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First American Title Insurance Co. v. Allen-Cook

United States District Court, D. Nevada

August 28, 2017

FIRST AMERICAN TITLE INSURANCE COMPANY, Plaintiff,
v.
LORI ALLEN-COOK, et al., Defendants.

          REPORT AND RECOMMENDATION

          C.W. Hoffman, Jr., United States Magistrate Judge

         Presently before the court is Defendants J. Scott MacDonald (“MacDonald”) and MacDonald & Associates, Ltd.'s (“M&A”) Motion for Determination of Good Faith Settlement (ECF No. 30), filed on February 27, 2017. The court ordered supplemental briefing on this motion, which was filed on March 23, 2017. (Order (ECF No. 32); Supp. Briefing (ECF Nos. 33, 34).) Plaintiff First American Title Insurance Company (“First American”) does not oppose the motion. (Notice of Non-Opp'n (ECF No. 31).)[1]

         The parties are familiar with the facts of the case and the court will repeat them only as necessary.[2] This cases arises out of a real estate transaction involving property located at 5302 Mountain Foliage Drive in Las Vegas, Nevada. The property, which was encumbered by two deeds of trust, was purchased in a short sale transaction in 2013. Title to the property was transferred to the buyer although the banks holding the deeds of trust were not paid. The property was sold again in late 2013. The bank holding the first deed of trust subsequently began foreclosure proceedings. First American, which issued a title insurance policy in connection with the second sale, ultimately paid a title insurance claim related to the outstanding encumbrances. First American subsequently brought this case alleging subrogation claims based on theories of negligence, among others, against M&A, MacDonald, [3] Lori Allen-Cook, [4] Spencer Judd, MacDonald & Judd, Ltd., and Nevada Short Sale Services, LLC, [5] who were involved in the short sale transaction.

         This is not the only case against MacDonald and M&A related to short-sale activities. Wells Fargo sued MacDonald, M&A, and Ms. Allen-Cook in a separate state court case. The state court case was jointly mediated with this case with a private mediator, resulting in a combined settlement that implicates the policy limits of M&A's applicable insurance policy. MacDonald and M&A now seek a determination that their settlement with First American in this case is made in good faith under Nevada Revised Statutes § 17.245(1)(b) and in satisfaction of the factors set forth in In re MGM Grand Hotel Fire Litigation, 570 F.Supp. 913 (D. Nev. 1983).

         Section 17.245 states in relevant part:

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.

Nev. Rev. Stat. § 17.245(1). Equitable indemnity is “a right of indemnity that is created by the court rather than expressly provided for in a written agreement.” Id. at § 17.245(2). The purpose of the statute is “to encourage settlements by discharging all liability for contribution by a settling tortfeasor to others upon a finding that the settlement was entered in ‘good faith.'” In re MGM Grand Hotel Fire Litig., 570 F.Supp. 913, 926-27 (D. Nev. 1983). The statute also protects non-settling defendants “because the non-settling defendant receives a credit in the amount contributed by the settling defendant in any subsequent verdict against that defendant.” Id. at 927; Nev. Rev. Stat. § 17.245(1).

         It is within the court's discretion “to consider the fairness and overall appropriateness of the proposed settlement” under § 17.245. Duk v. MGM Grand Hotel, Inc., 320 F.3d 1052, 1060 (9th Cir. 2003). Factors to be considered by the court in making this assessment include “the amount paid in settlement, the allocation of the settlement proceeds among plaintiffs, the insurance policy limits of settling defendants, the financial condition of settling defendants, and the existence of collusion, fraud or tortious conduct aimed to injure the interests of non-settling defendants.” Otak Nevada, LLC v. Eighth Jud. Dist. Ct., 312 P.3d 491, 496 (Nev. 2013); In re MGM Grand Hotel Fire Litig., 570 F.Supp. at 927.

         Having reviewed and considered the parties' arguments, and weighing the In re MGM Grand Hotel Fire Litigation factors, the court in its discretion makes the following findings and recommendations:

1. The amount paid (which the court has reviewed in camera) in settlement of all claims asserted by First American in this case, except for the claims against Ms. Allen-Cook, is more than half of the amount claimed by First American. This is a case where M&A has denied all allegations of wrongdoing.
2. First American is the only plaintiff in this case, and the entire amount is being paid to First American.
3. The court has reviewed, in camera, M&A's insurance policy limits. Significantly, the insurance policy is a “burning limits” policy, meaning that defense costs erode the policy limits. Between the state court case and this case being settled, the vast ...

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