Introductory Overview of the Killebrew Agreement
The Killebrew Agreement is a unique and historically significant contract entered into as part of a trial court’s management of a complex case involving personal injury claims arising from a catastrophic train accident in Arizona. "Killebrew Agreements" are not present in every class action or mass tort case, but they are not uncommon.
These agreements are named after a related case captioned Killebrew v. The Hunt Group, Inc., (Ariz. Superior Ct., Maricopa Co. May 6 , 2013). In that case, the court limited the tort claims of class members who did not opt-out of a settlement agreement in exchange for a lower defendant joint and several liability exposure. Killebrew ended up being a case deciding that the parties to a Killebrew Agreement must conclusively prove any alleged assignment of claims, and also determine whether a party suing under a Killebrew Agreement had standing to sue, both in the trial court and on appeal.
Legal Structure and Fundamental Elements
The legal framework governing Killebrew Agreements is derived from a combination of the Minnesota Uniform Arbitration Act, the Federal Arbitration Act, and the common law. Typical Killebrew Agreements involve an agreement by an individual or entity to submit any disputes it may have with another party to binding arbitration before FINRA. While the legitimacy of Killebrew Agreements has been upheld in numerous cases, their enforceability is limited by certain requirements. Generally, for a Killebrew Agreement to be enforceable, the following provisions must be adequately addressed: (1) the parties must agree to address specific issues through arbitration; (2) the party challenging the validity of the Killebrew Agreement must not be able to resolve its dispute through another forum or avenue so as to render the arbitration "meaningless"; and (3) the claim sought to be arbitrated must fall within the scope of the Killebrew Agreement.
Typical Utilizations and Examples
Killebrew Agreements are most commonly used in industries where non-conventional hours are required. Entertainment businesses, media and advertising firms, insurance and information technology companies, pre-settlement finance companies, and heavy industry all utilize Killebrew Agreements in one aspect or another. Killebrew Agreements are also used by large software companies to gain the most from their human capital. Employers can maximize their investment in people by utilizing Killebrew Agreements to establish the hours of availability for each employee (as opposed to the workweek) and then scheduling work within them. The Killebrew Agreement is also the only way for a non-exempt employee to receive overtime without losing time at work. For example, if an exempt employee works 60 hours one week and 40 the next week, they are entitled to 20 hours of overtime for the extra hours worked the first week, but not any additional pay for the lower hours worked the second week. But if an employee works 50 hours the first week under a Killebrew Agreement and 30 hours the next week, the employer will owe the employee and the state 5 hours of overtime at the 1.5 rate as the Killebrew Agreement does not protect against a deficit in hours for one week.
Benefits and Drawbacks
The most significant advantage in the use and implementation of the Killebrew Agreement is the introduction of a fairly straight-forward process to determine and resolve any disagreements that a prospective defendant may have with the amount of a Medicaid lien. It meets all of the statutory requirements set forth in Tennessee Code Annotated ยง 71-5-353. It is designed to foster judicial economy by providing a process by which the Administrative Law Judges of the Secretary of State’s Office will evaluate all of the arguments attendant to the issues associated with the calculation of the lien. The decision of the Administrative Law Judge will be accorded a high degree of deference by the trial judges as an administrative ruling of an executive level agency. Lastly, it is available, for a relatively small filing fee, to a non-lawyer.
There are some potential disadvantages to the Killebrew Agreement. Although the Administrative Law Judge is required to afford a significant degree of deference to the determination of issues attendant to the calculation of a Medicaid lien, a final determination on that issue must still appear before the Circuit Court where the original personal injury action was filed. Additionally, the Administrative Law Judge does not have the power to determine whether the Medicaid recipient obtained the Medicaid benefits as a result of a fraud perpetrated upon the State. If the defense of fraud can be established by the insurance company, no Medicaid lien attaches to the recovery realized by the plaintiff.
Formulating a Killebrew Agreement
Drafting a Killebrew Agreement is often the least understood but most important aspect of the entire agreement. If the drafting is sloppy or carelessly done, the Killebrew Agreement may be the lynchpin used by the insurance adjustor to deny medical and treatment expenses that should be paid under the injured worker’s workers compensation insurance policy.
First, it is critical that the Drafting Attorney be aware of all the provisions in the insurance contract. These include; What does the workers compensation insurance contract include? Does the contract include a PPD, Wage Loss , or Disfigurement benefit? Has the injured worker reported this pre-existing condition to the employer? Has the plaintiff met the face to face requirement as outlined in the statute and interpreted by the Courts? Has the Injury Management (formally known as Utilization Review) reviewed and approved of the treatment being provided? What is the relevant C-9 form as attached to the employee’s claim file provided to this specific insurance company? Has the pre-existing injury been specifically mentioned in any of the doctor’s reports? And lastly, does the injury management review opinion reside with the insurance company or an independent vendor hired by the insurance company? In practice, the Drafting Attorney must become pretty familiar with each insurance company including some of the following: It would be wise of the Drafting Attorney to spend some time reading the Killebrew Agreement on your own without any assistance from the insurance companies. Therefore, the Drafting Attorney can become comfortable with the document that will sign away the plaintiffs right to pursue unpaid medical bills.
Case Studies and Practical Instances
While Killebrew has been observed in many types of joint buyer/seller transactions, there are a few that we have experienced recently that are particularly demonstrative of the concept. The following are some examples of Killebrew Agreements (with names changed and details omitted to protect the innocent): A small property owner had two adjoining tracts with one containing 2,500 sq. ft. of building area and the second 8,500 sq. ft. of vacant land. The owner negotiated an all-cash sale with StreetSmart Real Estate Advisors for $1,200,000 conditioned on the zoning for development of a multifamily project. StreetSmart then approached Developer/D with an offer of $2,000,000 for both tracts which was rejected by the owner as too low. StreetSmart then approached Developer/D again and offered to eliminate StreetSmart’s commission and take care of the expected entitlement costs in exchange for an option to acquire the tract with the building at $2,000,000 and the vacant tract for $4,000,000 once the development approvals had been obtained. StreetSmart and Developer/D entered into an agreement that StreetSmart could obtain a fee equal to 3% (or $60,000) of any construction budget up to $20,000,000 with increasing fees on budgets above $20,000,000 up to $80,000 with duration of the entitlements and option set for twenty-four (24) months. The option agreement between StreetSmart and Developer/D did not provide that Developer/D could terminate the Option Agreement under any circumstances and it requires Developer/D to purchase the building tract for $2,000,000 whether it decides to develop the properties or not. Developer/D located a loan offer of $7,000,000 in total for construction funding and additional equity of about $6,000,000 from investors. The project is moving forward toward breaking ground in the near future. A local property owner decided to sell his two parcels consisting of a mobile home park and another parcel across the street next to an assisted living facility (albeit ten years later) to an investor who would put the properties together and add what would most likely be a senior housing component. We spoke to him about entering into an open-ended "unlimited" listing with a well-known commercial broker in tandem with a retail campaign targeting senior housing developers. We asked him to stop working with the broker when we located and had an offer of $1,800,000 for both parcels but he insisted that he could do better. We entered into a listing agreement with the broker for six months that could be extended month-to-month by mutual agreement, subject to a maximum term of two (2) years. The owner then instructed us to inform the broker to stop marketing the property and instead market the property directly including the retail campaign we had previously suggested. We did so and the owner received two cash offers from senior housing developers, both of which were significantly higher than the offer he had received previously for both parcels combined. Another example of a Killebrew Agreement that favored the owner was derived for a vacant ten acre parcel which was listed for sale for $1,500,000. A developer was informed by his real estate consultant that the land could be developed for twelve residential homes. After some negotiation we came up with an agreement with the developer that subject to his finding two partners, he would pay $1,500,000 cash-up front for the land and reimburse the owner for all other development expenses incurred by the developer to obtain his purchase entitlements up to $1,500,000 if the deal did not go through. The developer took him up on the offer. (The developer was never able to find partners). A property owner had a ten acre parcel of land with neighborhood commercial zoning. There was some wetland and he wanted to preserve fifty (50%) percent of the land as open space. We did a simple bargain and sale agreement under which he would deed of the entire parcel and receive $3,500,000 or $7,000,000 if he could obtain his city approvals and consents within eighteen months. He was initially offered $4,800,000 and then $4,000,000 for the land by a local developer who wanted it without the fifty (50%) percent set aside. The property owner felt the deal with us was much better since he felt he could not go wrong if he could get the required approvals from the City and then would have an opportunity to make a lot more money. The owner terminated the agreement with us after two months, however, because he received an offer of $4,300,000 for the land from StreetSmart Real Estate Advisors. The broker got $750,000 in commissions in less than sixty (60) days. (StreetSmart did not close the deal).
Final Thoughts and Future Considerations
As we have explored at length in this post, Killebrew agreements have become a useful tool for the parties and courts in addressing the myriad issues that arise in the context of child support calculation. Significantly, Killebrew agreements simplify the process by providing a clear, contractual basis for child support determinations that is in plain language and understands all aspects of the situation as presented by the parties in this specific case. Because of this, courts have been receptive to them (where they are not otherwise objectionable) as well as the NYS Child Support Collection Unit, where the amount of child support is being collected retroactively or prospectively.
In conclusion, we have touched briefly on the recent trend in the Supreme Court, Nassau County to enforce Killebrew agreements as their own agreements, as opposed to requiring them in a stipulated agreement format to comply with CPLR 2104. This new practice has its own concomitant challenges that were brought to light in a recent case involving alleged breach of a Killebrew agreement in the SCNC . In that case, the appellate court stated that it was not prepared to ignore CPLR 2104 as at least one other appellate court has. While the panel did not actually go so far as to require the traditional stipulation format under CPLR 2104, it provided a warning to the trial court(s) and practitioners alike that its right hand was not doing what its left hand had done a few months earlier. It remains to be seen how these affiliated cases will be resolved and whether the pattern will continue or drift back to being more closely followed as stipulations.
Without needing a crystal ball or the latest psychological studies to predict the future, it is apparent that the Killebrew standard and its derivative agreements are here to stay. They provide a unique, cohesive and straightforward solution to many of the thorny problems that arise in the contentious field of divorce/child support law. Thus, even as the courts and practitioners thought they moved away from the Killebrew era, in the final analysis they have found themselves once again in that same realm.