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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1995
- **Citation:** 516 U.S. 975

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_2228%3A3. Public record. Not legal advice.