Shen v. Club Med Sas

          REPORT AND RECOMMENDATION FOR ORDER GRANTING MINORS COMPROMISE PETITIONS (ECF No. 40)

          HON. BERNARD G. SKOMAL UNITED STATES MAGISTRATE JUDGE

         Before the Court are the petitions of guardian ad litem Erik Brewster to approve the compromise of the pending action on behalf of minor Plaintiffs Mila Shen, Zoe Shen, and Vesper Shen (“minor Plaintiffs”). (ECF No. 40.) This Report and Recommendation is submitted to United States District Judge Roget T. Benitez pursuant to 28 U.S.C. § 636(b)(1) and Local Civil Rule 17.1 of the United States District Court for the Southern District of California. After reviewing the Petitions and all supporting documents, and for the reasons discussed below, the Court RECOMMENDS that the Petitions (ECF No. 40) be GRANTED.

         I. BACKGROUND

         Plaintiffs Mila Shen, Zoe Shen, and Vesper Shen are minors appearing by and through their court appointed guardian ad litem, Erik Brewster. (ECF No. 21.) On August 8, 2018, Plaintiffs Mila, Zoe, Vesper and their parents, Plaintiffs Edwin and Joyce Shen, attended a performance at Club Med hotel in Tomamu Hokkaido, Japan. (ECF No. 1-2 at 4.) General manager Merlin Chelliah gathered the children to the front of the stage to have them partake in a sake barrel breaking ceremony. During the ceremony, Ms. Chelliah's wooden mallet slipped out of her hand and hit Mila in the center of her forehead. (Id. at 5.) She suffered a nondisplaced frontal skull fracture and today has a prominent scar across her forehead. (ECF No. 40-1 at 3.) She received emergency treatment, imaging, neurological examination, plastic surgery, and therapy for emotional trauma. (Id.) Mila was seven years old at the time of the injury. (ECF No. 1-2 at 5.) Her parents and sisters Zoe and Vesper witnessed Mila's injury causing them emotional distress. (Id.; ECF No. 40-2 at 3; ECF No. 40-3 at 3.)

         This action was initially filed in California Superior Court and was removed to this Court on February 20, 2019. (ECF No. 1.) Plaintiffs alleged claims of negligence, negligent infliction of emotional distress, and negligent misrepresentation. (ECF No. 1-2.) Defendants filed motions to dismiss for lack of personal jurisdiction. (ECF Nos. 21-22.) The undersigned judge held an Early Neutral Evaluation and Case Management Conference on September 4, 2019. (ECF No. 29.) The case did not settle, and a scheduling order was issued. (Id.; ECF No. 30.) On September 30, 2019, Plaintiffs filed their opposition to Defendants' Motion to Dismiss. (ECF Nos. 32-33.) On October 18, 2019, the parties filed a joint notice of settlement informing the Court they reached a settlement. (ECF No. 37.) On November 1, 2019, guardian ad litem Erik Brewster filed petitions for approval of the minor's compromise of claims. (ECF No. 40.) Exhibits were attached containing petitions for Mila (ECF No. 40-1), Zoe (ECF No. 40-2), and Vesper (ECF No. 40-3).

         II. LEGAL STANDARD

         It is well settled that courts have a special duty to safeguard the interests of litigants who are minors in the context of settlements proposed in civil suits. Robidoux v. Rosengren, 638 F.3d 1177, 1181 (9th Cir. 2011); see also Fed. R. Civ. P. 17(c) (district courts “must appoint a guardian ad litem-or issue another appropriate order-to protect a minor or incompetent person who is unrepresented in an action.”). This duty “requires a district court to ‘conduct its own inquiry to determine whether the settlement serves the best interests of the minor.'” Robidoux, 638 F.3d at 1181 (quoting Dacanay v. Mendoza, 573 F.2d 1075, 1080 (9th Cir. 1978)); see also Salmeron v. United States, 724 F.2d 1357, 1363 (9th Cir. 1983) (“a court must independently investigate and evaluate any compromise or settlement of a minor's claims to assure itself that the minor's interests are protected, even if the settlement has been recommended or negotiated by the minor's parent or guardian ad litem.”). Accordingly, Local Rule 17.1(a) provides that “[n]o action by or on behalf of a minor or incompetent will be settled, compromised, voluntarily discontinued, dismissed or terminated without court order or judgment.” CivLR. 17.1(a). This requires the Court to question if the settlement is in the best interests of the minor and consider not only the fairness of the settlement, but the structure and manner of the plan for the payment and distribution of the assets for the benefit of the minor.

         Ordinarily, “in considering the fairness of a minor's state law settlement, federal courts generally require that claims by minors . . . be settled in accordance with the applicable state law.” Lobaton v. City of San Diego, No. 3:15-cv-1416-GPC-DHB, 2017 WL 2610038, at *2 (S.D. Cal. June 16, 2017) (internal quotation marks and citation omitted). California law requires court approval of a settlement for a minor and attorney's fees to represent a minor. Cal. Prob. Code § 3601; Cal. Fam. Code § 6602. Under California state law, the Court is tasked with evaluating the reasonableness of the settlement and determining whether the compromise is in the best interest of the minor. Espericueta v. Shewry, 164 Cal.App.4th 615, 619-20 (2008). Furthermore, California Probate Code Section 3601 authorizes the court approving a compromise of a minor's disputed claim to “make a further order authorizing and directing that reasonable expenses, medical or otherwise[, ] ... costs, and attorney's fees, as the court shall approve and allow therein, shall be paid from the money or other property to be paid or delivered for the benefit of the minor.” Cal. Prob. Code § 3601(a). This “bestows broad power on the court to authorize payment form the settlement-to say who and what will be paid from the minor's money-as well as direct certain individuals to pay it.” Goldberg v. Superior Court, 23 Cal.App.4th 1378, 1382 (1994).

         In cases involving the settlement of a minor's claims, the Ninth Circuit has stated that district courts should “limit the scope of their review to the question of whether the net amount distributed to each minor plaintiff is fair, in light of the facts of the case, the minor's specific claim, and recovery in similar cases.” Robidoux, 638 F.3d at 1181-82. This inquiry should be made “without regard to the proportion of the total settlement value designated for adult co-plaintiffs or plaintiffs' counsel - whose interests the district court has no special duty to safeguard.” Id. at 1182. “So long as the net recovery to each minor plaintiff is fair and reasonable in light of their claims and average recovery in similar cases, the district court should approve the settlement as proposed by the parties.” Id.

         Here, the instant complaint was filed in San Diego County Superior Court and alleges state law claims for negligence, negligent infliction of emotional distress, and negligent misrepresentation. (ECF No. 1-2.) The Court, therefore, will apply California law and focus on whether “the compromise is sufficient to provide for the minor's injuries, care and treatment.” Goldberg, 23 Cal.App.4th at 1382. Additionally, the Court will consider the guidelines set forth in Robidoux because they provide a “framework for evaluating the reasonableness and fairness of Plaintiff's settlement.” Lobaton, 2017 WL 2610038, at *2.

         III. DISCUSSION

         A. Proposed Settlement

         Based on a review of the petitions and applicable law, the Court finds that the terms of the settlement are fair and reasonable as to the minor Plaintiffs. Under the terms of the settlement, Plaintiffs agree to accept $500, 000 in exchange for dismissing their claims against Defendants. (ECF No. 40 at 2.) The settlement is apportioned according to the following percentages: Mila is to receive 76.94%; Zoe is to receive 11.53%; and Vesper is to receive 11.53%. (ECF No. 40-1 at 13.) The gross proceeds are to be apportioned accordingly, with Mila receiving $384, 700 and each of her sisters receiving $57, 650. (ECF Nos. 40-1 at 7, 40-2 at 7, 40-3 at 7.) After attorney's fees and costs, Mila will receive $299, 707.18, Zoe will receive $45, 091, and Vesper will receive $45, 091 to be paid into structured annuities. (Id.) The minors' parents are not taking any settlement funds and Plaintiffs' counsel reduced their fee from 33 1/3% to 20% to ensure adequate compensation for Mila. (Id.; 40-1 at 19.)

         This action was initiated in state court December 6, 2018 (ECF No. 1-2 at 2) and removed to federal court on February 20, 2019 (ECF No. 1.) Over the course of the litigation, Plaintiffs' counsel conducted an extensive investigation into the events surrounding Mila's injury, and the facts of the case were thoroughly investigated in response to Defendants' Motions to Dismiss on basis of lack of personal jurisdiction and via participation in an Early Neutral Evaluation with the undersigned judge. Based upon consideration of the facts, the minor Plaintiffs' ...