72 The Alabama Lawyer 308 (2011). Settling the Claims of a Minor.

• Author: By William E. Shreve, Jr.

Alabama Lawyer

2011.

72 The Alabama Lawyer 308 (2011).

Settling the Claims of a Minor

Settling the Claims of a MinorBy William E. Shreve, Jr.Lawyers often settle claims of plaintiffs who have yet to reach the age of majority (19)(fn1) and whose disabilities of -J nonage have not been otherwise removed.(fn2) These are commonly known as "pro-ami settlements," in reference to the prochein ami or next friend who brings suit on the minor's behalf. They involve more than merely paying an agreed amount and obtaining a release. This article will attempt to summarize the case law on pro-ami settlements and serve as a guide for attorneys by answering some basic questions about the process of settling a minor's claim.

Why is settling the claim of a minor different than settling the claim of an adult?

A minor lacks capacity to contract. See S.B. v. Saint James School, 959 So. 2d 72, 96 (Ala. 2006). Therefore, a minor cannot enter into a binding settlement. See Hines v. Seibels, 204 Ala. 382, 86 So. 43, 44 (1920); Dacanay v. Mendoza, 573 F.2d 1075, 1080 (9th Cir. 1978); 42 Am. Jur. 2d Infants § 58 (Westlaw 2010). The contract of a minor is voidable at his election during minority or within a reasonable time thereafter, and once disaffirmed is "void ab initio." Standard Motors, Inc. v. Raue, 37 Ala. App. 211, 65 So. 2d 829, 830 (1953). Settlement agreements and releases are no exception; they are subject to disaffirmance like any other contract. See Hines, 86 So. at 44; Dacanay, 573 F.2d at 1080; 42 Am. Jur. 2d Infants § 58. Furthermore, since Ala. Code § 6-2-8 tolls the statute of limitations during minority and allows the minor a period of time after reaching majority to file suit, the minor may disaffirm a settlement and reassert the "settled" claim long after the statute would have otherwise expired.

Thus, a settlement agreement or release executed by a minor is of little or no value, as it leaves the defendant vulnerable to reassertion of the claim whenever the minor chooses.

Can a minor's next friend, parent, attorney or guardian ad litem bind the minor to a settlement and release his claims?

No. While a minor "may sue by [his or her] next friend" under Ala. R. Civ. P. 17(c), the minor is still "the real party to the suit; his rights are those litigated, and [the] recovery belongs to him" and to no one else. Maples v. Chinese Palace, 389 So. 2d 120, 123 (Ala. 1980). Neither the next friend, the minor's parent, the minor's attorney nor a guardian ad litem has authority to bind the minor to a settlement or to release the minor's claim. See Abernathy v. Colbert County Hospital, 388 So. 2d 1207, 1208-1209 (Ala. 1980); Mudd v. Lanier, 247 Ala. 363, 24 So. 2d 550, 558 (1946); Alabama Power Co. v. Hamilton, 201 Ala. 62, 77 So. 356, 360 (1917); Tennessee Coal, Iron and R. Co. v. Hayes, 97 Ala. 201, 12 So. 98, 102-103 (1892); Collins v. Gillespy, 148 Ala. 558, 41 So. 930 (1906); Isaacs v. Boyd, 5 Port. 388, 392-93 (Ala. 1837).

How can a defendant settle a minor's claim and be protected from disaffirmance of the settlement and reassertion of the claim?

This can be done by reaching agreement on settlement with the minor's next friend, notifying the court of the proposed settlement and asking the court to approve the settlement after a hearing. Where a court, after hearing the facts, determines that a proposed settlement is in the minor's best interest and enters judgment approving the settlement, the settlement is binding and enforceable and bars future claims for the same injury. See Maryland Casualty Co. v. Tiffin, 537 So. 2d 469, 471 (Ala. 1988); Large v. Hayes, 534 So. 2d 1101, 1105 (Ala. 1988); Chambers County Comm'rs v. Walker, 459 So. 2d 861, 866-68 (Ala. 1984); Tennessee Coal, Iron and R. Co., 12 So. at 103; 43 C.J.S. Infants § 335 (Westlaw 2009).

What kind of hearing and determination are necessary for valid court approval?

Minors are said to be "wards of the court," entitled to the court's protection. See Stone v. Gulf Am. Fire and Cas. Co., 554 So. 2d 346, 361 (Ala. 1989). Courts have the power and duty to determine that any settlement of a minor's claims is in the minor's best interest. See Large, 534 So. 2d at 1105; Abernathy, 388 So. 2d at 1208-09; Tennessee Coal, Iron and R. Co., 12 So. at 103. More than mere pro-forma approval of the settlement is necessary: "Before [a pro-ami] settlement can be approved, there must be a hearing, with an extensive examination of the facts, to determine whether the settlement is in the best interest of the minor." Large, 534 So. 2d at 1105. If the required hearing is not conducted, the settlement is subject to being set aside in an independent action or on a motion under Ala. R. Civ. P. 60(b). See id.; Abernathy, 388 So. 2d at 1208-09; Burke v. Smith, 252 F.3d 1260, 1263, 1265-66 (11th Cir. 2001).

Large v. Hayes, 534 So. 2d 1101 (Ala. 1988) illustrates a settlement properly approved after a hearing. The suit was a medical-malpractice case involving injuries to a minor causing brain damage and total disability. The trial court heard testimony by the minor's parents, observed the minor in court, viewed a "day in the life" videotape and reviewed the depositions of the minor's parents and five physicians. After considering the evidence regarding the minor's injuries and the dispute as to liability, the court determined the proposed settlement was in the minor's best interest, approved the settlement and entered judgment for the minor based on the terms of the settlement. When the minor's guardian ad litem later challenged the attorney's-fee provisions of the settlement in a collateral proceeding, the Alabama Supreme Court held that since the trial court approved the settlement, including the attorney's fees, after a hearing, the judgment was immune from collateral attack. Id. at 1105-07.

Abemathy v. Colbert County Hospital, 388 So. 2d 1207 (Ala. 1980) and Burlington Northern Railroad Co. v. Warren, 574 So. 2d 758 (Ala. 1990) are examples of cases where parties failed to obtain valid court approval. In Abemathy, the purported settlement was "summarily approved without a hearing" and a consent judgment entered in favor of the minor for the settlement amount M, 388 So. 2d at 1208. The supreme court held the trial court erred in denying the minor's motion to vacate the judgment Id. at 1209. In Burlington Northern, a death case under the Federal Employers Liability Act, the trial court held a hearing in chambers at which the mother of the minor beneficiaries of the decedent's estate testified concerning her understanding and approval of the settlement, but the court "did not focus on whether the proposed settlement would be in the best interest of the children." Id., 574 So. 2d at 762. The supreme court, in dicta, stated this was insufficient to approve the settlement. Id. at 761-62.

The supreme court has emphasized that the trial court must make the final determination as to whether the settlement is in the minor's best interest, regardless of any agreement by the minor's next friend. In Tennessee Coal, Iron and Railroad Co. v. Hayes, 97 Ala. 201, 12 So. 98 (1892), the court stated:

[The next friend's] mere consent is nugatory. It is as if it were not, and had never been. The court may, upon being advised of the facts, upon hearing the evidence, enter up a valid and binding judgment for the amount so attempted to be agreed upon; but this is not because of the agreement at all-that should exert no influence-but because it appears from the evidence that the amount is just and fair, and a judgment therefore will be conservative of the minor's interests.

Tennessee Coal, Iron and R. Co., 12 So. at 103. Since the next friend's consent is "nugatory," a court could conceivably approve a defendant's offer of settlement over the next friend's objection if it found the terms proposed to be in the minor's best interest. See Dacanay, 573 F.2d at 1080; 42 Am. Jur 2d Infants § 188 (Westlaw 2010). The Tennessee Coal case in effect makes the defendant the offeror and the court the offeree as to the settlement, since it is the court that must "accept" the offer of settlement.

What is the effect of settlement approved after a hearing?

"A compromise approved by the court is valid and binding, and an approved settlement of a claim...bars a subsequent action...to recover for the same injuries." 43 C.J.S. Infants § 335 (Wesdaw 2009). See Chambers County Comm 'rs, 459 So. 2d at 864-66. The judgment approving the settlement is immune from collateral attack. See Large, 534 So. 2d at 1105. "[A] minor fully represented in court...is bound by a valid judgment in the same maimer as any other party." Wheeler v. First Ala. Bank, 364 So. 2d 1190, 1200 (Ala. 1978).

Is it necessary for the court to appoint a guardian ad litem to represent the minor's interest?

No, it is not, as long as the minor has a lawyer, and as long as the next friend has no conflict of interest and is adequately representing the minor's interest. But the parties may wish to have a guardian ad litem appointed, or the court may decide to appoint one, even though not required.

A guardian ad litem is "a special guardian appointed by the court in which the particular litigation is pending to represent an infant, ward or unborn person in that particular litigation." Sharp V. Hanceville Nursing Home, Inc.,119 So. 2d 243, 244 (Ala. Civ. App.), cert, denied (Ala. 1998) (quoting from Black's...