dissenting:
Whether the settlement agreements at issue here were made in good faith within the meaning of section 2(c) of the Contribution Act (740 ILCS 100/2(c) (West 1994)) was a matter for the trial court’s discretion. In re Guardianship of Babb, 162 Ill. 2d 153, 162 (1994). Unlike my colleagues, I do not believe that the trial court abused its discretion when it held that the settlement agreements challenged by Litgen were made in good faith. I would therefore affirm the trial court’s judgment and reverse the judgment of the appellate court.
When a settling tortfeasor can establish that the settlement was supported by consideration, that is prima facie evidence of the settlement’s good faith. See Solimini v. Thomas, 293 Ill. App. 3d 430, 437 (1997). Once a preliminary showing of good faith is made, a presumption arises that the settlement is valid. The burden then shifts to the party challenging the settlement to show that it was not made in good faith. Wilson v. Hoffman Group, Inc., 131 Ill. 2d 308, 318-19 (1989). As the Second, Third, Fourth and Fifth Districts of the appellate court have each held, the absence of good faith must be established by clear and convincing evidence. See Warsing v. Material Handling Services, Inc., 271 Ill. App. 3d 556, 560 (2d Dist. 1995); Alvarez v. Fred Hintze Construction, 247 Ill. App. 3d 811, 816 (3d Dist. 1993); Bunge Corp. v. Northern Trust Co., 252 Ill. App. 3d 485, 505 (4th Dist. 1993); Higginbottom v. Pillsbury Co., 232 Ill. App. 3d 240, 249 (5th Dist. 1992).
The settling tortfeasors in this case clearly made a prima facie showing of good faith. The settlement agreements were supported by millions of dollars in consideration. Those agreements were therefore presumptively valid, and the burden was on Litgen to establish, by clear and convincing evidence, that the agreements had not, in fact, been made in good faith.
In assessing good faith under the totality-of-the-circumstances analysis, a court should consider whether the agreement is consistent with the terms of and the policies underlying the Contribution Act. An agreement that conflicts with the Act’s provisions or its underlying policies will not satisfy the good-faith requirement and cannot discharge the settling tortfeasor from contribution liability. Babb, 162 Ill. 2d at 170.
Our court has recognized two policies that support the Contribution Act: (1) the promotion of settlement, and (2) the equitable sharing of damages. Babb, 162 Ill. 2d at 171. Litgen asserts that the assignment provisions in the agreements at issue here, for which the settling defendants paid nearly $4.5 million in additional compensation, defeat both policies. They do not.
Nothing about any aspect of the contested assignments can fairly be claimed to have discouraged litigants from coming to the bargaining table and resolving their differences prior to trial. For all parties, the effect of the assignments was to facilitate rather than impede the settlement process. By affording plaintiffs the opportunity to obtain additional sums in exchange for assignment of their causes of action against the nonsettling defendants, the agreements provided an extra inducement for plaintiffs to settle. By giving defendants an opportunity they would not otherwise have had to recover money damages from their nonsettling codefendants, the agreements offered defendants additional incentive to settle. From each side, the assignments thus promoted settlement.
There is likewise no merit to the contention that the assignment agreements will apportion the burden of damages among defendants in a way which is not equitable.
Although the agreements may ultimately enable the settling defendants to recover damages from Litgen, their ability to recover is contingent on the outcome of trial. If Litgen prevails and they lose, their recovery will be nothing and they, rather than Litgen, will bear the full weight of plaintiffs’ loss. Even if they do prevail, the recovery will scarcely constitute a windfall. To the extent that the settling defendants succeed in obtaining any money damages, it will be because they were willing to bear the full risk and expense of prosecuting the claims and paid millions of dollars in advance, without recourse, for the right to do so.
There is no unfairness in this for Litgen. Litgen could have settled too, but chose not to, as was its right. While the company still faces litigation, its position is no different than it would have been had the settlements not included the assignments and plaintiffs prosecuted their claims against it directly. In either instance, Litgen would not be permitted to recover contribution from the settling defendants, but would be able to claim a setoff against any judgment entered against it for the amount stated in the settlement agreements between plaintiffs and the settling defendants or the actual amount paid by the settling defendants in consideration for the release of the settling defendants from liability, whichever is greater. 740 ILCS 100/2(c) (West 1996). Litgen would be entitled to such a setoff and will be entitled to such a set-off if judgment is ultimately entered against it even if the resultant monetary award is thereby reduced to zero dollars. Pasquale v. Speed Products Engineering, 166 Ill. 2d 337, 368 (1995).
My colleagues’ concern that Litgen’s potential setoff might be inadequate is premature. Whether Litgen is entitled to any setoff is dependent upon the outcome of the trial, which has yet to occur. If Litgen’s defense is unsuccessful and it needs to claim a setoff against the judgment entered against it, the amount of the setoff will be a matter for the trial court to determine. If Litgen is dissatisfied by the amount of the setoff allowed by the trial court, it can raise the issue by appeal at that time.
Even if the adequacy of the potential setoff were properly before us, my colleagues’ concerns would be misguided. The problem with their analysis is that it overlooks the clear and unambiguous wording of section 2(c) of the Act. While the terms of the settlement agreements at issue here allocate only half of the total consideration paid to the settlement, section 2(c) makes clear that the phrasing of the agreements is not controlling. If the trial court ultimately determines that the full $9 million should be attributed to the settlement and therefore represents “the amount of consideration actually paid,” it may allow the full $9 million as a setoff, notwithstanding the fact that the terms of the agreements purport to allocate only $4.5 million to the settlement.
For Litgen, the principal risk of being the sole remaining nonsettling defendant is that even after setoff for the amounts paid by the other defendants in settlement, the judgment could be so large that it will end up paying an amount disproportionally higher than its actual comparative fault. Again, however, that potential result is unrelated to the fact that plaintiffs have assigned their causes of action to settling defendants. It would exist even if plaintiffs retained their claims and prosecuted them personally.
The settlement agreements in this case are not subject to challenge based on this court’s decision in Babb, 162 Ill. 2d 153. Babb held that a settlement agreement could not be regarded as having been made in good faith within the meaning of the Contribution Act where it was the product of collusion and included a loan-receipt provision. Our opinion expressly noted that we were overturning the trial court’s finding of good faith based on “the unique facts of th[e] case” (Babb, 162 Ill. 2d at 163). We further held that “our conclusion that loan-receipt agreements may not be considered good-faith settlements” applied only to that case and to settlement agreements executed after September 29, 1994, the date the opinion was filed.
The matter before us today involves assignments of causes of action for property damage, not loan-receipt agreements in a personal injury case, and Illinois law has long recognized the validity of assignments of claims for compensatory damages for damage to property. Grunloh v. Effingham Equity, Inc., 174 Ill. App. 3d 508, 518 (1988). The agreements here were all executed and approved before the September 29 date specified in Babb, 162 Ill. 2d at 179. In addition, there is nothing in this case comparable to the collusion condemned in Babb. Unlike Babb, this litigation was under way when the good-faith finding was sought, no effort was made here to misrepresent the terms of the agreements to the court, and opposing counsel were fully involved in the hearings on the agreements’ good faith.
For the foregoing reasons, I would hold that the circuit court did not abuse its discretion when it held that the settlement agreements at issue here had been made in good faith. The judgment of the appellate court should therefore be reversed, and the judgment of the circuit court should be affirmed.
JUSTICES FREEMAN and KILBRIDE join in this dissent.