Eddis J. Fruge v. Classic Communications, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

04-1348

EDDIS J. FRUGE, ET AL.

VERSUS

CLASSIC COMMUNICATIONS, INC., ET AL.

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APPEAL FROM THE
TWELFTH JUDICIAL DISTRICT COURT
PARISH OF AVOYELLES, NO. 2002-4086 B
HONORABLE BRUCE C. BENNETT, JR., DISTRICT JUDGE

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ELIZABETH A. PICKETT
JUDGE

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Court composed of Oswald A. Decuir, Glenn B. Gremillion, and Elizabeth A. Pickett,
Judges.

AFFIRMED.

Jerold Edward Knoll
The Knoll Law Firm, LLC
P.O. Box 426
Marksville, LA 71351
(318) 253-6200
Counsel for Plaintiff-Appellee:
Eddis J. Fruge
Jennie Mills Fruge
David W. Gaspard

James K. Carroll
G. Beauregard Gelpi
Fowler Rodriguez & Chalos
400 Poydras Street, 30th Floor
New Orleans, LA 70130
(504) 523-2600
Counsel for Defendant-Appellant:
Great American Insurance Company

Pickett, Judge.

Great American Insurance Company appeals a judgment of the trial court

finding that it acted in bad faith in failing to timely pay a settlement and awarding

interest and penalties on the settlement.

STATEMENT OF THE CASE

This lawsuit originated as a suit against Classic Communications filed on

behalf of the heirs of Melissa Fruge Gaspard, Sean Gaspard, Donnie Deshotel, and

Donnie Ray Deshotel, who were killed in a collision with a van owned by Classic

Communications. Great American Insurance Company (Great American), the

appellant, was named as a defendant as the insurer of Classic Communications. Trial

was set for March 16, 2004. On that date, the parties entered into a settlement, which

was discussed in open court. Relevant to this appeal, Great American agreed to pay

$7,000,000.00 to the heirs of the Gaspards.

The heirs of the Gaspards, Eddis Fruge, Jennie Mills Fruge, and David W.

Gaspard, filed a Motion for Damages for Bad Faith Handling of Settlement on May

11, 2004. Great American filed a Motion to Enforce Settlement on May 13, 2004.

The trial court heard arguments on the motions on May 26, 2004. The trial court

granted the motion to enforce the settlement, but allowed further briefing on the issue

of the bad faith handling of the settlement. On June 24, 2004, the trial court issued

written reasons finding Great American acted in bad faith and awarded damages in

the form of interest from April 16 through May 26, 2004, in the amount of

$40,273.97, plus a penalty of $80,547.94, for a total of $120,821.91. The trial court

entered a judgment conforming with the written reasons on July 2, 2004. Great

American now appeals.

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ASSIGNMENTS OF ERROR

Great American asserts three assignments of error:

1. The district court erred in finding the March 16, 2004, agreement was
“reduced to writing” as required by La.R.S. 22:1220(B)(2).

2. The district court erred in finding the delay in funding the settlement
was the result of bad faith on the part of Great American.

3. The trial court erred in awarding damages from April 16, 2004, through
May 26, 2004.

DISCUSSION

The penalty in this case was imposed pursuant to La.R.S. 22:1220, which states

in pertinent part:

A. An insurer, including but not limited to a foreign line and
surplus line insurer, owes to his insured a duty of good faith and fair
dealing. The insurer has an affirmative duty to adjust claims fairly and
promptly and to make a reasonable effort to settle claims with the
insured or the claimant, or both. Any insurer who breaches these duties
shall be liable for any damages sustained as a result of the breach.

B. Any one of the following acts, if knowingly committed or
performed by an insurer, constitutes a breach of the insurer's duties
imposed in Subsection A:

....

(2) Failing to pay a settlement within thirty days
after an agreement is reduced to writing.

....

C. In addition to any general or special damages to which a
claimant is entitled for breach of the imposed duty, the claimant may be
awarded penalties assessed against the insurer in an amount not to
exceed two times the damages sustained or five thousand dollars,
whichever is greater. Such penalties, if awarded, shall not be used by
the insurer in computing either past or prospective loss experience for
the purpose of setting rates or making rate filings.

The trial court found that the settlement had been reduced to writing because

it had been recited in open court, citing La.Civ.Code art. 3071 and this court’s

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opinion in Guilbeau v. Ramsey, 03-1402 (La.App. 3 Cir. 4/7/04), 870 So.2d 565.

Article 3071 states:

A transaction or compromise is an agreement between two or
more persons, who, for preventing or putting an end to a lawsuit, adjust
their differences by mutual consent, in the manner which they agree on,
and which every one of them prefers to the hope of gaining, balanced by
the danger of losing.

This contract must be either reduced into writing or recited in
open court and capable of being transcribed from the record of the
proceeding. The agreement recited in open court confers upon each of
them the right of judicially enforcing its performance, although its
substance may thereafter be written in a more convenient form.

In Guilbeau, this court stated that a settlement read into the record in open

court satisfies the requirement of being “reduced to writing” in La.R.S.

12:1220(B)(2). In its first assignment of error, Great American argues that the

Guilbeau decision can be distinguished from the instant case because the parties

knew at the time the settlement was read into the record that the terms of the

settlement would later be reduced to writing. The pertinent portions of the settlement

agreement as discussed in open court are as follows:

BY MR. KNOLL:
Your Honor, the agreement that has been reached between the
plaintiffs and defense is that the total settlement for the claims of Mr.
and Mrs. Fruge as well as Mr. Gaspard is the sum of $7,000,000.00.
Each party Your Honor, is to absorb their own costs that have been paid
to the clerk and other than that Judge, I think that’s all.
Is there anything else?

BY THE COURT:
Mr. Brown, you were the first defendant in this with Classic, is
that your understanding of the settlement agreement?

BY MR. BROWN:
Yes, Your Honor, that’s my understanding of the settlement. Of
course Your Honor, the parties do envision that a more detailed written
document will be prepared along with a judgment of dismissal with
prejudice but in essence that is the consideration for the settlement.

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BY THE COURT:
O.K.

BY MR. BROWN:
Full and complete release of all claims against all parties without
any reservation of rights whatsoever.

Further, the trial court explained at the close of the March 16, 2004, hearing that the

settlement would be further reduced to writing:

BY THE COURT:

O. K. The settlement agreement is now part of the record and it
will take some time before the documents are drawn up for you to sign
and the checks to get here. But I mean you’ve been patient all along it
will take a little bit more patience probably within the next thirty to
forty-five days if will all be done and resolved, okay.

Nevertheless, we find this case is not distinguishable from Guilbeau. As this court

stated, “Although the parties may agree to set forth its terms in a more convenient

form, it is not necessary they do so for the penalty provision in La.R.S. 22:1220(B)(2)

to apply.” Guilbeau, 870 So.2d at 569. The terms of the settlement were clearly set

forth in open court on March 16, 2004, and payment was due within 30 days pursuant

to La.R.S. 22:1220(B)(2). The first assignment of error lacks merit.

In its second assignment of error, Great American argues that the failure to pay

the settlement funds timely was not an act of bad faith. Great American argues that

they were engaged in negotiations with the plaintiffs about the structuring of a

portion of the settlement, which caused the delay in the tendering of payment. The

trial court concluded that Great American did act in bad faith, and in its reasons for

ruling provided a detailed chronological listing of events which led to the conclusion.

First, while there was some discussion about structuring a portion of the settlement,

Great American did not tender the settlement funds when demand was made for them

by the plaintiffs’ counsel on May 4, 2004. On May 4, 2004, the plaintiffs agreed to

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wait for receipt of the funds until May 10. But on May 6, a dispute arose about the

agent who would be used for the structuring, and on May 10, Great American refused

to structure a portion of the settlement unless it was with an agent of its choosing.

Since the funds were not received on May 10, the plaintiffs filed the Motion for

Damages for Bad Faith Handling of Settlement that is the subject of this appeal on

May 11. On May 12, the plaintiff demanded payment of the $5,000,000.00 that was

not subject to the dispute over structuring. Great American’s counsel responded on

the same day by refusing to structure any part of the settlement and offering to tender

the full $7,000,000.00. On May 18, defense counsel alleged in a letter that he had

tendered the full amount, but that plaintiffs’ counsel refused to accept the tender. In

a letter dated the same day, plaintiffs’ counsel explained that the release documents

sent to the plaintiffs included a clause requiring dismissal of the bad faith claims. In

the course of this disagreement, the checks were sent to the plaintiffs’ counsel, but

counsel for the defense refused to alter the release documents to allow the plaintiffs

to proceed with the bad faith claims.

The trial court concluded that Great American acted in bad faith because it

refused to tender the amount that was not part of the structure negotiations,

$5,000.000.00. He further found that Great American’s conduct after payment was

demanded, and its insistence on the plaintiffs dropping the bad faith claims, was

“totally unexcusable.” A trial court’s finding of bad faith is a factual determination

subject to the manifest error standard of review. Aguillard v. Crowley Garment Mfg.

Co., 01-594 (La.App. 3 Cir. 2/27/02), 824 So.2d 347, writs denied, 02-1348, 02-1170

(La. 8/30/02), 823 So.2d 955, 956. The trial court’s conclusion is supported by the

record and will not be disturbed.

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In its third assignment of error, Great American argues that the damages should

not be calculated from April 16, 2004, through May 26, 2004. For the period from

April 16 through May 10, Great American argues that it was involved in the structure

negotiations, and the plaintiffs granted an extension on May 4 that expired on May

10. It further argues that if Great American was in bad faith, the bad faith ended on

May 10 when the funds became available, and the damages should be decreased.

This argument glosses over the attempt by Great American to require the plaintiffs

to drop their bad faith claim in exchange for the settlement checks. Essentially, Great

American argues that it should not have to pay any damages. The trial court did not

abuse its discretion in awarding damages and the award is affirmed.

CONCLUSION

The trial court’s opinion is affirmed in all respects. Costs of this appeal are

assessed against the appellant, Great American Insurance Company.

AFFIRMED.

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