Opposition Brief — Ernst & Young v. Rhode Island Depositors Economic Protection Corp.

No. 95-445

IN THE

Supreme Court of the Gnited States

October Term, 1995

ERNST & YOUNG LLP,

Petitioner,

v

RHODE ISLAND DEPOSITORS ECONOMIC PROTECTION

CORPORATION, ET ALS.,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF RHODE ISLAND

BRIEF OF THE FORMER DIRECTORS OF BROWN

UNIVERSITY EMPLOYEES CREDIT UNION

IN OPPOSITION

JAMES E. CARROLL

Counsel of Record

SHELIA HIGH KING

KIRSTEN M. LACOVARA

PEABODY & ARNOLD

One Citizens Plaza, Suite 840

Providence, RI 02903

(401) 831-8330

Attorneys for Respondents

BATEMAN & SLADE, INC. BOSTON, MASSACHUSETTS

ee ee ee ee Te at

QUESTIONS PRESENTED

1. Whether the court below properly held that a

retroactive state statute does not offend the Due Process Clause

of the Fourteenth Amendment, where (a) the statute was enacted

subsequent to a banking crisis which affected the public welfare

and gave rise to an avalanche of lawsuits against more than 100

alleged tortfeasors who may have contributed to the crisis; (b)

the statute was enacted for the legitimate public purpose of

facilitating settlement of the lawsuits in order to minimize state

taxpayers’ liability for the depositor bailout; (c) that legitimate

public purpose is furthered by the statute's alteration of a non-

settling joint tortfeasors' right to seek contribution from settling

parties to induce alleged tortfeasors to seek finality of litigation;

and (d) every alleged tortfeasor to whom the statute may apply

has equal opportunity to gain the benefit of the statute and avoid

its potential harshness.

ys Whether the court below properly held that Ernst

& Young was afforded due process when Ernst & Young had (a)

notice and an opportunity to be heard in the state legislature

prior to the enactment of the retroactive statute and (b) notice

and an opportunity to be heard in the state court in the

settlement approval hearings.

ii

PARTIES TO THE PROCEEDINGS

Petitioner Ernst & Young LLP was a third-party

defendant in the proceeding below. Edward T. Broadmeadow,

Alfred J. Corso, Larry D. Davidson, Stephen B. Forman,

Robert R. Fournier, Geoffrey B. Hopper, Keith R. Phillips, and

Michael A. Rizzo -- all present or former partners or employees

of Ernst & Young LLP -- were also third-party defendants

below.

Respondents Rhode Island Depositors Economic

Protection Corporation and Edward D. Pare, Jr., Receiver of

Brown University Employees Credit Union, were plaintiffs

below.

Respondents Wilhelmina Brown, George R. Cabral, Don

Desrochers, Patricia J. Dodd, Walter Feldman, Douglas

Figueiredo, Judy A. Lux, Robert Santilli, Michael Sheehan,

Anthony Tanzi, Dorothy Testa, Debra Marisi Viau, John Doe

and Jane Doe -- all former directors of Brown University

Employees Credit Union -- were defendants and third-party

plaintiffs below.

eee

TABLE OF CONTENTS

QUESTIONS PRESENTED .......cccccccccccces

PARTIES TO THE PROCEEDINGS ..............

pe EN Eee

I ag 5 9g Gs dao he G04 05g De * 8s

CONSTITUTIONAL AND STATUTORY

PROVEISGUNS INVOLVED ..........0cccccccees

I. THE DECISION OF THE RHODE

ISLAND SUPREME COURT IS

CORRECT BECAUSE THE

RETROACTIVE OPERATION

OF THE ACT FURTHERS A

LEGITIMATE GOVERNMENTAL

PURPOSE OF FACILITATING

SETTLEMENT OF THE VAST

AND COMPLEX LITIGATION

ARISING OUT OF THE STATE'S

CREDIT UNION CRISIS .................

iV

TABLE OF CONTENTS - Continued

Page

A. The Act Comports With The

Requirements of Due Process ............ 8

1. A Legitimate Public Purpose Furthered

By Rational Means Justifies The Act ...... 8

2. The Act Does Not Constitute Arbitrary And

Unreasonable Governmental Action ..... 10

B. The Strong Incentive For Settlement Created

By Affording Settling Alleged Joint Tortfeasors

Contribution Protection And Posing The

Prospect Of Non-Settling Joint Tortfeasors

Paying More Than Their Proportionate Share

Of Liability Justifies The Retrospective

a ee ee 11

Il. THE ALLEGED CONFLICT BETWEEN

THE DECISION BELOW AND THAT

OF THE VIRGINIA COURT IN

SHIFLET IS PROSPECTIVE AND

DOES NOT JUSTIFY FURTHER

CUTE SECA A ae eile ow wee 4

Ill. ERNST & YOUNG HAS HAD AMPLE

OPPORTUNITY TO BE HEARD .......... 15

CALMED 5 nc occ 0 eben CAE ea 17

Vv

TABLE OF AUTHORITIES

Page

Cases:

Day-Bright Lighting, Inc. v. Missouri, 342 U.S. 421

aE Eh a eh oe hay gree Q

Ernst & Young LLP v. Depositors Economic Protection

Comp, 45 F.3d S30 (ist Cie. 1995)... . 2 5 eee 6

General Motors Corp. v. Romein, 503 U.S. 181

OA ar ee a a ere 8

Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975) ...... 15

Grannis v. Ordean, 234 U.S. 385 (1914) ......... 16

In re Jiffy Lube Securities Litig., 927 F.2d 155

EE TE tS at a a ae 15, 16

Landgraf v. USI Film Prods., 114 S. Ct. 1483

CE 6 i ey Oe ee eee Ce 8 8

In re Master Mates & Pilots Pension Plan, 957 F.2d

I re ey 15

McDermott, Inc. v. AmClyde, 114 S. Ct. 1461

ED 60k elon bee Ea ae eee ea 10, 11

Minnesota v. Clover Leaf Creamery Company,

Cee ns SD I koh kool alae aka he ec 9

vi

TABLE OF AUTHORITIES - Continued

Page

Cases:

Millane v. Central Hanover Bank & Trust Co.,

Sa Us ee ee ok eo we 8 owe ss oe 16

Pension Benefit Guaranty Corp. v. R.A. Gray & Co.,

467 UB. Fir Cae Pas & 0s SS Fa a e's 8, 9, 10

Rhode Island Depositors Economic Protection Corp.

v. Brown (In Re: Advisory Opinion to the Governor),

CP A.2G we Gs SOU 60 6s Wi wee eRS passim

Shiflet v. Eller, 228 Va. 115, 319 S.E.2d

Tae COS Swe ea RS CR eR BW ete 14

Smithfield Concerned Citizens v. Town of

Smithfield, 907 F.2d 239 (ist Cir. 1990)........ 10

TGB, Inc. v. Bendis, 36 F.3d 916 (10th Cir. 1994) ... 13

United States v. Cannons Engineering Corp.,

Gee P28 79 CE Ca. Foi so ben vee ds és 12

United States v. Carlton,

te Me Fl a ere 8, 9, 10

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1

i ere re ee 8, 12

Vii

TABLE OF AUTHORITIES - Continued

Page

Constitutional Provisions:

US. Const. cmmend, AMV, 9 1 ww cee passim

BE Cs Ge FE OF ook 6 os Keb ca rwsiene 2

Statutes:

a Oe SE nh ees 6a es Ke ee 2

RI. Gen. Laws § 9-24-27 (1993) .. 0... eee 2

RI. Gen. Laws § 42-116-12(i) (1993) .. 2... 6 65s. 3,4

RI. Gen Laws § 42-116-40 ©... 0.0.0... eee ees passim

No. 95-445

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1995

ERNST & YOUNG LLP,

Petitioner,

V.

RHODE ISLAND DEPOSITORS ECONOMIC PROTECTION

CORPORATION, et als.

Respondents.

On Petition for Writ of Certiorari to the

Supreme Court of Rhode Island

BRIEF OF THE FORMER DIRECTORS OF BROWN

UNIVERSITY EMPLOYEES CREDIT UNION

IN OPPOSITION

TO THE HONORABLE SUPREME COURT:

The respondents Wilhelmina Brown, George R. Cabral, Don

Desrochers, Patricia J. Dodd, Walter Feldman, Douglas

Figueiredo, Judy A. Lux, Robert Santilli, Michael Sheehan,

Anthony Tanzi, Dorothy Testa, Debra Marisi Viau, John Doe

and Jane Doe, the former Directors of Brown University

Employees Credit Union (the "Brown Directors"), respectfully

2

request that this Court deny the Petition for Writ of Certiorari

submitted by Ernst & Young LLP.

OPINIONS BELOW

On May 19, 1995 the Rhode Island Supreme Court answered

questions transmitted by the state Governor and those certified

by the Superior Court Justice on the constitutionality of a state

statute, in the negative and held that the state statute is

constitutional. The Rhode Island Supreme Court Opinion is

reported at 659 A.2d 95 and is reproduced in the Appendix to

Ernst & Young LLP's Petition for Certiorari (hereinafter

referred to as "App.") (App.la.). The opinion and the order of

the Superior Court certifying the questions are unreported;

however, the opinion and order are reproduced in the Appendix

to Ernst & Young LLP's Petition for Certiorari. (App.21a, 26a.)

STATEMENT OF JURISDICTION

The jurisdiction of this Court is invoked under 28 U.S.C.

§ 1257(a).

The jurisdiction of the Rhode Island Supreme Court was

invoked pursuant to Article 10, Section 3 of the Rhode Island

Constitution and R.I. Gen. Laws 1956 (1993 Reenactment)

§ 9-24-27.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

In addition to those constitutional and statutory provisions

cited by the Petitioner, the Brown Directors submit the following

to this Court:

3

Section 42-116-12(i) of the Rhode Island General Laws

provides in relevant part:

(1) All net proceeds of litigation, (after payment of

all legal fees, costs and expenses arising in connection

therewith) whether by settlement or suit, prosecuted

by an eligible institution, the receiver of an eligible

institution and/or the corporation, shall be paid to the

corporation and shall be utilized as follows:

(i) To pay the guaranteed balances in accordance

with subsection (e)(3); and

(ii) After the guaranteed balances have been paid in

full, to pay the loan obligations or bond indebtedness

of the corporation.

(2) The term "litigation," for purposes of this

subsection shall mean all rights, claims and causes of

action against:

(i) Any eligible institution;

(ii) The Rhode Island Share and Deposit Indemnity

Corporation;

(iii) And/or any officers, directors, employees,

accountants, attorneys, appraisers, consultants,

agents, or providers of professional services to the

institution and/or the Rhode Island Share and Deposit

Indemnity Corporation.

STATEMENT OF THE CASE

In 1991, the Rhode Island General Assembly enacted

emergency legislation establishing respondent Rhode Island

Depositors Economic Protection Corporation ("DEPCO"), a

public corporation, in response to the collapse of the private

deposit and indemnity insurer of 45 credit unions and financial

institutions. (App.3a.) Funded by the Rhode Island taxpayers,

4

DEPCO was created to bail-out thousands of depositors whose

funds had been frozen on January 1, 1991 when the then

Governor of Rhode Island proclaimed a banking emergency and

ordered the closing of the insolvent Rhode Island Share and

Deposit Indemnity Corporation ("RISDIC") and the institutions it

insured, including the not-for-profit Brown University

Employees Credit Union ("Brown"). (App.3a.) In addition, the

comprehensive scheme of the DEPCO legislation created a new

receivership law for credit unions and financial institutions;

obligated DEPCO to liquidate the assets of RISDIC and fourteen

credit unions and financial institutions which did not reopen; and

authorized DEPCO to pursue claims against alleged tortfeasors

who contributed to the banking crisis. (App.3a.) The

legislation mandated DEPCO to repay deposits, loan obligations

and bond indebtedness from the net proceeds of litigation. See

R.I. Gen. Laws § 42-116-12(i).

Armed with statutory authority, DEPCO asserted a variety

of claims against a plethora of borrowers and former officers,

directors and staff of RISDIC and the closed credit unions

(including the Brown Directors) as well as against numerous

professionals who had rendered expert services to RISDIC and

the credit unions including, but not limited to, accountants such

as Ernst & Young LLP ("Ernst & Young"). (App.4a, 23a.)

Additionally, depositors filed over 170 complaints in the state

court against the various directors, officers and staff of the

closed institutions. On February 20, 1992, DEPCO, the

permanent receivers of each of the closed institutions and other

plaintiffs, filed a complaint against Ernst & Young in state court

alleging negligence, breach of contract and negligent

misrepresentation. The banking crisis spawned an ocean of

lawsuits. (App.4a.) DEPCO opened settlement discussions and

subsequently made demands on alleged joint tortfeasors in an

attempt to collect its alleged damages.

5

In the ensuing months and years, DEPCO's settlement

demands were spurned by the alleged tortfeasors because

DEPCO would not agree to provide unlimited indemnification to

those who were likely to be sued for contribution. In 1993, the

Rhode Island Geneiral Assembly amended the DEPCO statutory

scheme with a retroactive’ statute (the"Act") designed to

facilitate and promote settlement of the DEPCO claims against

alleged tortfeasors by affording contribution protection to

persons who resolve their liability with DEPCO in a judicially-

approved good faith settlement. (App.4a, 5a.) Under the Act, a

non-settling joint tortfeasor is liable for the full judgment amount

of damages awarded against such tortfeasor less a pro fanto

reduction equivalemt to the settlement amount. In effect, the Act

encourages settlements by (1) giving the alleged joint tortfeasors

that settle first an Opportunity to settle for less than the full

amount of their poitential joint liability without the risk of

lawsuits from non-settling parties for contribution and (2)

exposing non-settling joint tortfeasors to the possibility of

bearing a disproportionate share of liability.

Less than a month following the Act's enactment, Ernst &

Young filed a declaratory judgment action in the Federal District

Court for the District of Rhode Island seeking a declaration that

the Act is unconstitutional. (App.5a.) Ernst & Young appealed

from the District Court's dismissal of the complaint on ripeness

, The Brown Directors argued below that the Act does not operate

in a retroactive manner because the Act has a prospective affect on inchoate

contribution claims; te statute does not increase any person's liability

(inasmuch as there is joint and several liability) and the statute imposed no

new duties on any person. See Brief of Certain Former Brown Directors and

Officers of Brown University Employees Credit Union as Proponents of the

Constitutionality of Rhode Island General Laws § 42-116-40 at 13-14. The

Rhode Island Supreme Court rejected this argument. (App. 12a.)

6

and abstention grounds, and the United States Court of Appeals

for the First Circuit affirmed noting that in order for Ernst &

Young to be harmed by the operation of the Act, among other

things, Ernst & Young must be found to have been negligent; its |

negligence must be found to have caused or contributed to the

damages; a court must find it liable for an amount greater than

Ernst & Young's ratable share of the damages and order Ernst

& Young to pay the same, Ernst & Young LLP v. Depositors

Economic Protection Corp., 45 F.3d 530, 538 n.11 (ist Cir.

1995).

On September 29, 1994, more than a year after the passage

of the Act, DEPCO filed a complaint against the Brown

Directors in state court. The Brown Directors answered the

complaint, denied DEPCO's allegations and asserted their

affirmative defenses. The Brown Directors filed a third-party

complaint against Ernst & Young and certain of its current and

former partners. On October 14, 1995, the Brown Directors

moved the state court to certify questions of the Act's

constitutionality to the state Supreme Court. On October 17,

1994, DEPCO moved for approval of a settlement between it,

the Permanent Receiver for Brown University Employees Credit

Union and the Brown Directors. (App. 2a.) On the same date,

DEPCO moved to certify questions, as well. (App.2a.) The

Superior Court overruled Ernst & Young's objections (App.22a,

24a); approved the settlement (App.25a, 26a, 27a); and granted

the motion to certify the questions (App.25a, 26a, 27a). Ina

separate proceeding, the Governor of Rhode Island requested an |

advisory opinion pursuant to Rhode Island law on the Act's |

constitutionality. (App.2a, 3a, 26a, 27a.) The state Supreme

Court consolidated the proceedings and after entertaining full

briefing and hearing oral argument, responded to the

consolidated matters upholding the constitutionality of the Act in

7

the opinion from which Ernst & Young seeks review. (App.2a,

3a.)

REASONS FOR DENYING THE PETITION

The opinion below does not warrant review. The Rhode

Island Supreme Court held that the retroactive operation of the

challenged Act does not offend the Due Process Clause of the

Fourteenth Amendment to the United States Constitution because

(1) a rational basis exists for the Act--the promotion of

settlement which permits the cost efficient and expeditious

collection of damages from alleged tortfeasors to reimburse

DEPCO and the Rhode Island fisc for the depositor bailout

before funds available to pay damages under defense-within-

limits insurance policies are depleted; and (2) a legitimate public

purpose is furthered by affording settling alleged joint tortfeasors

protection from contribution claims by non-settling joint

tortfeasors who risk the burden or benefit of a pro tanto set-off

of their adjudged liability by the settlement amount.

Ernst & Young's sally that Rhode Island "rigged the rules"

against it by passing the Act is the unfortunate remnant of

petitioner's bias. Such a conclusion ignores the magnitude of

the fiscal crisis that engulfed the state when the credit unions

closed and the flood of litigation that ensued. The Rhode Island

General Assembly's informed decision to fashion a remedy that

would facilitate settlement of hundreds of lawsuits with all of the

alleged tortfeasors involved in the credit union litigation belies

any assertion of an improper motive of targeting the petitioner.

Petitioner is just one of many alleged tortfeasors sued in

hundreds of cases. Petitioner's decision not to settle and gain

the benefit of the Act gives it a way to complain the loudest.

After five years of litigation, it seems that is all the petitioner

has left.

8

The Act does not violate principles of due process because

it furthers the rational goal of encouraging settlement of the

multitude of lawsuits arising out of the RISDIC and credit union

closings. The principles of due process are easily satisfied and

the impediments to retroactive economic legislation are easily

overcome because the legislation is rationally related to a

legitimate purpose. Landgraf v. USI Film Products, 114 S. Ct.

1483, 1501 (1994).

I. THE DECISION OF THE RHODE ISLAND

SUPREME COURT IS CORRECT BECAUSE THE

RETROACTIVE OPERATION OF THE ACT

FURTHERS A LEGITIMATE GOVERNMENTAL

PURPOSE OF FACILITATING SETTLEMENT OF

THE VAST AND COMPLEX LITIGATION ARISING

OUT OF THE STATE'S CREDIT UNION CRISIS.

A. The Act Comports With The Requirements Of Due

Process.

1. A Legitimate Public Purpose Furthered By

Rational Means Justifies The Act.

Although this Court has repeatedly articulated the rule that

the retroactive operation of a statute fully supported by a

legitimate purpose and rational means comports with due

process, see, e.g., United States v. Carlton, 114 S. Ct. 2018,

2022 (1994); General Motors Corp. v. Romein, 503 U.S. 181,

191 (1992); Pension Benefit Guaranty Corp. v. R.A. Gray &

Co., 467 U.S. 717, 733 (1984); Usery v. Turner Elkhorn Mining

Co., 428 U.S. 1, 16-17 (1976), Ernst & Young petitions this

Court for certiorari review of the decision below in which the

State court applied appropriately the rational basis and

relationship test to the challenged Act. That test is the same

9

standard that is applied to prospective legislation. Pension

Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. at 733.

Ernst & Young would have this Court substitute its

judgment for the wisdom of the Rhode Island General Assembly

because it would like to unravel a settlement induced by the Act.

However, the Act satisfies the test for due process of law under

the Fourteenth Amendment and therefore, "judgments about the

wisdom of such legislation remain within the province of the

legislature." United States v. Carlton, 114 S. Ct. at 2022

quoting Pension Benefit Guaranty Corp. v. R.A. Gray, 467 U.S.

at 730. Courts do not sit to decide whether the policy the

legislature expresses offends the public welfare. Day-Brite

Lighting, Inc. v. Missouri, 342 U.S. 421, 423 (1952).

The Rhode Island Supreme Court found the Act bears a

rational relationship to the legitimate state purpose of

encouraging settlements with the defendants in the RISIDC-

related tort cases so as to avoid the depletion of the "defense-

within-limits" or "wasting-assets" insurance coverage available

to pay settlements or satisfy judgments and thereby minimize the

taxpayers burden for the depositor bailout. App.9a, 9b, 15a.

This purpose justifies the retroactive application of the Act.

* The court below first held that the Act is "rationally related to

legitimate public purposes” and therefore does not violate the Equal

Protection Clause under the state and federal constitutions. The court then

considered whether the Act is violative of due process. It followed a

ortiorari from the court's conclusion that the Act bears a rational relation to

legitimate governmental purposes that the Act would be sustained under the

Due Process Clause of the Fourteenth Amendment. See Minnesota v. Clover

Leaf Creamery Company, 449 U.S. 456, 470 n.12 (1981).

10

2. The Act Does Not Constitute Arbitrary And

Unreasonable Governmental Action.

The pro tanto scheme the Act employs is rational, logical

and effective. Only a showing that the legislature had acted in

an arbitrary and irrational way could imperil otherwise valid

economic legislation under the due process clause. Pension

Benefit Guaranty Corp. v. R.A. Gray, 467 U.S. at 730. Perhaps,

the unpersuasiveness of its own argument motivates Ernst &

Young to contort federal case law to question the Act's

rationality.

Despite Ernst & Young's inference otherwise, the Court's

validation of the retroactive statute in United States v. Carlton,

114 S. Ct. 2018 (1994), does not hinge on Congress's motive on

passing the statute involved in that case. This Court will not

look behind retroactive legislation to infer an improper motive

where a rational basis can be inferred. See Carlton, 114 S. Ct.

at 2025 (J. O'Connor, concurring). Last year, Justice O'Connor

wrote that "the subjective motivation" of the legislative branch

in enacting a statute "to the extent it can even be known" is

irrelevant in the context of economic legislation and "it is

sufficient for due process analysis if there exists some legitimate

purpose underlying the retroactivity provision." Carlton, 114 S.

Ct. at 2025. In fact, it may be impermissible for courts to delve

into the legislature's motives where as in Carlton and here, a

rational basis for the Act exists. See Smithfield Concerned

Citizens v. Town of Smithfield, 907 F. 2d. 239, 246 (1st Cir.

1990) (actual purpose that may have motivated proponents of

ordinance is irrelevant for rational basis analysis").

Even this Court has paused to acknowledge, "Sometimes

the pro tanto approach will better promote settlement.”

McDermott v. AmClyde, 114 S. Ct. 1461, 1468 (1994). Ernst &

renee >

en AL SOL Mar

11

Young's reliance on McDermott v. AmClyde in support of its

constitutional challenge is misplaced. In McDermott v.

AmClyde, an admiralty case, this Court stated that "[a]lthough

Congress has enacted significant legislation in the field of

admiralty law, none of those statutes provide . . . any ‘policy

guidance’ or imposes any limit on our authority to fashion the

rule . . ." that will best answer the questions of which credit

reduction rule the court should apply. /d. at 1464. McDermott

v. AmClyde involved consideration of a non-statutory, court

imposed contribution bar. /d. That case does not stand for the

proposition that the pro tanto rule lacks rationality but simply

for the proposition that in the absence of statutory guidance the

proportionate fault method should be used in admiralty cases to

calculate a non-settling defendant's liability. See id.

B. The Strong Incentive For Settlement Created By

Affording Settling Alleged Joint Tortfeasors

Contribution Protection And Posing The Prospect Of

Non-Settling Joint Tortfeasors Paying More Than

Their Proportionate Share Of Liability Justifies The

Retrospective Operation Of The Act.

Miscasting itself as the "target" of the Act, Ernst & Young

complains of the harm it may suffer from the Act's allowance of

a pro tanto reduction credit in the amount of the settlement. In

fact, the pro tanto method presents the possibility that a non-

settling party may pay less than its proportionate share if the

settlement amount for which it receives pro tanto credit is

greater than the amount later determined at trial to be the

settling party's equitable share. McDermott v. AmClyde, 114 S.

Ct. at 1467 n.14. Ernst & Young is but one of at least one

hundred alleged joint tortfeasors who risk the benefits and

burdens of the Act. The Act affords every DEPCO-related

12

alleged joint tortfeasor an opportunity to seek the protective

shelter of the Act by negotiating a settlement early.

Yet, consistent with its self-fabricated victim's role and in

an apparent effort to convince the Court it is a "target", Ernst &

Young mischaracterizes an argument proponents of the Act's

constitutionality made below. Certain amici noted in their

amicus curiae brief that: "[t]he classifications employed by the

[ ] Act increase incentives to settle . . . by granting the settling

DEPCO tortfeasor the finality of complete protection from

contribution and equitable indemnity on the basis of an approved

settlement irrespective of proportionate fault, and by presenting

the non-settling DEPCO tortfeasor with the risk of being subject

to a level of exposure in excess of its proportionate fault."

Amicus Curiae Brief on Behalf of Certain Officers and Staff of

Rhode Island Central Credit Union, 14, submitted in the

proceeding below. Although the amici did not single out Ernst

& Young in their example, Ernst & Young recasts the amici's

argument to incorrectly convey that the purpose of the Act is to

"coerce Ernst & Young, the only national 'deep pocket’ sued by

DEPCO into settling . . . by changing the law of contribution so

as to expose Ernst & Young to the threat of enormous and

disproportionate liability." See Petition at 17.

Ernst & Young's attack on the Act's rationality flies in the

face of this Court's precedents. Quite simply, the prospect of

disproportionate liability created by the Act's contribution bar

and pro tanto set-off scheme "promotes early settlements and

deters litigation for litigation's sake . . . .". See United States v.

Cannons Engineering Corp., 899 F.2d. 79, 92 (1st Cir. 1990)

(discussing the analogous CERCLA contribution protection

Statute). Readjusting rights and burdens is not unlawful solely

because it upsets otherwise settled expectations. Usery v. Turner

Elkhorn, 428 U.S. at 16.

a

13

In its unrelenting campaign to cast the Act as unreasonable,

Ernst & Young fails to mention that the appellate court in TGB,

Inc. v. Bendis, 36 F.3d 916 (10th Cir. 1994) held that a district

court impermissibly barred non-settling defendants' contribution

claims against settling defendants because Congress had not

ims, /d at 924.

Indeed, the court in TGB, Inc. v. Bendis suggested Congress

should follow the many states which have enacted statutes

allowing contribution bars, and, further; cautioned that absent 4

law authorizing contribution protection, courts lack the power to

bar federal statutory claims if they provide a specified reduction

of any judgment against non-settling defendants. /d at 924-925.

Ernst & Young overlooks the fact that the 7GB. Inc. v.

Bendis court identified five "unique incentives to settlement" that

a contribution bar employing pro tanto credit creates: (1) a

guarantee that the plaintiff will get whatever the jury awards at

trial; (2) elimination of the risk of the plaintiff making a low

settlement and collecting something less; (3) the ability for the

plaintiff to fund further litigation; (4) the non-settling defendants

post trial absorption of any shortfall of plaintiffs' settlement

recovery discount; and (5) defendants’ interest in avoiding

paying more than their ratable share post-trial. /d at 925. In

other words, the line of cases upon which Ernst & Young relies

to challenge the rational bases for the Act actually support the

Act's rationality and stand for the proposition that interest in

settlement cannot empower a court to bar contribution from

claims under a pro tanto scheme without a statute authorizing

the same. See, e.g, id

14

Il. THE ALLEGED CONFLICT BETWEEN THE

DECISION BELOW AND THAT OF THE VIRGINIA

COURT IN SHIFLET IS PROSPECTIVE AND DOES

NOT JUSTIFY FURTHER REVIEW.

The Petitioner contends that the Virginia Supreme Court

decision, Shiflet v. Eller, 228 Va. 115, 319 S.E.2d 750 (1984),

is at odds with the decision in the instant case. Petition at 19.

The Shiflet case involved parties to an automobile accident in

1977. Id at 117, 319 S.E.2d. at 752. The Shiflets brought

negligence actions against two other drivers, id, but in 1981

they executed a release with one of the two operators and

reserved their claims with respect to Eller, the other driver, id

at 118, 319 S.E.2d. at 752. In 1979, Virginia enacted a statute

which held that a release or a covenant not to sue, with regard

to one of two or more persons who are jointly and severally

liable in tort, does not release all other tortfeasors. /d. at 117,

119, 319 S.E.2d. at 752, 753. That new statute abrogated

Virginia's common-law rule that a release of one tortfeasor is a

release of all joint tortfeasors. Shiflet, 228 Va. at 119, 319

S.E.2d. at 753. The trial court granted Elier's motion to

dismiss the Shiflets' action on grounds that the Shiflets' release

of the other driver also operated as a release upon him. /d at

118, 319 S.E.2d. at 752. On appeal, the Virginia Supreme

Court concluded that because Eller's right to contribution arose

in 1977, “it necessarily follows that the 1979... statute...

cannot be applied retroactively to impair that right." /d@ at 121,

319 S.E.2d. at 750.

While it is true the Rhode Island Supreme Court found

Shiflet unpersuasive, App.15a, it must be underscored that the

Shiflet decision does not indicate whether it was based on the

federal or Virginia constitution. Moreover, the Virginia court

did not apply the rationality test and it offered no analysis of the

15

due process clause. In contrast, the Rhode Island Supreme

Court applied the rational basis and relationship test and then

added another layer of scrutiny by weighing the important public

interests involved against any unfairness stemming from the

retroactive application of the Act. App.15a, 16a. The court

concluded that on balance any unfairness is outweighed by the

public interests. App.15a, 16a.

Significantly, the Shiflet case neither involves a statute

identical to the Act nor implicates a response to a statewide

economic crisis. Ernst & Young has asked this Court to resolve

a conflict that does not yet exist. See Petition at 19. It contends

that "if Virginia enacted a statute identical to the Act .. . that

Statute would be .. . held unconstitutional.” Petition at 19.

Ernst & Young's request is premature inasmuch as the alleged

conflict is prospective, at best.

Ill. ERNST & YOUNG HAS HAD AMPLE

OPPORTUNITY TO BE HEARD.

Ernst & Young was afforded all process that is due and its

assertions to the contrary were considered by the court below.

It is apparent that Ernst & Young had an opportunity to be heard

in the legislature. Indeed, Ernst & Young has been heard at

every stage of this case. See App.22a. Ernst & Young was

represented by counsel and expressed its viewpoint at the

hearings in the proceedings below. See App.22a. Nonetheless,

in purported support of its tortured claim that its procedural due

process rights were violated, Ernst & Young cites additional

cases dealing with hearing requirements for court imposed pro

fanto contribution schemes. See, e.g., In re Master Mates &

Pilots Pension Plan, 957 F.2d 1020, 1031 (2nd Cir. 1992); Jn

re Jiffy Lube Securities Litig., 927 F.2d 155, 160 n. 3 (4th Cir.

1991); Girsh v. Jepson, 521 F.2d 153, 160 (3d Cir. 1975).

16

The current argument is a favorite one of Ernst & Young.

Ernst & Young, a party in Jn re Jiffy Lube Securities, 927 F.2d

at 159, challenged the settlement in that case. Jd There, just as

in this case, Ernst & Young was given an opportunity to be

heard at a hearing on the settlement. /d at 159. The Jiffy Lube

court stated that the trial court did not have a specific duty of

fairness to Ernst & Young beyond ensuring it had been afforded

the opportunity to be heard. Jd. Ernst & Young knows the

routine and should not complain in this case where its

‘. procedural due process rights have been protected.

\ In the proceedings below, Ernst & Young sought and

obtained an enlargement of time to be heard on the settlement

issue in this case. The credit union litigation had been in

progress for over four years before the parties sought approval

of a settlement. Ernst & Young reviewed over one million

documents in the litigation below. The Superior Court offered

Ernst & Young the opportunity to present whatever evidence it

wanted to at the hearing to consider whether the settlement

should be approved. All Ernst & Young could do was complain

that the Act was unfair because proportional fault was not

assigned. In choosing not to offer any evidence as to the

adequacy of the settlement, Ernst & Young made a tactical

decision. Ernst & Young's conduct at the hearing was

tantamount to standing silent. That decision and not the

mechanics of the hearing is now driving the argument that Ernst

& Young had no opportunity to be heard.

The fundamental requisite of due process of law is the

Opportunity to be heard. Grannis v. Ordean, 234 U.S. 385, 394

(1914). As this Court noted in Mullane v. Central Hanover

Bank & Trust Co., 339 U.S. 306, 314 (1950), once given the

opportunity to be heard, a party can choose for himself whether

to acquiesce or contest. The Act provides that there be a

17

judicially approved good faith settlement. As a third-party

defendant, Ernst & Young was given notice and the opportunity

to be heard on the issue of the good faith nature of the

settlement. Nothing more is required.

CONCLUSION

For the foregoing reasons, the Petition for a Writ of

Certiorari should be denied.

Respectfully Submitted.

JAMES E. CARROLL

(Counsel of Record)

SHELIA HIGH KING

KIRSTEN M. LACOVARA

Peabody & Arnold

One Citizens Plaza, Suite 840

Providence, RI 02903

(401) 831-8330

Attorneys for Respondents

Wilhelmina Brown, George R.

Cabral, Don Desrochers,

Patricia J. Dodd, Walter

Feldman, Douglas Figueiredo,

Judy A. Lux, Robert Santilli

Michael Sheehan, Anthony

Tanzi, Dorothy Testa, Debra

Marisi Viau, John Doe and

Jane Doe, Former Directors

of Brown University

October 16, 1995 Employees Credit Union