17 1. The amount paid (which the court has reviewed in camera) in settlement of all claims 18 asserted by First American in this case, except for the claims against Ms. Allen-Cook, is more than 19 half of the amount claimed by First American. This is a case where M&A has denied all 20 allegations of wrongdoing. 21 22 2. First American is the only plaintiff in this case, and the entire amount is being paid to First American. 23 3. The court has reviewed, in camera, M&A’s insurance policy limits. Significantly, the 24 insurance policy is a “burning limits” policy, meaning that defense costs erode the policy limits. 25 Between the state court case and this case being settled, the vast majority of the policy 26 limits are being paid towards the plaintiffs. 27 28 4. As to the financial condition of the settling defendants, the court has been informed that M&A is not a publically traded company, is not a “deep pockets” defendant, and that it was 3 1 foreseeable that if plaintiffs prevailed in their respective federal and state court cases, any eventual 2 judgment would be uncollectible as to M&A. 3 5. The court finds no evidence of collusion, fraud, or tortious conduct aimed to injure the 4 interests of the non-settling defendant, Ms. Allen-Cook, who has filed a notice of bankruptcy. The 5 negotiations were at arm’s-length. First American’s attorney zealously advocated on its behalf. 6 The settlement amount was significant. Negotiations were facilitated by retired Judge Jackie Glass. 7 Nothing appears to have been done to injure the interests of a non-settling defendant. Rather, it 8 appears that M&A was attempting to protect itself. 9 10 6. The court finds that the settlement is fair. A majority of the policy limits are being paid to First American on disputed claims. 11 IT IS THEREFORE RECOMMENDED that Defendants J. Scott MacDonald and 12 MacDonald & Associates, Ltd.’s Motion for Determination of Good Faith Settlement (ECF No. 30) 13 be GRANTED, thereby affording those parties the protection of Nevada Revised Statute 17.245, 14 including but not limited to, dismissal of any claims for equitable indemnity and contribution in 15 this matter. 16 17 IT IS FURTHER RECOMMENDED that the claims against Defendants J. Scott MacDonald and MacDonald & Associates, Ltd. be dismissed with prejudice. 18 NOTICE 19 This report and recommendation is submitted to the United States district judge assigned to 20 this case under 28 U.S.C. § 636(b)(1). A party who objects to this report and recommendation may 21 file a written objection supported by points and authorities within fourteen days of being served 22 with this report and recommendation. Local Rule IB 3-2(a). Failure to file a timely objection may 23 waive the right to appeal the district court’s order. Martinez v. Ylst, 951 F.2d 1153, 1157 (9th Cir. 24 1991). 25 DATED: August 28, 2017 26 27 28 ______________________________________ C.W. Hoffman, Jr. United States Magistrate Judge 4

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