Zoe Strand, et al., Plaintiffs, vs. Allied Insulation Supply Co., et al., Defendants, and General Pipe Covering, Inc., Defendant and Third Party Plaintiff, Appellant, vs. Quality Insulation, Inc., Third Party Defendant, Respondent, Econ Insulation, Inc., Third Party Defendant, Respondent.

Zoe Strand, et al., Plaintiffs, vs. Allied Insulation Supply Co., et al., Defendants, and General Pipe Covering, Inc., Defendant and Third Party Plaintiff, Appellant, vs. Quality Insulation, Inc., Third Party Defendant, Respondent, Econ Insulation, Inc., Third Party Defendant, Respondent. A06-1623, Court of Appeals Unpublished, August 21, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-1623

 

Zoe Strand, et al.,
Plaintiffs,
 
vs.
 
Allied Insulation Supply Co., et al.,
Defendants,
 
and
 
General Pipe Covering, Inc.,
Defendant and Third Party Plaintiff,
Appellant,
 
vs.
 
Quality Insulation, Inc.,
Third Party Defendant,
Respondent,

 

Econ Insulation, Inc.,

Third Party Defendant,

Respondent.

 

 

Filed August 21, 2007

Affirmed

Minge, Judge

 

Ramsey County District Court

File No. C8-05-50034

 

 

Byron M. Peterson, Tomsche, Sonnesyn & Tomsche, P.A., 610 Ottawa Avenue North, Golden Valley, MN 55422 (for appellant)

 

Paul E. D. Darsow, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., 500 Young Quinlan Building, 81 South Ninth Street, Minneapolis, MN 55402 (for respondent Quality Insulation)

 

Susan M. Hansen, Brownson & Ballou, PLLP, 225 South Sixth Street, Suite 4800, Minneapolis, MN 55402 (for respondent Econ Insulation)

 

            Considered and decided by Worke, Presiding Judge; Kalitowski, Judge; and Minge, Judge.

U N P U B L I S H E D  O P I N I O N

 

MINGE, Judge

            Appellant challenges the district court's dismissal of its third-party complaint for contribution from respondents, arguing that the district court erred in dismissing the third-party complaints.  Because we conclude that the district court did not err in dismissing the complaints, we affirm.

FACTS

 

            James Strand was diagnosed with asbestosis as a result of his occupational exposure to asbestos.  In 1990, he settled his workers' compensation claim with his former employers; including appellant, General Pipe Covering, Inc., and respondents, Quality Insulation, Inc. and Econ Insulation, Inc.  James's wife Zoe was subsequently diagnosed with mesothelioma, a form of lung cancer commonly associated with exposure to asbestos.  In February 2005, the Strands, as plaintiffs, filed a complaint against General Pipe asserting several causes of action and seeking compensation for damages sustained as a result of Zoe's illness, allegedly caused by second-hand exposure to asbestos.

            In early 2005, appellant General Pipe served third-party complaints for contribution on respondents Quality and Econ.[1]  In June 2005, respondent Quality moved for summary judgment on the third-party claim or, in the alternative, severance of the third-party claims.  Respondent Econ joined Quality's motion to sever.  Following a hearing, the district court granted respondents' motion to sever the third-party complaints.  But the district court denied Quality's motion for summary judgment, concluding that General Pipe produced enough evidence to create a genuine issue of material fact for trial on its third-party contribution claim. 

            Meanwhile, the Strands' direct claims against appellant General Pipe were expedited.  But before trial, on July 21, 2005, General Pipe entered into a "NAIG/PIERRINGER RELEASE AND SETTLEMENT AGREEMENT" with the Strands.  In exchange for General Pipe's payment of $289,999.99, the Strands released any and all claims against General Pipe, and also any and all claims against respondents Quality and Econ.  The Strands also agreed to indemnify General Pipe, Quality and Econ for any future claims resulting from Zoe Strand's mesothelioma.  The agreement noted the parties' intent to preserve General Pipe's third-party contribution claims against Quality and Econ. 

            On March 10, 2006, respondents Quality and Econ moved for summary judgment on appellant General Pipe's third-party contribution claim, arguing that because General Pipe entered into a Pierringer settlement with the Strands and settled for its share of liability, General Pipe's third-party claim for contribution was barred as a matter of law.  Following a hearing, the district court granted Quality's and Econ's motion and dismissed General Pipe's third-party contribution claim with prejudice.  This appeal follows.         

D E C I S I O N

 

            The issue on appeal is whether the district court erred in concluding that appellant General Pipe's third-party complaints for contribution are barred as a matter of law.  "On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the [district] court[] erred in [its] application of the law."  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  If there are no genuine issues of material fact, we review the district court's application of the law de novo.  In re Collier, 726 N.W.2d 799, 803 (Minn. 2007). 

 "A settlement agreement is a contract," which we interpret de novo.  In re Welfare of M.R.H., 716 N.W.2d 349, 352 (Minn. App. 2006), review denied (Minn. Aug. 15, 2006).  Like any contract, we give a settlement agreement's unambiguous language its plain and ordinary meaning.  State by Humphrey v. Philip Morris USA, Inc., 713 N.W.2d 350, 355 (Minn. 2006), cert. denied 127 S. Ct. 1259 (2007).  But when the operative language of a settlement agreement is ambiguous, "we consider the contract as a whole in light of the circumstances surrounding its formation, and strive to arrive at the parties' real understanding." Id. Intent is a question of fact.  Brown v. Cannon Falls Twp., 723 N.W.2d 31, 44 (Minn. App. 2006).  Here, because the parties do not contend that there are any genuine issues of material fact and only dispute the legal effect of the Strands' and appellant General Pipe's settlement agreement ("the settlement agreement") on General Pipe's third-party contribution claims, our review of the district court's application of Pierringer principles[2] and greater contract law is de novo.

            Prior to Minnesota's recognition of the Pierringer release, the general rule was that the release of one joint tortfeasor released all other joint tortfeasors.  Frey v. Snelgrove, 269 N.W.2d 918, 921 (Minn. 1978).  But in Frey, the Minnesota Supreme Court approved the use of the Pierringer release as a means to release settling defendants, reserve the plaintiff's causes of action against the remaining defendants, and cut off the nonsettling defendants' claims of contribution against the settling defendants.  Id. at 921.  The supreme court's approval of the Pierringer release promoted settlements by ensuring the settling plaintiff that in releasing one tortfeasor, he would not release all tortfeasors, and by ensuring the settling defendants that, after settling for their fair share of liability with the plaintiff, they would not face future collateral contribution claims.

            The elements of a Pierringer release are:

(1) The release of the settling defendants from the action and the discharge of a part of the cause of action equal to that part attributable to the settling defendants' causal negligence; (2) the reservation of the remainder of plaintiff's causes of action against the nonsettling defendants; and (3) plaintiff's agreement to indemnify the settling defendants from any claims of contribution made by the nonsettling parties and to satisfy any judgment obtained from the nonsettling defendants to the extent the settling defendants have been released.

 

Bunce v. A.P.I., Inc., 696 N.W.2d 852, 855 (Minn. App. 2005).  Because a Pierringer release limits a settling defendant's total liability to the amount paid in settlement, "the legal effect of [a] Pierringer release is that each tortfeasor pays only its proportionate share of liability, and no more, there can be no liability for contribution."  Alumax Mill Prods., Inc. v. Congress Fin. Corp., 912 F.2d 996, 1007-10 (8th Cir. 1990) (applying Minnesota law to the parties' Pierringer release).  Typically, once the parties execute a Pierringer release, the settling defendant is dismissed from the suit with prejudice, and any cross-claims for contribution by the settling defendant against the remaining defendant are also dismissed.  Rambaum v. Swisher, 435 N.W.2d 19, 22 (Minn. 1989).

            Our recent decision in Bunce further developed Pierringer law.  In that case, plaintiff Bunce used a Pierringer-type release to settle his personal-injury claim against A.P.I., Inc., one of several defendants that manufactured or distributed products that contained asbestos.  Bunce, 696 N.W.2d at 854.  The release in Bunce recited that the parties intended the document to "‘have the same effect as the releases described in [Pierringer] and in [Frey].'"  Id. at 857.  The Bunce settlement agreement satisfied all three elements of a standard of Pierringer release.  Id.  It released and discharged A.P.I.'s percentage of causal negligence.  Id.  It reserved Bunce's causes of action against non-settling defendants.  Id.  And in the release, Bunce agreed to indemnify A.P.I. from any future contribution claims made by non-settling defendants.  Id.  But contrary to the typical elements of a Pierringer release, the agreement provided:

            It is also specifically agreed that [respondent] reserve all claims [respondent] may have for contribution, indemnity, or subrogation against other persons or entities who may be found liable to [Bunce], or who may be jointly or severally liable to [Bunce] with [respondent].

 

Id. at 857 (alterations in original).  These purportedly reserved contribution claims were against parties that were still subject to claims by the plaintiff.  Id.

            Prior to the settlement, A.P.I. initiated third-party contribution claims against entities that Bunce had not directly sued.  Id. at 854.  Those entities moved for summary judgment, arguing that because Bunce and A.P.I. completed a Pierringer release, A.P.I.'s third-party contribution claims were barred as a matter of law.  Id.  A.P.I. asserted that because the agreement was a "modified" Pierringer that expressly reserved its third-party contribution claims, dismissal of those claims was improper.  Id. at 857.

            In Bunce, this court concluded that the agreement was a Pierringer release notwithstanding A.P.I.'s attempt to "craft[] its own legal theory to attempt to build in a chance to recoup more money, while remaining absolutely immune from having to pay anybody one dollar more than it paid Bunce."  Id. at 858.   According to this court, reservation of A.P.I.'s third-party contribution claims was incompatible with those third parties' continuing liability to the plaintiff.  Id. at 857.  We observed that well-established Pierringer law did not allow A.P.I. and Bunce "for their own self-interest, [to] rewrite Pierringer/Frey law and make appellants, non-signatories to the A.P.I./Bunce release, bound by it."  Id. at 857.

            Here, the settlement agreement is titled "NAIG/PIERRINGER RELEASE AND SETTLEMENT AGREEMENT" and recites that "[i]t is the intention of the parties that this instrument also be construed in accord with the principles set forth in Pierringer v. Hoger . . . and Frey v. Snelgrove."  The agreement releases appellant General Pipe "from any and all ‘individual claims' of [plaintiffs/Strands] arising in any way from Zoe Strand's claimed asbestos-related disease of mesothelioma."  Consistent with a standard Pierringer release, the agreement preserves the Strands' claims against non-settling parties.  And finally, under the release, the Strands also agreed to indemnify General Pipe for any claim by any person for contribution in the event that the Strands recover damages from another person as a result of Zoe Strand's asbestos-related disease.  These provisions are all consistent with the hallmarks of a Pierringer release.

            But here, the settlement agreement deviates from a standard Pierringer release in several respects.  This agreement not only releases appellant General Pipe, but despite their express non-involvement in the settlement, the agreement also purports to release respondents Quality and Econ from liability for Zoe Strand's mesothelioma.  And the agreement states that General Pipe's settlement payment satisfies the liability for which those additional parties are responsible.  Furthermore, the agreement purports to indemnify Quality and Econ against, and release them from, future contribution claims by parties other than General Pipe.  But Quality and Econ did not sign the agreement, did not pay any portion of the consideration, and did not participate in the agreement's preparation or agree to its terms.  In preserving General Pipe's contribution claims against Quality and Econ, the agreement here provides that:

This settlement agreement is not entered into, nor in any way intended to release any claim or cause of action by the Releasors against other parties for damages sustained as a result of Zoe Strand's claimed asbestos-related disease . . . .  It is specifically reserved to the Releasees, or any one of them, the right to obtain a determination of the allocation of this payment amount among them pursuant to any legal proceeding, be it mediation, arbitration, or third party    action. . . .  It is not the intent of this release to resolve any third party claims that have been asserted by [General Pipe]    . . . .    

 

In reserving some further claim, this release resembles the settlement agreement in Bunce. 

            Based on the foregoing provisions, appellant General Pipe argues that it settled for respondents Quality's and Econ's percentage of liability on top of its own liability, that the agreement releases Quality and Econ (as the third-party defendants) from the Strands' future claims, and that the Strands agreed to indemnify General Pipe and Quality and Econ for any future contribution claims.  As a result of these conditions, General Pipe claims that Quality and Econ will never pay more than their share of liability, and, therefore, that General Pipe's contribution claim is consistent with the principles of Pierringer.  According to General Pipe, the settlement agreement here avoids the unfairness that was present in Bunce, which permitted A.P.I. to maintain its third-party contribution claims against tortfeasers against whom the injured party still had claims.

            We recognize that because the settlement agreement here does not attempt to preserve any claims against entities with whom the injured party has yet to settle, it is distinguishable from the agreement at issue in Bunce and that the case before us represents a creative attempt to assign Strands' claims against respondents Quality and Econ to appellant General Pipe.  But the principle embodied in Bunce haunts General Pipe.  Bunce establishes a presumption that when settling parties unambiguously invoke the principles of Pierringer, the parties intend the agreement to be construed in accordance with the fundamental principles of a Pierringer release, which necessarily means the releasee has paid no more and no less than its share of the total liability to the injured party.  See Bunce, 696 N.W.2d at 855-56.  This bars releasee's future claims of contribution.  Id. at 858.  Under Bunce, a defendant settling pursuant to a Pierringer release can not shift its fair share of liability by attempting to offset that liability with third-party contribution claims.  Id.  Here, as in Bunce, appellant has attempted to "craft[] its own legal theory to attempt to build in a chance to recoup more money, while remaining absolutely immune from having to pay anybody one dollar more than it paid [plaintiffs]."  Id.

In addition to the problems caused by the settlement agreement's inconsistency with the rules of Pierringer, to make this arrangement successful, appellant General Pipe must successfully navigate two additional difficulties: first, the rule preventing the assignment of personal-injury tort claims, and second, respondents' ability to enforce the settlement agreement.

Dating back to as early as 1893, "well settled Minnesota law has prohibited an assignment of a cause of action for personal injuries."  Regie de l'assurance Auto. du Quebec v. Jensen, 399 N.W.2d 85, 89 (Minn. 1987) (citing Hammons v. Great N. Ry., 53 Minn. 249, 251-52, 54 N.W. 1108, 1109 (1893)); see Boogren v. St. Paul City Ry., 97 Minn. 51, 54, 106 N.W. 104, 106 (1906) ("A cause of action for a personal tort is strictly personal.  It is not in the nature of property, in the sense that any one but the injured party can have any right in it.").[3]  Even though several early common-law restrictions on the transfer of causes of action have since been discarded, the restriction on the assignment of causes of action for tort claims continues to be recognized and applied.  Restatement (Second) of Contracts § 317 cmt. c (1981) ("[T]he historic common-law rule that a chose in action could not be assigned has largely disappeared.  It remains applicable to some non-contractual rights, particularly claims for damages for personal injury. . . .").    

Here, appellant General Pipe attempted to compensate the Strands for respondents Quality's and Econ's liability, obtain a release from the Strands for the benefit of Quality and Econ, and maintain the contribution claims against Quality and Econ that would be eliminated under a standard Pierringer release.  In essence, General Pipe attempted to purchase the Strands' causes of action against Quality and Econ.  Presumably, General Pipe was purchasing the Strands' claims against Quality and Econ for a discount substantial enough to cover the costs of litigating its contribution claims and to recover a profit from those claimsthereby decreasing the cost of its settlement with Strands.[4]  The rule preventing the assignment of personal-injury tort claims is based in public-policy considerations, and we do not reverse this settled precedent.[5]     

            In addition to violating the rule prohibiting the assignment of personal-injury tort actions, the release arrangement that appellant General Pipe has drafted does not assure respondents Quality and Econ that they are able to enforce the settlement agreement against the Strands if other joint tortfeasers initiate contribution claims against Quality and Econ.  The general rule is that non-parties to a contract acquire no rights or obligations under the contract.  Wurm v. John Deere Leasing Co., 405 N.W.2d 484, 486 (Minn. App. 1987).  However, such an obligation may arise as a result of intent or duty.  See Cretex Cos. v. Constr. Leaders, Inc., 342 N.W.2d 135, 139 (Minn. 1984) (describing the intent-to-benefit-third-party-beneficiary test); see also Badger Equip. Co. v. Brennan, 431 N.W.2d 900, 905 (Minn. App. 1988) (describing the duty-owed-third-party-beneficiary test).  The enforceability of such an obligation would be determined on a case-by-case basis. 

            Here, respondents Quality and Econ are not assured that a future court would find either an enforceable intent or duty.  Quality and Econ did not participate in the settlement agreement.  It is not clear what extra payment the Strands received because Quality and Econ were included.  Furthermore, appellant General Pipe never assumed an indemnification obligation to Quality and Econ.  Ironically, General Pipe did not intend to benefit Quality and Econ in crafting the settlement agreement; rather, General Pipe intended to maintain its opportunity to sue them. 

            Finally, even if respondents Quality and Econ have an iron-clad legal claim against the Strands for enforcement of the indemnity obligation, it may be uncollectible.  Zoe Strand carried a diagnosis of mesothelioma at the time the settlement agreement was executed, and James Strand was diagnosed with asbestosis.  Even if both of the Strands were living at the time of a future contribution claim against Quality or Econ, they may not have assets to satisfy such a claim.  In the normal Pierringer-release situation, the settling tortfeasor can evaluate the situation and decide to assume these collection risks.  Here, Quality and Econ were not parties to the agreement and never made the decision to assume the risk of enforcement.  The district court did not err in refusing to impose liability on Quality and Econ based on an agreement to which they were not parties.    

            In sum, one of the established principles of Pierringer and its progeny, is that the settling defendant foregoes the opportunity to pursue contribution claims.  To succeed, appellant needed to (1) carefully distinguish its agreement from the rules of Pierringer; (2) overcome the rule preventing the assignment of personal-injury tort claims; and (3) assure respondents Quality and Econ that they would be able to enforce and collect on the protections in the arrangements.  On this record, we conclude that the district court did not err in dismissing appellant General Pipe's third-party contribution claims.  Because we affirm the district court's dismissal of General Pipe's contribution claims, we do not consider respondent Quality's alternative argument that it is entitled to summary judgment dismissal of those claims.

            Affirmed.

 

Dated:

[1] In May 2005, the Strands served a direct complaint against respondent Quality for Zoe's illness.  However, contrary to General Pipe's assertion, this complaint was subsequently withdrawn without prejudice.

[2] This settlement structure is associated with and named after the seminal case of Pierringer v. Hoger, 124 N.W.2d 106 (Wisc. 1963).

[3] At oral argument, General Pipe conceded that Minnesota law bars the purchase of tort claims but argued that it did not do so in settling Strands' claims against Quality and Econ.

[4] General Pipe maintains that it is unfair to allow Quality and Econ to escape their alleged liability to the Strands.  But if General Pipe settled Quality's and Econ's liability at a steep discount, General Pipe would receive a windfall if it obtained a generous contribution recovery from Quality and Econ. 

[5] We recognize that the release arrangement that General Pipe negotiated with the Strands may have allowed the Strands and, if the arrangement is upheld, may enable other injured parties to recover on claims that such injured parties would otherwise be unable to collect.  Here, the Strands had dismissed their claims against respondent Quality and never made a claim against respondent Econ.  There is no representation that such a benefit to an injured party is presented in this factual setting.  We do not reach the question of whether an arrangement that achieved that objective, if properly constructed and presented, would be valid.