Allen v. Montalvan, — So.3d —-, 2016 WL 4547993 (Fla. 4th DCA Aug. 31, 2016)
Two points to keep in mind when thinking about this case. First, most disputes — even those that end up in court — ultimately settle. Second, if you’re a trusts and estates lawyer sooner or later you’re going to have to deal with a dispute involving minors.
Which means you owe it to yourself to at least have a passing familiarity with the mechanics for settling disputes involving minors. Why? Because if you don’t get that process right the settlement deal you spent months hammering out may come back to bite you when you least expect it, as the parties in this case can attest to.
This case involves two minors injured in an automobile accident. Their parents/natural guardians entered into a pre-suit settlement agreement with the insurance company of the driver responsible for the accident. Under this deal the insurance company tendered $50,000 to settle all claims arising from the accident — including the minors’ claims — in exchange for releases from all concerned — including releases signed by the minors’ parents/natural guardians.
After finalizing the settlement deal on behalf of their minor children the parents apparently had a change of heart. They hired new attorneys who proceeded to sue on the claims they had just settled. Insurance company cried foul (surprise!), and the trial court agreed, tossing the new lawsuit on the grounds that these claims had just been settled on behalf of the minor plaintiffs by their parents/natural guardians. Not so said the 4th DCA.
Because the original pre-suit settlement hadn’t been blessed by a court in a proceeding in which the minors had been independently represented by a guardian ad litem (GAL), it was invalid — and non-binding — as a matter of law. The parents, as natural guardians, simply did not have the legal authority to bind their children in a settlement deal involving a total sum of $50,000 or more (even if most of the money is NOT going to the minors). Bottom line, the parents get a second bite at the apple; so saith the 4th DCA:
Section 744.3025(1)(b), Florida Statutes (2009), states that unless a guardian with no potential adverse interest to the minor has already been appointed, “the court shall appoint a guardian ad litem to represent the minor’s interest before approving a settlement of the minor’s claim in a case in which the gross settlement involving a minor equals or exceeds $50,000″ (emphasis added). . . .
Because the pre-suit settlement in this case involved minors and totaled $50,000 or more, the trial court was required to appoint a guardian ad litem to represent the children’s interests before approving a settlement that disposed of the children’s claims. See generally Sullivan v. Dep’t. of Transp., 595 So.2d 219 (Fla. 2d DCA 1992) (referencing other chapter 744 statutory provisions to arrive at the conclusion that, when the monetary threshold amount is met in a pre-suit settlement, the minor’s guardian (natural or appointed) must obtain the circuit court’s approval of the settlement). . . .
Because the proposed settlement did not comply with the requirements of section 744.3025, it was invalid as to the claims of the children. As such, the trial court erred by dismissing the children’s complaint based upon that agreement.
When are GALs mandatory?
But wait, argued insurance company, the minors’ claims alone didn’t settle for $50,000, that sum was part of a larger global deal that involved an adult killed in the accident, so the statutory threshold wasn’t triggered. Not so says the 4th DCA. Even if the minors’ portion of the deal didn’t add up to $50,000, if the total sum of the deal did, you still need a court-appointed GAL to validly settle their claims.
Further support for considering the full $50,000 as a single settlement “involving a minor” comes from the Florida Probate Rules. Rule 5.636(d), which was intended to mirror the requirements of section 744.3025, states:
The court shall appoint a guardian ad litem on behalf of a minor, without bond or notice, with respect to any proposed settlement that exceeds $50,000 and affects the interests of the minor, if:
(1) there is no court-appointed guardian of the minor;
(2) the court-appointed guardian may have an interest adverse to the minor; or
(3) the court determines that representation of the minor’s interest is otherwise inadequate.
Fla. Prob. R. 5.636(d). The committee notes for this provision provide a useful illustration.
The total settlement to be considered under subdivisions (d) and (e) is not limited to the amounts received only by the minor, but includes all settlement payments or proceeds received by all parties to the claim or action. For example, the proposed settlement may have a gross value of $60,000, with $30,000 payable to the minor and $30,000 payable to another party. In that instance the total proposed settlement exceeds $50,000.
So what’s the takeaway?
Most of us assume that parents who don’t have a conflict of interest with their minor children and are acting in good faith can settle their claims without going through the costs and delays inherent to getting court approval and appointing GALs for all the minors. That assumption, while intuitively appealing, is probably wrong once the sums at issue reach $15,000, and definitely wrong once a lawsuit’s actually filed and/or you’re talking about a settlement deal involving payments of at least $50,000 — even if most of the money is NOT going to the minors.
A good resource for figuring out the specifics of how this is all supposed to work in real life is Miami-Dade’s local rule for settling claims involving minors. See 2008 1-08-18 Standards and Procedures for Minor Settlement.
And for a general discussion of the ins and outs of settling claims involving minors, you’ll want to read Settlements Involving Minors by Miami probate attorney Elizabeth M. Hughes. Ms. Hughes does an excellent job of explaining Florida’s statutory thicket for settlement agreements involving minors, as well as providing a big picture explanation to put it all in context. Here’s an excerpt from Ms. Hughes’ article (which I highly recommend):
Minors are considered to be wards of the court and the courts are thus charged with responsibility for their welfare in many situations. As a result, . . . even though parents are jointly the natural guardians of their minor children, the status as natural guardian typically confers only custody of the person and not of the property. As natural guardians, parents typically have all the rights, duties, and powers that a guardian of the person would have but without most of the rights, duties, and powers of a guardian of the property. . . . [T]his lack of authority over the minor’s property rights means that parents, generally, do not have the legal authority to settle or compromise a child’s claim or to waive substantive rights without court approval.
By the way, the “price” for getting this all wrong may be more than just professional embarrassment, you might find yourself on the receiving end of your own lawsuit, which is apparently what happened in a scary 3d DCA case cited and summarized as follows by Ms. Hughes in footnote 31 of her article:
Auerbach v. McKinney, 549 So. 2d 1022 (Fla. 3d DCA 1989) (The acceptance of funds offered in settlement of a minor’s claim using an arrangement that circumvents the proper legal procedures may result in personal liability of the plaintiff’s counsel, restoration of funds improperly paid to the attorney, and legal malpractice liability. Attorneys had to return money meant for brain damaged minor client, where attorneys accepted payments from defendant’s insurers made out to attorneys rather than to the minor client without seeking court approval.).