Jay Merrill, V Pemco Mutual Insurance Company

• Court: Court of Appeals of Washington
• Decided: May 1, 2017
• Docket: 75637-1
• Status: Unpublished

Opinion

FILED COURT OF APPEALS DIV I 011 STATE OF WASHINGT

2011 - 1 AM 9:36

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

JAY MERRILL, individually and as the ) No. 75637-1-1 representative of all persons ) similarly situated, ) ) Appellant, ) ) DIVISION ONE v. ) ) PEMCO MUTUAL INSURANCE ) COMPANY and PEMCO INSURANCE ) COMPANY, ) ) UNPUBLISHED OPINION Respondents. ) ) FILED: May 1, 2017

MANN, J. — This case involves the interpretation of a settlement agreement

(settlement) reached between members of a certified class of PEMCO Insureds (class)

and PEMCO Mutual Insurance Company. Jay Merrill, on behalf of the class, appeals

the trial court's decision to incorporate an updated class list into the settlement for the

purposes of calculating the "total repair cost payments of the class." The settlement

defined the class list to be "the revised class notice list furnished to Class Counsel by

the Defendants on March 31, 2015." However, both parties contemplated, and

subsequently approved, adding additional claimants to the class list. We affirm the trial

court's decision holding that the revised class list applies throughout the settlement. No. 75637-1-1/2

On April 15, 2015, the trial court ordered the preliminarily approval of a stipulation

of settlement between PEMCO and the class. The settlement required PEMCO to pay

$15 million into a common settlement fund. Class members could then submit a claim

to receive a pro rata share of the common settlement fund. The settlement provided for

the creation of a "class list" that contained:(1) a list of all "class members,"(2) the

"individual class member repair cost payments"(the amount each class member

actually paid for repair costs), and (3) the "total repair cost payments"(the sum of all of

the individual repair costs). The settlement set up a payment formula designed to

ensure that each class member would be entitled to a pro rata share of the $15 million

common settlement fund after subtraction of attorney fees and expenses. Paragraph

44.2 of the settlementl contains the payment formula2 and may be expressed as

follows:

(Individual Class Member Repair Cost Payment) (15 mm - $ 4.572 mm)x Total Repair Cost Payments

1 Paragraph 44.2 Provides:

44. Payment to eligible Class Members ("Settlement Payment") shall be calculated as follows:

(2) Each Class Member who has submitted a timely Valid Claim Form and who is eligible for payment shall receive payment from Defendants to be calculated as follows:

($15,000,000.00— attorney's fees and costs awarded to Class Counsel pursuant to Paragraph 56 and Class Representatives Service fees pursuant to paragraph 45)x (Individual Class Member Repair Cost Payment divided by the Total Repair Cost Payments).

2 The first bracket, $15 mm — $4.572 mm, represents the common settlement fund ($15 mm) less attorney's fees and expenses($ 4,572 mm). This number is multiplied by the fraction representing each individual member repair cost payment(the numerator) divided by the total repair costs (the denominator). -2- No. 75637-1-1/3

The following provisions of the settlement are significant to its construction:

9: "Class List" means the revised class notice list furnished to Class Counsel by the Defendants on March 31, 2015.

11: "Class Period" means the period from October 8, 2007 to March 31, 2015, inclusive. • • 44.1: Defendants will use the total amount of payments under the Collision and/or Comprehensive and/or UIM PD coverages as shown on the Class List (excluding payments to Opt Outs) as the "Total Repair Cost Payments." That amount will be the total repair costs shown for any member of the class who submits a valid exclusion request. The individual amounts listed as having been paid for each Class Member on that list shall be considered the "Individual Class Member Repair Cost Payment."

51: As soon as practicable after the Preliminary Approval of this Settlement the Claims Administrator shall have sent a copy of the Individual Notice and a Claim Form, by first-class mail, to each Person on the Class List.

83: The exhibits to this Stipulation are an integral part of the Settlement and are hereby incorporated into and made a part of this Stipulation.3

Exhibit C to the settlement provides:

The Individual Notice shall be mailed per the Stipulation of Settlement using the Class List provided to Class Counsel on March 31, 2015 or as updated by Defendants.[4]

In February 2015, before reaching settlement, class counsel estimated that the

class size was 17,607. When the parties agreed to the common settlement fund of $15

million, they did not have the March 31, 2015, class list. The class list PEMCO provided

on March 31, 2015, included 17,050 class members and a total repair cost payment for

those 17,050 class members of $59,132,793.10. The class list sent by PEMCO to class

3(Emphasis added.) 4(Emphasis added.)

-3- No. 75637-1-1/4

counsel on March 31, 2015, was not final. As PEMCO's counsel explained: "Here is an

updated list through the end of February." Because under the settlement, the "class

period" extended to March 31, 2015, PEMCO's counsel informed the class counsel that

PEMCO would send a revised class list as soon as the March data was gathered.

In the order granting preliminary approval of the Settlement, the trial court

directed that "the Individual Notice shall be mailed per the Stipulation of Settlement

using the Class List provided to Class Counsel on March 31, 2015 or as updated by

Defendants."5 At this time, both parties understood that more class members would be

added to the list provided on March 31, 2015. Indeed, while class counsel believed the

number of additions would be smaller, counsel conceded to the trial court that the

original list was missing a month of claims and both parties contemplated the class list

would be supplemented.6

On April 22, 2015, PEMCO e-mailed the class counsel a revised class list that

included 17,873 class members. After class counsel conducted confirmatory discovery

on the new list, that number was reduced to 17,863 class members. Class counsel

approved the new list of 17,863 class members on May 19, 2015. As a result of the

5(Emphasis added.) 6 As class counsel explained: This order, which was [Exhibit] C to the settlement and is incorporated in the settlement which you signed, the preliminary approval order, was changed for this case and it reads,"The individual notice shall be mailed per the stipulation of settlement using the class list provided to class counsel on March 31, 2015, or as updated by the defendants." So there's no doubt, your Honor, that both parties contemplated that the settlement documents themselves were changed to reflect the fact that who's in the class for purposes of the notice and for purposes of class membership might change, in fact, would change after March 31st, 2015. Mr. Phillips[PEMCO's Counsel] is absolutely correct in the sense that he told us, and his e-mail said, that when he gave us the original list on March 31st, he said this is missing a month of claims, but as he also doesn't dispute, and this is before we signed the settlement, Your Honor, the claims that were anticipated were a month of UIM claims, which would have been about 60 claims.

-4- No. 75637-1-1/5

increased number of class members the sum of the repair costs for the 17,863 class

members amounted to a total repair cost payment of $60,040,671.19. On June 20,

2015, PEMCO mailed notices to all class members on the revised class list.

On September 23, 2015, the trial court entered the "Final Judgment and Order

Approving the Settlement and Dismissing Claims of Class Members with Prejudice." On

October 2, 2015, PEMCO informed class counsel that they sent an additional notice to

1,395 existing class members that had two valid claims within the class period. This

increase meant there was a total of 19,258 individual class member repair cost

payments and a total repair cost payment of $64,577,010.19.

After the addition of the new class members to the class list, PEMCO filed a

motion with the trial court to determine the proper calculation for payment to eligible

class members. PEMCO argued that the settlement should add the new class

members' individual class member repair cost payments to the total repair cost payment

amount. Under PEMCO's position, because the denominator (total repair cost

payment) in the payment formula would increase each class member would receive

slightly smaller payments.

Merrill, representing the class, opposed the motion. While Merrill agreed that the

claimants added after March 31, 2015, should be compensated, Merrill's position was

that the payment formula denominator (total repair cost payment) should be frozen at

$59,132,793.10—the amount identified in the original March 31, 2015, class list. Merrill

argued that if both the number of class members total repair cost were increased, the

result would be decrease in the amount received by each individual class member from

-5- No. 75637-1-1/6

$610.99 to $559.42. Merrill contends that the settlement was not ambiguous and

therefore the court should not reinterpret or modify the terms.

The trial court ruled in favor of PEMCO stating:

I think I agree on this with Mr. Phillips[PEMCO's Counsel]. It makes more sense if you're going to increase the numerator, which I think is good, more claims, more individuals get paid. They will get paid somewhat less, but it only makes sense to increase the denominator also.

The trial court ordered, "Individual payments will be calculated in accordance with the

final Class List used in sending Initial and Supplemental Notice to the class, and based

on Total Repair Cost Payments of $64,523,387.26."

Merrill, on behalf of the class, appeals.

II

Merrill argues that the trial court erred in interpreting the settlement to allow the

addition of new class members that were not identified in the original March 31, 2015,

list. We disagree.

We review the interpretation of a settlement agreement de novo. Aguirre v.

AT&T Wireless Servs., 118 Wn. App. 236, 240, 75 P.3d 603(2003); Tyrrell v. Farmers

Ins. Co. of Wash., 140 Wn.2d 129, 132-33, 994 P.2d 833(2000).

The principles of the law of contracts apply to the review of settlement

agreements. In re Estate of Harford, 86 Wn. App. 259, 262, 936 P.2d 48 (1997).

Washington follows the objective manifestation theory of contracts. "Under this

approach, we attempt to determine the parties' intent by focusing on the objective

manifestations of the agreement, rather than on unexpressed subjective intent of the

parties." Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 503, 115 P.3d

-6- No. 75637-1-1/7

262(2005). "We generally give words in a contract their ordinary, usual, and popular

meaning unless the entirety of the agreement clearly demonstrates a contrary intent."

Hearst, 154 Wn.2d at 504. "And we view the contract as a whole, interpreting particular

language in the context of other contract provisions." Viking Bank v. Firgrove Commons

3 LLC, 183 Wn. App. 706, 713, 334 P.3d 116 (2014). If the language is clear and

unambiguous, we "must enforce it as written and may not modify it or create ambiguity

where none exists." Black v. Nat'l Merit Ins. Co., 154 Wn. App. 674, 679, 226 P.3d 175

(2010). Generally, "In the absence of anything in the context of a contract clearly

indicating a contrary intent, when the same word is used in different parts of the

contract, it will be presumed to be used in the same sense throughout the contract."

Black, 154 Wn. App. at 681-82.

Merrill is correct that the term "class list" is defined in paragraph 9 of the

settlement as meaning "the revised class notice list furnished to Class Counsel by the

Defendants on March 31, 2015." Thus, viewed in isolation, the term class list is

unambiguous. But because the term class list is used in multiple places in the

settlement, we must examine the context of the settlement as a whole and presume that

the term class list is used in the same sense throughout. Black, 154 Wn. App. at 681-

82.

The term "class list" is used in paragraph 44.1 of the settlement to determine

both the "Total Repair Cost Payments"(the denominator in the payment formula) and to

identify "Individual Class Member Repair Cost Payment[s]"(the numerator in the

payment formula). Merrill argues that the denominator ("Total Repair Cost Payments")

is defined by reference to the class list. But Merrill ignores that the numerator

-7- No. 75637-1-1/8

("Individual Member Repair Cost Payment") is also defined by reference to the same

class list. Thus, if Merrill is correct that the class list was final on March 31, 2015, then it

necessarily means that both the number of class members and the total repair cost

payments must be held constant—at the amounts supported by the original March 31,

2015, class list. This interpretation would necessarily lead to the exclusion of 813

otherwise valid class members identified after March 31, 2015. Indeed, when asked by

the trial court if those 813 people should be excluded, Merrill responded "no." Exclusion

of otherwise valid class members would be detrimental to the class and contrary to the

intent the objective manifestations of the agreement. Hearst, 154 Wn.2d at 503.

Thus, we agree with the trial court that when viewed as a whole, the settlement

contemplated that the class list would be updated to ensure that it captured all claims

filed by March 31, 2017. The settlement specifically incorporates Exhibit C which

provides that the "class list" would be revised "as updated by Defendants" so that no

claims would be artificially excluded. The trial court recognized this in its preliminary

approval and directed that "the Individual Notice shall be mailed per the Stipulation of

Settlement using the Class List provided to Class Counsel on March 31, 2015 or as

updated by Defendants."7 The Class List "updated by Defendants" was then used to

send the class notice.

Because the trial court and parties agreed that the class list should be updated

for the purpose of notice, it is only logical that it would also be updated for the purpose

of determining the number of class members and for determining the total repair cost

7(Emphasis added.)

-8- No. 75637-1-1/9

payments in the payment formula denominator. This result is consistent with the intent

and the objective manifestations of the agreement. Hearst, 154 Wn.2d at 503.

We affirm.

WE CONCUR:

e.‘

-9- ,