Settlements are often largely within the control of the parties to structure to bring a case to resolution. However, when settlement involves a plaintiff minor or person with a disability, the procedure is more complicated and is subject to court scrutiny within a procedure called a Petition to Approve Compromise of Disputed Claim or Pending Action or Disposition of Proceeds for Judgment for Minor or Person with Disability. Generally, these actions are referred to as "Minor's Compromises."
For the unwary, there can be misconceptions about both Minor's Compromises themselves and, more specifically, the court's role in reviewing Minor's Compromise cases. This article reviews the procedure.
What Is a Minor's Compromise?
Though typically referred to as a "Minor's Compromise," the actual language of the Probate Code provides for the payment or delivery of money or other property for the benefit of a minor or a person with a disability. California law provides that where a minor or person with a disability has a disputed claim that is settled, the court must approve the compromise. Probate Code Section 3600 et seq., Code of Civil Procedure Section 372. For simplicity's sake, this article will refer to the whole process as a "Minor's Compromise," though some procedures and requirements differ between a settlement involving a minor or a settlement involving a disabled person.
When an adult settles a case (generally a tort case but settlement agreements exist in all types of cases), the payor will send the payee a "Release of Liability" form. The client and the attorney sign it, return it to the payor, and a check arrives. Money is disbursed. The case is dismissed.
For minors or disabled adults, the initial process proceeds relatively in the same manner as an adult's case. However, by law, the settlement must be approved by the court, and many payors will not issue the settlement check until a Minor's Compromise is approved. While a Minor's Compromise can/does delay the settlement process, it does not necessarily have to be a painful process.
What Is the Court's Role?
So let's begin with the obvious question: What is the court's role? Many believe the court is merely there to act as a rubber stamp for any settlement reached between the parties. However, the law requires the court to assume a protective role to assure that whatever is done is in the minor's or disabled person's best interests. California Code of Civil Procedure Section 372. In approving a Minor's Compromise, the court's primary concern is whether the compromise is sufficient to provide for the minor's or disabled adult's injury, care and treatment. Pearson v. Superior Court, 202 Cal. App. 4th 1333 (2012).
Expedited Minor's Compromise vs. Non-Expedited Minor's Compromise
There are two types of Minor's Compromises, Expedited Petition's to Approve Minor's Compromise and Non-Expedited Minor's Compromises. Expedited petitions are limited to settlements of $50,000 or less or the payout is the single person policy limit and the defendant has no additional assets. Probate Code Section 3600 et seq, Code of Civil Procedure Section 372, California Rules of Court 7.950 et seq, LASC Rule 4.115. Expedited Minor's Compromises typically occur as an ex parte/in chambers proceeding and are only set for a hearing if the court requires additional information from the party or counsel. The Court will rule based solely on the Petition and the supporting documentation (more fully discussed below).
Non-Expedited Minor's Compromises will typically arise when the settlement amount falls outside the parameters allowed or is filed upon settlement in connection with a pending civil case. These proceedings are generally not handled as ex parte/in chambers matters and are set for hearing by the court clerk.
The overall process of evaluation of the Minor's Compromise is generally the same. As such, whether it be Expedited or Non-Expedited Petitions, complications in the approval process can be similar, creating delays in the approval process.
Detailed information provided in the petition about the incident, injury or medical treatment is beneficial to the prompt resolution of the petition. Similar to law and motion, bench officers cannot search through a stack of attachments to a petition to find necessary information. Concise and accurate responses to each question posed in the petition, in the body of the petition, will make it easy to get through the review process, while referring to attachments, such as "See Police Report," "See Drs. Report," or see attached "Drs. Billings and treatment" will not. The Judicial Council forms are written in such a way to make this happen.
To make the petition clear, reference the supporting documentation when necessary and make them easy to locate. Ensure that medical reports, police reports and medical billing and Medi-Cal claim resolution letters (as required by the forms) are attached and appropriately labeled for easy reference. This is also true for reimbursable costs. References to specific costs such as "filing fees" or "service fees" are descriptive and easily recognizable. References to costs as "Misc." are neither descriptive nor easily recognizable. If a party is seeking reimbursement for an unusual cost, provide documentation to support it.
Cost of the Litigation vs. Costs of Doing Business
Approved costs attributed to the settlement are funds taken away from settling minor or disabled person. Neither the minor nor the disabled adult are responsible for a lawyer's ordinary costs associated with doing business, such as "file opening fee" or "file storage fee" or "administrative fee," whereas deposition transcript costs, medical records retrieval, and police reports are generally considered costs associated with the litigation. Impermissible, unreasonable or dubious requests, may result in questions from the court, and a delay in approval.
Party Participation in Petition Preparation
If the petition is set for hearing, questions from the court may prove awkward if the minor and parent, or disabled person and guardian/conservator, were not involved in the preparation of the petition in the first instance.
A common first question asked of the minor or disabled person is "How are you feeling?" If the answer to that question involves ongoing symptoms, follow-up inquiries may ask about details that may lead a bench officer to question counsel about why the matter is being settled.
Simple discussions with the clients before submission of the petition will prevent awkward moments in court. The court's role is to protect the child and/or disabled person. If the child is still in pain, additional medical services may be necessary or additional outstanding medical bills may be incurred, and be reasons for a continuance or denial of the petition. Discussions regarding disabled adults may include in-depth inquiries about their condition and level of future care needed, so be prepared to answer the court's questions with specificity.
Presence of the Minor or Disabled Person at the Hearing
If the matter is set for hearing, consider whether the presence of the settling minor or disabled person will assist in the prompt successful resolution of the hearing. Some bench officers require that the settling minor or disabled person be present, so they may speak to the minor and/or disabled person to inquire about their injury, care, and treatment. However, others do not require the minor to present, only the parent and/or guardian/conservator. Check with the clerk of the department where the hearing is set to see if the court wants to speak with the minor and/or disabled person. Some bench officers will permit appearances by telephone or video appearance. Failure to conform to the bench officer's requirements for a hearing may result in a continuance.
Attorney fees in Minor's Compromises are covered by California Rule of Court, Rule 7.955, setting forth a reasonable fee standard that can be influenced by an engagement agreement but is not bound by it. An older local court rule in Los Angeles County Superior Court (Local Rule 10.79(c)(3)) limited attorney fees to 25%, but that rule was preempted by Rule 7.955(d). The mere fact that a retainer agreement provides for a recovery of 25% (or any amount) is not binding on the court.
Attorney fees are based on the declaration the attorney provides in support of their fees (7.955(c)). Gonzalez v. Chen, 197 Cal. App. 4th 881 (2011), found that the court should use a "reasonable fee standard when approving and allowing the amount of attorney's fees payable." If no declaration is provided, the court can determine what, if any amount, it determines to be reasonable based on the presumed services provided. A detailed declaration in conformity with 7.955(b) and, if possible, supporting billing statements from the firm, can assist in the evaluation.
Guardian Ad Litem
A "guardian ad litem" is a person the court appoints to investigate what solutions would be in the best interests of a child or disabled person. Code of Civil Procedure Section 372. A parent can be a guardian ad litem but it is not always a parent. It can be a relative, non-relative, counsel or a governmental agency. A parent, or any other person seeking to represent a minor or the disabled person, cannot file a petition without first being approved by the court for an appointment as the guardian ad litem. While typically a parent is appointed as the guardian ad litem, they must still apply for that role.
Guardians and Conservators
Persons who have been appointed as guardians or conservators in separate proceedings by which they have already received their Letters of Appointment add another layer of complexity to the approval process. There are different types of guardianships and conservatorships: guardianships and conservatorships of the person, the person and the estate, or only the estate. Even within conservatorships, there are sub-divisions, namely a limited conservatorship versus a general conservatorship. Each of these types of guardianships/conservatorships provide for a different scope of authority to the appointed party as it relates to litigation and settlements.
Guardians Ad Litem vs. Conservators/Guardians
It is important to understand that the authority granted to a guardian ad litem may be in contravention of the powers granted to the conservator or guardian. For example, a petition which has been approved for a conservatorship or guardianship of the person may include the power/ability to retain counsel, to file the litigation, and, possibly, the power to enter into the settlement agreement, but, generally, does not include the power/ability to receive the settlement proceeds. The reason being that guardians or conservators of the person do not generally possess the authority to handle financial issues on the conservatee or ward's behalf. Typically, only guardians or conservators of the estate may handle financial matters (i.e., receipt of settlement funds being a financial matter). As such, a guardian ad litem may be exceeding the authority granted by the court in the underlying guardianship/conservatorship cases if the guardian ad litem seeks to make decisions about the settlement proceeds. Probate Code Section 3600 et seq.; Code of Civil Procedure Section 372; Scruton v. Korean Airlines Co., 39 Cal. App. 4th 1596 (2009). Additional proceedings in the underlying conservator/guardian cases may then be required to obtain settlement authority or receive settlement funds. Those additional proceedings may add serious delays to the resolution of the civil matter. Addressing any insufficiency in the scope of authority held by the guardian or conservator before the case reaches the settlement stage may prevent significant delays at the end of the case. Additionally, if a fee waiver was obtained in the underlying guardianship or conservatorship proceedings, reimbursements may be owed upon settlement which needs to be repaid as part of settlement disbursement.
Special Needs Trusts
A person receiving public assistance disability benefits from Social Security, Supplemental Security Income, Medicare or Medicaid is allowed to receive a certain amount of income each year. They are also limited in the amount of money they can have in savings and/or investments. Each year, the beneficiary must submit a financial disclosure form to the appropriate governmental agencies. If a party exceeds the threshold amount, they could be disqualified from receiving some or all of their governmental benefits. The threshold amount that a person can receive changes yearly. If a settlement for a minor or disabled person exceeds the yearly threshold amount allowed, it can disqualify that person from services, or their services are significantly reduced. Gonzalez v. City National Bank, 36 Cal. App. 5th 734 (2019); Conservatorship of Kane, 137 Cal. App. 4th 400 (2006).
A special needs trust allows a minor or disabled person to receive settlement income without reducing their eligibility for governmental benefits. 42 U.S.C. Section 1396(d)(4)(A); California Probate Code Section 3604. A special needs trust can be used to cover a percentage of a person's financial needs that are not covered by the benefits they receive. As the name implies, the trust is established to provide for expenditures such as medical expenses, payments for caretakers, transportation costs and other permitted expenses. So long as the trust is properly maintained and adhered to, the amounts placed in the trust will not disqualify a person for governmental assistance. Shewry v. Arnold, 125 Cal. App. 4th 186 (2004).
The establishment of the special needs trust is a separate procedure and may be handled by different divisions in the court. When dealing with these specialized issues to coordinate all the filings and keep the different bench officers up to date on the status of all the filings. Typically, a settlement that requires a special needs trust will prevent the settlement of the underlying proceeding, as the special needs trust needs to be approved before settling any other portion of the case.
The court desires to resolve all cases in a manner that is fair and equitable and in an expeditious manner. By providing the court will all the necessary information and documentation to achieve that goal at outset, the attorney and the litigants will assist in reaching that goal.