Settlement Hearings: A Primer

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Too often settlement hearings, especially those involving minor children are treated by attorneys as routine, ministerial matters. Handling these hearings is often pushed down to the newest attorneys in a law firm. While such hearings are indeed a great opportunity for young attorneys to get into the courtroom, it is a mistake to treat them as routine.

In over 27 years appearing in hundreds of settlement hearings (especially my last 15 years as a settlement planner), I have learned two important lessons: (1) know your judge and (2) be prepared. This is not to suggest forum shopping. But knowing your judge as much as possible can help avoid unexpected problems arising at the hearing.

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In April, I had the privilege of moderating a Judicial Panel on Settlement Hearings at the National Structured Settlement Trade Association’s Annual Meeting in Charleston, SC.

The panelists were North Carolina Superior Court Judges Wayland Sermons, (Judicial District 2), Marvin Blount (3A) and Allen Baddour (15B). The panel was a great success, and the judges and I hope to repeat it for North Carolina judges and attorneys in the coming years.

PREPARATION IS KEY

All three judges would agree that preparation is key. In fact, each stressed that they strongly prefer to see final drafts of settlement documents, including the Release and proposed Order of Approval, several days before the hearing. This is a great opportunity to avoid situations where (1) you may not know the proclivities of hearing judge and (2) then you get to the hearing and find the judge has issues with the settlement details. When structured settlements are involved, this is particularly troublesome because every structure involves a funding deadline to preserve the benefit levels for the minor. Many defendants and liability insurers refuse to issue any settlement checks including the structure funding without a file-stamped Order in hand.

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Once the total settlement amount has been agreed to, the first task is to calculate the amount of attorneys’ fees, litigation costs and expenses, and any and all liens. The remaining amount will presumably be distributed for the benefit of the minor. Then, the client and the attorney must decide whether those funds will be placed in the Clerk of Court’s office, into a structured settlement or a combination of both. Because the judge must determine that the settlement is “in the best interests” of the minor, few if any judges will approve a settlement involving any risk to the funds being held for the minor’s benefit. Thus, most judges will only approve one of these options.

Many judges likewise prefer a structured settlement — especially in larger settlements — because (1) there is a guaranteed rate of return that is almost always far in excess of what is paid by the Clerk and (2) they are wary of paying an entire settlement amount at to a very young adult at age 18. A structure provides the option of spreading out those payments for college and/or getting the young adult started off in life financially. Again, knowing what your judge prefers is helpful to avoiding problems in the middle of a settlement hearing.

BEFORE THE HEARING

The next major task is to get your hearing scheduled. Again, if a structure is involved, this is a critical because of the funding deadline. Let us know if we can help. As with any hearing, maintaining good relationship with the Trial Court Administrator and their staff is highly advisable. TCA’s are a critical lifeline for an attorney in any matter when dealing with the courts. They can be your best friend or your worst enemy. All TCA’s are very protective of their judges and their busy court schedules. Therefore, the TCA staff know if there is a critical funding deadline involved when a structured settlement is used.

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Before you contact the TCA, make sure all necessary parties are available for the hearing, including the structure broker. Unlike many brokers, I attend all of my clients’ settlement hearings. I have found that both my clients and the court my being available to answer unexpected questions about the structure planning. If your broker is unavailable, have an affidavit from the broker ready well before the hearing. “All necessary parties” should include defense counsel, the minor, the child’s parent(s) and the Guardian ad Litem. In rare instances, the court will excuse the minor in exceptional circumstances. But, it is imperative that you contact the TCA well in advance to let the judge know of those reasons and obtain his/her permission to do so.

Many settlements involve a mutually agreed to confidentiality agreement as negotiated by the parties. Do not assume the judge concurs. Many judges will excuse the minor, but again, the attorneys would be well-advised to let the judge know (through the TCA) well in advance. The court will need to accommodate a closed hearing or a hearing in chambers, so they need to know ahead of time. Again, knowing the judge and whether he/she has an issue with confidentiality avoids serious problems on the day of hearing, and an embarrassing issue to be resolved with the clients. The simple fact that the parties agree to confidentiality is not usually sufficient for most judges.

In preparing for the hearing, and after submitting the settlement documents to the court, the attorney should properly prepare his or her clients for the hearing itself. The client should know that, when the court addresses the Guardian ad Litem and/or parents, they need to stand before the court. More importantly, they need to be prepared to respond orally to questions from the bench. The judge is going to ensure that the GAL/parents fully understand that the settlement is a full and final release of any and all future claims against the defendants. Likewise, the judge will want to know that the GAL/parents are willing to state in court that they believe the settlement is fair, reasonable and in the best interests of the child.

AT THE HEARING

On numerous occasions, I have been involved in hearings where the parent is still harboring doubts about the amount of the settlement or the fact that future medical care may be necessary. These are issues that should be fully resolved between the attorney and his clients before the hearing. However, if there is still a reluctant client, let all parties to the hearing know ahead of time. Frequently, those issues can be resolved by the judge during the hearing, but the judge should know that is coming well before the hearing.

I also highly recommend that a court reporter be involved in all settlement hearings, whether in chambers or in open court. I also recommend that my clients order a copy of the transcript to maintain in their file for risk management purposes. Frankly, this is simple “CYA” in the event that years from now, an issue arises. It is unlikely the attorneys will be able to obtain the hearing transcript several years in the future.

On the date of the hearing, make sure the clients are present by the start of calendar call. If not, find out what the delay is and let the judge know. Always be aware and respectful of the fact that our courts are on extremely busy and on a tight schedule – unexpected delays are not appreciated by most judges and the TCA’s staff. However, they also know that the unexpected can happen. Just let them know if it does.

During the hearing, provide the judge with a short, plain statement of the facts and a summary of the injuries involved in the accident of issue. If future medical care is anticipated, inform the judge and explain how the settlement plan anticipates those future costs. If I know about those costs, it is my standard practice to recommend – at the outset of my work with the claimant — that sufficient funds be placed in the Clerk’s office to cover those costs if they are expected before the child reaches his or her age of majority. And, make sure the proposed Order reflects that the judge has ordered the Clerk to release such funds to the legal guardian at the time of medical services being rendered.

Explain the distribution if every penny of the total settlement amount: attorneys’ fees, litigation costs and expenses, liens and the amount disbursable for the benefit of the minor upon reaching their age of majority. If a structure is being used, I usually take over from the claimant’s counsel in order to present the details of the structure. Those include the present cost of the plan, the future periodic payments of the plan, and my work with the GAL/parents to arrive at a suitable plan upon the several options presented to them.

I then hand make sure to hand up for the judge’s review – and the court file – a summary of the claims paying and financial strength ratings of the life insurer issuing the annuity. I also explain what the guaranteed internal rate of return is for the structure plan and the tax-equivalent rate of return. If your structure broker is not available, make sure the broker prepares an affidavit detailing for the court these items.

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