DEBENEDETTI INVESTMENT ASSOCIATES v. CIRCRAFT INCORPORATED, et al.

Background

DeBenedetti Investment Associates sued several defendants over alleged contamination of property it owns. Circraft Incorporated, the Estate of Lee Adams, and the Estate of Anne Adams had not appeared in the litigation. The remaining parties entered into a settlement agreement and asked the court to do two things: appoint the Clerk of Court as an elisor to sign the agreement for Circraft and the two Estates, and determine that the settlement was made in good faith under California law.

Request to Appoint an Elisor for Circraft

The court found no identified legal basis, and no basis apparent to the court, for a federal court to appoint an elisor to sign a release for a party that had not appeared and was not before the court. The settling parties argued that Circraft had been properly served. The court stated that this appeared accurate: Circraft was listed as suspended, but a suspended corporation may still be sued and served in the same manner as another corporation. The court also stated that service on Circraft through Charles Young, whom available records identified as the company’s secretary and chief financial officer, appeared permissible.

The court further stated that Circraft appeared to have defaulted by not appearing or responding to the complaint. But proper service and a possible default did not authorize the court to sign a settlement agreement for Circraft. The court said that if the parties wanted to prevent Circraft from asserting counterclaims or cross-claims based on the events in the case, the proper procedure was to seek default judgment.

Request to Appoint an Elisor for the Estates

DeBenedetti served insurance providers for the Estates rather than serving estate representatives. The court explained that California law permits an action establishing a deceased person’s liability, when insurance protects against that liability, to proceed against the estate without joining the personal representative or successor in interest. But when an estate representative is not joined, a judgment does not adjudicate rights by or against the estate; the plaintiff may instead pursue damages within the insurance limits and coverage.

The court concluded that these provisions did not authorize signing settlement agreements for the Estates, particularly because the proposed releases extended beyond the insurance assets involved in the litigation. The releases would have caused the Estates to lose rights to pursue broader claims related to the alleged contamination and the property. California Code of Civil Procedure section 664.6, which allows an insurer to sign a settlement agreement for an insured in certain circumstances, did not change the result. The court stated that the provision did not allow an insurer to bind an insured regarding future claims in a different lawsuit.

The court acknowledged DeBenedetti’s efforts to locate representatives of the Estates. It stated that DeBenedetti might be able to satisfy the standards for service by publication. If the Estates still did not appear after publication, the court said default judgment could then be sought. The court found no basis to bypass ordinary service and default-judgment procedures or to sign releases for parties who had not appeared or had an opportunity to object.

Ruling

The court denied the motions to appoint the Clerk of Court as an elisor for Circraft and the Estates. The settlement agreement was contingent on that appointment. Because the court denied the elisor requests, it denied as moot the motion asking for a determination that the settlement was made in good faith. The order did not decide the underlying contamination claims.