The Seventh Circuit Applies The Erie Doctrine To Minor Settlements

For the purposes of the Erie doctrine, which directs federal courts sitting in diversity to apply state substantive law and federal procedural rules, "damages law is substantive law," and that includes the law that governs judicial approval of settlements with minors, according to In re Williams, Bax & Saltzman, P.C., No. 13-2434 (Nov. 5, 2015), a recent decision from the Seventh Circuit written by Judge Diane S. Sykes.*

In so holding, the Seventh Circuit joined a handful of other federal courts that have reached the same conclusion.

Williams, Bax represented the plaintiff in a personal-injury case, and the firm appealed from a decision of the U.S. District Court for the Northern District of Illinois that had restructured the calculation of the firm's contingency fee based on the district court's concern that the law firm had received too much of a proposed settlement and the minor plaintiff too little. Williams, Bax insisted that its fee ought to be calculated, as provided for in its engagement agreement, as one-third of the total recovery. The district court thought that "fairness and right reason" required otherwise, so it reduced the fee by calculating it as one-third of the settlement after costs.

The district court's incantation of "fairness and right reason" was insufficient under Illinois law, the Seventh Circuit determined, to justify modifying a freely negotiated contract (and so it reversed and remanded), but the antecedent question was whether the federal court could look to Illinois law in the first place.

Northern District Local Rule 17.1 requires "written approval by the court" before a...