DeSenne v. Jamestown

• Court: Court of Appeals for the First Circuit
• Decided: July 6, 1992
• Docket: 91-2325
• Status: Published

Opinion

USCA1 Opinion

July 6, 1992             ____________________

        No. 91-2325

                                GLENDA CAROLE DESENNE,

                                Plaintiff, Appellant,

                                          v.

                              JAMESTOWN BOAT YARD, INC.,

                                 Defendant, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

[Hon. Raymond J. Pettine, Senior U.S. District Judge]
                                          __________________________

                                 ____________________

                                        Before

                      Aldrich and Coffin, Senior Circuit Judges,
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                             and Young,* District Judge.
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                                 ____________________

            Susan M. Carlin for appellant.
            _______________
            Amy Beretta with whom A. Lauriston  Parks, Hanson, Curran, Parks &
            ___________           ___________________  _______________________
        Whitman, and Standard, Weisberg, Heckerling & Rosow, PC, were on brief
        _______      __________________________________________
        for appellee.

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____________________

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        *Of the District Of Massachusetts, sitting by designation.

COFFIN, Senior  Circuit Judge.   Plaintiff  DeSenne suffered
                       _____________________

          serious injury when the boat on which she served as a crew member

          sank at sea.   She filed this diversity action  against Jamestown

          Boat  Yard,  Inc. (Jamestown)  alleging  that  its negligence  in

          making repairs  caused  her injuries.    Prior to  this  lawsuit,

          plaintiff settled her claims with the vessel's owners and insurer

          and  gave a  release of all  her rights.   The  appeal raises two

          questions:  was  the release  champertous  and  void under  Rhode

          Island  law? and,  if  not, should  the  release nevertheless  be

          reformed  so as to convey  plaintiff's rights only  to the extent

          necessary to reimburse the boat's  owners and insurers for monies

          paid to her?   The district court answered "No"  to both, and so,

          after reflection, do we.

                                      The Facts

               On November 7,  1987, the  sailing vessel "Isle"  sank in  a

          fierce  storm in the Atlantic  en route from  Point Judith, Rhode

          Island to the Azores.  Plaintiff, on board as  both passenger and

          crew, suffered  abrasions, a  concussion, injuries to  her teeth,

          jaw, and toe,  enduring pain, and the loss of  wages and property

          including navigation  equipment.    An  insurance  adjuster,  one

          Amato,  represented the  Isle's  owners, the  Beisers, and  their

          insurers.  He maintained contact with plaintiff for nearly a year

          and a half,  took care of her medical bills, paid for her loss of

          personal  property,  agreed  to  pay  for  dental  work  and  for

          treatment at a pain management clinic, and finally, on August 16,

          1989, obtained a release from her.

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When  plaintiff executed  the release,  Amato presented  her

          with a check  for $20,000.   In addition,  further medical  bills

          (for dental work and pain management) were guaranteed up to a cap

          of $7,500.  Six thousand dollars had been paid for property loss.

          The  release, an eclectic  borrowing from other  forms devised by

          Amato for his standard  use, ran to the owners  and underwriters,

          and  to the Isle itself.  It  would be difficult to contemplate a

          document with  a broader  reach.   It began  by reciting  that in

          consideration of the sum of $20,000 the releasees were discharged

          of all actions, including those under four specific statutes, but

          extending to causes of action under all pertinent laws, state and

          federal.   It  encompassed  all remedies attributable  to some 46

          specified  mental and physical injuries  and ailments.  It stated

          that  "all of my possible  rights" under all  "possible laws" had

          been explained to plaintiff,  and that she fully understood  that

          her  disabilities  might increase  or that  they might  have been

          misdiagnosed.   It  concluded by  stating  that, in  addition  to

          "giving  up every  right" to  releasees, plaintiff  assigned "all

          rights . . .  to any and all .  . . causes of action  [present or

          future]," empowered  releasees "to make  claim, file suit  and to

          take all other  legal action  necessary with the  same force  and

          effect as [plaintiff]," and assigned "the express  right . . . to

          reassign, release or  dismiss with prejudice any .  . . causes of

          action" connected with the accident.

               One week after plaintiff  executed this release, Amato wrote

          his  superiors, noting that  plaintiff might be  the Beisers' and

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their insurers'  "best witness in the  recovery against Jamestown

          Boatyard," and explaining, "in  approaching settlement, I did not

          want  to cause  any  negative feelings  which might  alter future

          cooperation."   He then  referred to plaintiff's  suffering "pain

          that  will  be a  permanent  part  of  her  life," and  his  side

          agreement to  pay an additional  amount of $7,500  for subsequent

          medical expenses  "[t]o make her comfortable  with a settlement."

          He also  noted a significant wage loss as a factor in the $20,000

          settlement  amount.  He concluded,  "I had her  execute a Release

          which  covers Jones Act status and assigns all rights of recovery

          to underwriters.   As I  understand from the  facts uncovered  to

          date, our chances for recovery are excellent."

               In his deposition  testimony, Amato stated that he felt that

          the  release was solely to protect the Beisers and their insurers

          against suit by plaintiff.  The money paid plaintiff was for lost

          wages,  loss of  personal  property, pain  and medical  expenses.

          Although he did not say so to plaintiff, he felt that she had not

          waived any claims against Jamestown.   He could not say  that she

          had read the release but described  her as someone who "would not

          sign a five-page document without reading it."  Plaintiff, in her

          testimony  before  the  court,  said  that,  although  Amato  had

          suggested that she read  the release and then "walked  away," she

          did not read it, being "a very trusting person."  She asked Amato

          if signing the document would prevent her from suing Jamestown at

          some future  date.  Amato  said, "No."   As  of the  date of  the

          release,  she was  "contemplating  looking into"  filing a  claim

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against  Jamestown, but  felt that  she would  not need  a lawyer

          because  it would  be  a "joint  suit"  managed by  the  Beisers'

          insurance company.

               Nine  months earlier, on November  17, 1988, the Beisers had

          filed  suit  against  Jamestown for  the  loss  of  the Isle  and

          personal   injuries  suffered  during  the  sinking  and  rescue.

          Jamestown cross-claimed for money allegedly owed for repair work.

          Nine  months after  the release  was executed,  on May  17, 1990,

          trial  began   and  plaintiff  in  the   instant  case,  DeSenne,

          testified.  On May 23, 1990, the action was settled and dismissed

          with prejudice.  Under the settlement agreement, Jamestown agreed

          to pay the Beisers $300,000 and the Beisers were to pay Jamestown

          $10,472.32, each party giving the other releases of all claims.  

                              Legality of the Assignment

               Jamestown moved to dismiss  the instant action by reason  of

          plaintiff's assignment to the Beisers and the latters' release of

          all claims  as part of the settlement of May 23, 1990.  Plaintiff

          opposed dismissal on  the ground  that the release  she gave  the

          Beisers  was contrary  to Rhode  Island public  policy forbidding

          assignment of  personal injury  causes of action  as champertous.

          The district  court, after  reviewing the pertinent  Rhode Island

          cases, ruled:

               The assignments were made  in furtherance of settlement
               and  were not "the purchasing of personal-injury claims
               by intermeddling volunteers for  their own profit."  As
               there is no  danger of champerty or  maintenance, I see
               no  reason  to allow  Ms.  DeSenne to  evade  the clear
               agreement  she   entered  into   and  thus   upset  the
               settlement the parties have agreed upon.

-5-

Memorandum and Order, April 24, 1991, at 6 (citation omitted).

               We  are  in  full agreement.    The  doctrine  relied on  by

          plaintiff stems from general language in Tyler v. Superior Court,
                                                   _____    ______________

          30  R.I.  107,  73   A.  467  (1909)  addressing  the   evils  of

          maintenance.1  The court feared "the power  of litigious persons,

          whether rich  or poor, to  harass and annoy others,  if they were

          allowed to purchase claims for pain  and suffering, and prosecute

          them in courts  as assignees." 30 R.I. at 109, 73  A. at 468.  It

          also  observed that  "there  are no  counterbalancing reasons  in

          favor  of such  purchases,  growing  out  of the  convenience  of

          business. .  . ."  Id.   In the case  before us, not  only is the
                             __

          apprehended  evil  absent,  but  the  practical  requirements  of

          facilitating  settlements in  multi-party  litigation  provide  a

          weighty counterbalance.

               As Justice  Kelleher remarked  in Hospital Service  Corp. of
                                                 __________________________

          R.I. v.  Pennsylvania Ins. Co., 101  R.I. 708, 227 A.2d  105, 110
          ____     _____________________

          (1967),  "We have come a long way since the ruling in Tyler . . .
                                                                _____

          ."   Like the district  court, we find a recent dispositive case,

          Etheridge v. Atlantic Mutual Ins. Co., 480 A.2d 1341 (R.I. 1984).
          _________    ________________________

          In  that  case  plaintiff  had been  injured  in  a  motorboating

          accident.  The tortfeasors  were insured by two companies.   One,

          Atlantic,  was a primary insurer, with a policy limit of $50,000.
                              
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          1   The district court,  quoting Black's Law  Dictionary (4th ed.
                                           _______________________
          1968),  defined  maintenance   as  "maintaining,  supporting,  or
          promoting the litigation of another"  and champerty as a "bargain
          by a stranger with a party to a suit, by  which such third person
          undertakes to  carry on the litigation at  his own cost and risk,
          in consideration  of  receiving, if  successful,  a part  of  the
          proceeds or subject sought to be recovered."

                                         -6-

Aetna, an umbrella carrier, covered losses in excess of $300,000,

          and was made a  third party defendant by Atlantic.  Aetna settled

          with the plaintiff, engaging in a structured settlement, agreeing

          to pay plaintiff $10,000  a year for life, with  some medical and

          educational benefits.  Plaintiff agreed to pay Aetna $50,000 plus

          half  of any  additional judgment  obtained from Atlantic  or any

          other  party.   The  tortfeasors assigned  to Aetna  any proceeds

          recovered from Atlantic or another party.  

               As appellee points out, it is clear that Aetna theoretically

          could  have  recovered  more  than  it  paid  out  to  plaintiff.

          Plaintiff's  recovery from  Atlantic and  third parties  may have

          been  enough so  that its  required payment  to Aetna  might have

          exceeded Aetna's payments, particularly if plaintiff did not long

          survive; and the tortfeasors' claims, assigned to Aetna, also may

          have  produced a  return  for Aetna  greater  than its  payments.

          Notwithstanding these possibilities, the Rhode Island court ruled

          that  there was "no element  of wagering or  gambling involved in

          this agreement."  480 A.2d at 1346.   It referred to the frequent

          situation  where an  insured person  finds himself  "the helpless

          victim of  a technical dispute between insurers . .  . ."  Id. at
                                                                     __

          1345.   The court reasoned:

               Under such circumstances, a  company that pays the loss
               and absolves the insured from liability, except for the
               right  to  proceed  against   the  other  carrier,  has
               performed  a function that furthers rather than impedes
               public  policy.    Such  agreements  ought  not  to  be
               rendered void  or impeded by the  simplistic maxim that
               the  common-law assignments  of personal  injury claims
               were unenforceable.

          Id.
          __

                                         -7-

The  Beisers' insurers  were  in precisely  the position  of

          Aetna  in Etheridge and the agreement at issue here furthered the
                    _________

          same public policy.  The insurers did not  meet the definition of

          those  the  Etheridge  court   declared  to  be  prohibited  from
                      _________

          purchasing   personal   injury   claims,   i.e.,   "intermeddling

          volunteers for their own profit," id.  
                                            __

               The  court in Etheridge deemed  it absurd to  apply the rule
                             _________

          against assignment  of personal  injury claims in  a "context  in

          which  it  has  no  meaning,"   id.,  and  thereby  "obstruct  an
                                          __

          appropriate  device" for  facilitating payment  of a  claim while

          preserving a right to  pursue contribution. Id.  That  is, again,
                                                      __

          precisely  the situation  in this  case.   The Beisers  and their

          insurers knew  that,  in  settling with  plaintiff,  so  long  as

          Jamestown was  not involved, there remained  the possibility that

          in a future suit  by plaintiff against Jamestown, they  faced the

          possibility  of a Jamestown claim for contribution.  That this is

          not idle speculation  is revealed in the following  commentary of

          Professors Prosser and Keeton:

                    The effect  of a settlement with  the plaintiff by
               the contribution defendant, who  has received a release
               or  a  covenant not  to  sue,  has perhaps  given  more
               difficulty than  any other problem.   The usual holding
               has been that the defendant so relieved of liability is
               not released  from contribution.   There has  been much
               dissatisfaction with this because it becomes impossible
               for a defendant to settle the case, take a release, and
               close the file, since the potentialliability        for
               contribution is still open.

          W. Keeton,  Prosser and Keeton  on Torts    50, at  340 (5th  ed.
                      ____________________________

          1984) (footnote omitted).

-8-

It  is true that Rhode  Island has a  statute which relieves

          one  settling  tortfeasor  from  liability  for  contribution  to

          another tortfeasor if  a release  is given by  the injured  party

          before  such   other  tortfeasor   has  obtained  the   right  to

          contribution and if the release "provides for a reduction, to the
                       ___

          extent  of the pro rata share  of the released tortfeasor, of the

          injured  person's  damages  recoverable  against  all  the  other

          tortfeasors."  R.I. Gen. Laws    10-6-8.  But this device clearly

          was  less attractive to the  Beisers and their  insurers than the

          all-purpose release they secured.

               This, then, was the  situation.  During the suit  brought by

          the   Beisers  against   Jamestown,   the  plaintiff   testified.

          Undoubtedly her testimony  related in substantial part to her own

          losses and injuries, for which she had received compensation from

          the  Beisers   and  their   insurers.    The   Beisers  possessed

          plaintiff's release, giving them specific authority to release or

          dismiss  with prejudice all causes  of action arising  out of the

          sinking of the Isle.   Jamestown therefore was in a  position, by

          settling with the  Beisers, to foreclose  the possibility of  any

          additional  lawsuits  --   and,  accordingly,  made   payment  of

          $300,000.    Now,  over  two  years  later,  plaintiff  seeks  to

          unscramble what has not only been scrambled but digested.  

               It  may be that plaintiff  would have been  better served by

          filing   claims  contemporaneously   against   the  Beisers   and

          Jamestown,  but there is no  issue of overreaching  in this case.

          Nor  is this a  case where an  assignee paid for  only a discrete

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segment  of  a  putative   plaintiff's  claims  and  received  an

          assignment  of  all  claims; here,  plaintiff  received  payments

          covering all  facets of her  losses and injuries,  including pain

          and suffering.  And  there is nothing in this  record to indicate

          that  the  Beisers or  their insurers  received  a windfall.   We

          therefore  hold  that  the district  court  did  not  err in  its

          original ruling, dismissing plaintiff's suit.

                              Reformation of the Release

               After dismissal of her action  plaintiff moved under Fed. R.

          Civ.  P. 59(e) to reconsider  the ruling, again  referring to the

          legality  of  the  assignment,  but adding  the  allegation  that

          insurance  agent Amato  had  induced her  to execute  the release

          through  false representations.    The district  court granted  a

          hearing  solely to  hear evidence  and arguments  concerning that

          issue.   After observing that  the matters raised  in the hearing

          inexplicably  had  not been  raised  earlier,  it concluded  that

          plaintiff  had not been misled,  having been advised  by Amato to

          seek legal advice.  The  court also rejected a new  argument made

          at  the  hearing  in  which  plaintiff  sought,  based  on mutual

          mistake, to have the  release reformed to assign her  claims only

          up to  the amount the  Beisers had paid.   The court  ruled that,

          "[i]f there is any merit to this argument it is  not addressed by

          the present action, since the Beisers are not the defendants."

               In  reviewing the  district court's  decision on  this post-

          judgment  motion  under Rule  59(e), we  look  only for  abuse of

          discretion.  United States v.  Land at 5 Bell Rock Rd.,  896 F.2d
                       _____________     _______________________

-10-

605, 611 (1st Cir. 1990).  Clearly there was no abuse.  The court

          leaned over backward in granting a hearing on an issue that could

          have  been  raised  earlier.    When  this  issue evaporated,  it

          patiently considered the contention that both plaintiff and Amato

          had  intended  that  the  release not  foreclose  her  from suing

          Jamestown.   Even though  the written evidence  strongly suggests

          that  Amato  sought  to  secure  for   his  client  all  possible

          protection,  it  credited  both   plaintiff  and  Amato  with  so

          intending.  

               What plaintiff seeks is most singular.  In a suit against B,

          she wishes to  restructure a  contract she entered  into with  A.

          Were  this to be allowed,  an insurance adjuster  could serve his

          client  to the  maximum, and  then come  into court  and  say, "I

          didn't mean what I drafted."  In this  case, such testimony would

          open the  door both to  a lawsuit Jamestown  had paid heavily  to

          avoid and to  a substantial  claim for  contribution against  the

          Beisers  and their insurers which  they in turn  thought they had

          foreclosed by a substantial settlement.   Plaintiff has not cited

          any  persuasive authority  allowing contracts  to be  reformed in

          this  manner.   Such  authorities as  McInnis v.  Harley-Davidson
                                                _______     _______________

          Motor Co.,  625 F.  Supp. 943,  948-49 (D.R.I.  1986),   City  of
          _________                                                ________

          Cleveland v.  Cleveland Electric  Illuminating Co., 538  F. Supp.
          _________     ____________________________________

          1287, 1289 (N.D. Ohio,  E.D. 1980), and Cram v.  Northbridge, 410
                                                  ____     ___________

          Mass.  800, 803,  575  N.E.2d  747  (1991),  all  deal  with  the

          substantive question of how  to interpret a release secured  by a

          single tortfeasor  that purports  "to acquit her  and `all  other

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persons, firms or corporations,'" McInnis, 625 F. Supp. at  948.2
                                            _______

          We have found no instances of contract reformation in the absence

          of one party to the contract.

               Plaintiff argues in her brief, "Boat Yard was not a party to

          the  Release in question, nor an intended beneficiary, nor has it

          changed its  position in  reliance on  the  Release.   Therefore,

          reformation  is in order."  This reveals both an unrealistic view

          of  the facts and  a simplistic  view of the  law.  For  there is

          every  reason to  believe that  Jamestown, in  making payment  of

          $300,000,  did  rely  on  the comprehensiveness  of  the  release

          obtained from the Beisers.   And reformation of contracts  is not

          so easily  "in order"  when the party  against whom  it is  being

          reformed  is not present.   See  generally 3 A. Corbin, Corbin on
                                      ______________              _________

          Contracts    598,  at  588;     614,  615 (1960)  (discussion  of
          _________

          reformation  solely  within  context of  litigation  between  the

          parties to a document).

                We see no abuse of discretion.

               AFFIRMED.
               ________

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          2  Judge Selya in  McInnis noted three  possible constructions of
                             _______
          such  a  broad  discharge:  (1)  that  a  party  is  barred  from
          proceeding against all  tortfeasors, whether  or not  identified;
          (2)  that a party is  barred only from  proceeding against others
          either named in the release or identifiable from  the face of the
          document;  and (3)  that  the discharge  releases those  persons,
          named or not, whom the parties intended to release.  625 F. Supp.
          at 948-49.

                                         -12-