Trial Court Has Authority to Determine Reasonable Settlement Amount

Meadow Valley Owners Ass'n v. St. Paul Fire & Marine Ins. Co. (April 9, 2007)
Plaintiff and defendants in a construction defect case stipulated to a covenant judgment that included $2.4 million in attorney's fees. The trial court held a reasonableness hearing and defendants' insurers, which had intervened in the lawsuit, opposed the reasonableness of the settlement. The trial court determined that $2.4 million in attorney's fees was unreasonable and that a reasonable amount of attorney's fees would be $1.6 million. Plaintiff and defendants entered into a new stipulated judgment including $1.6 million in attorney's fees.

Defendants' insurers appealed, arguing that the trial court lacked authority to determine the reasonable amount of attorney's fees because RCW 4.22.060(3) provides in part that the court shall not make any adjustment in the amount paid between the parties to the agreement. The court of appeals affirmed. The court held that, under RCW 4.22.060(2), if a trial court determines that the amount of a settlement agreement is unreasonable, the trial court must determine a reasonable amount. The court held that, in doing so, the trial court does not change the parties' agreement: " [A]fter the court determines that a settlement amount is unreasonable, neither RCW 4.22.060 nor caselaw precludes the parties from then agreeing to entry of a new stipulated judgment in the amount the court determined would be reasonable."