Abbey/Land, LLC v. Glacier Constr. Partners, LLC
2019 MT 19
Mont.2019Background
- Abbey (sole owner) controlled both Abbey/Land (owner) and Glacier (general contractor). Glacier performed only this project; contract initially limited damages and required arbitration.
- Subcontractor Interstate sued/arbitrated; Glacier recovered limited arbitration award and then shifted to defendant position; Abbey/Land filed suit in state court seeking consequential and punitive damages.
- Glacier and Abbey/Land coordinated strategy closely; counsel for Glacier (Cushman) pushed for stipulated confession of judgment by Glacier in favor of Abbey/Land for $12 million, with assignment of Glacier’s rights against insurers and covenant not to execute.
- James River (Glacier’s insurer) denied coverage and sought to intervene to challenge the reasonableness and possible collusion behind the confessed judgment. This Court remanded (Abbey/Land I) for a reasonableness/collusion hearing.
- On remand the District Court found the $12M judgment unreasonable and product of collusion, reduced the amount to ~$2.43M (rather than dismissing), and awarded James River fees and costs; this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the $12M confessed judgment reasonable? | Abbey/Land: judgment reflected damages and was presumptively enforceable; the court should respect the settlement. | James River: amount was unsupported by evidence and inflated. | Court affirmed: $12M was unreasonable given likely trial recoverable damages and evidentiary weaknesses. |
| Was the settlement collusive? | Abbey/Land/Glacier: shared ownership and open process are not per se collusion; conduct was permissible practice. | James River: coordinated conduct, amendment to contract to expand recovery, silencing defenders, and counsel incentives show collusion. | Court affirmed collusion finding: parties acted to inflate recovery and undermine an arms-length settlement. |
| Appropriate remedy after finding collusion — reduce judgment or dismiss? | Abbey/Land: court may fashion a revised reasonable judgment (citing some authority). | James River: collusion warrants dismissal with prejudice. | Court reversed District Court: dismissal with prejudice required; reduction was abuse of discretion under facts. |
| Are attorney fees and costs recoverable by James River? | Abbey/Land/Glacier: fees not allowed under equitable or insurance exceptions to American Rule; fee award improper or excessive. | James River: fees proper under UDJA §27-8-313 as necessary relief to challenge collusive judgment. | Court affirmed authority to award fees under §27-8-313 (UDJA), remanded to reduce fees by stipulated amount; costs remanded to conform to §25-10-201. |
Key Cases Cited
- Abbey/Land LLC v. Interstate Mech., Inc., 378 Mont. 372 (Mont. 2015) (remanded to allow insurer to challenge reasonableness/collusion)
- Tidyman's Mgmt. Servs. Inc. v. Davis, 376 Mont. 80 (Mont. 2014) (insurer bears burden to show unreasonableness/collusion and court must review reasonableness)
- Tidyman's Mgmt. Servs. Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 384 Mont. 335 (Mont. 2016) (standards for assessing stipulated judgment reasonableness)
- Indep. Milk & Cream Co. v. Aetna Life Ins. Co., 68 Mont. 152 (Mont. 1923) (insurer must rebut presumption that recovery was in good faith)
- Foy v. Anderson, 176 Mont. 507 (Mont. 1978) (limited equitable exception to American Rule for attorney fees)