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A Los Angeles County Superior Court judge won points for innovation Tuesday, but he was dinged all the same by the Second District Court of Appeal for stepping out of bounds as a settlement judge in dozens of clergy sex abuse cases. It was proper, even creative, for Judge Peter Lichtman to hold a two-day hearing to estimate a reasonable settlement value for about 90 cases against the Roman Catholic Diocese of Orange, the court concluded. But he went too far when he told the parties they could use his “valuation order” in other courtrooms as evidence in future bad faith proceedings. “The court abandoned its designated role as a neutral facilitator without decision-making authority,” wrote Justice Laurence Rubin. Justices Candace Cooper and Madeleine Flier concurred. In his order, Lichtman had blamed the church’s insurers for stymieing settlement talks by threatening to forfeit the church’s coverage if the diocese settled without their agreement, according to the Second District opinion. With his valuation order, Lichtman “dangled over the insurers’ heads the threat of a bad faith action that was already fortified with the weight of a judge’s findings,” Rubin wrote. Lichtman had improperly tried to stop the insurance companies from exercising their forfeiture rights, the Second District said. The court noted that insurance companies can’t be held liable on a policy if a client settles without the company’s consent — and without a “trial” to determine the insurance company’s liability. Lichtman’s order said the hearing he held satisfied the trial requirement. The Second District vacated his order, siding with seven of the church’s insurers when it concluded that Lichtman abandoned his role as a neutral facilitator. “Judge Lichtman should not have characterized his settlement valuations as findings,” Rubin wrote. “Neither should he have purported to make findings concerning the actual trial requirements � nor otherwise taken a position concerning whether the insurers’ conduct was in bad faith.” In the judge’s defense, the Second District — as well as lawyers for the alleged abuse victims and the church — suggested that Lichtman’s hearing had helped them reach a settlement. The parties settled in December for $100 million, the largest such settlement ever. “If he hadn’t had this hearing � I think that we’d still probably be litigating,” said Raymond Boucher of Kiesel, Boucher & Larson, one of the plaintiff attorneys. And the order might have done even more good, said Boucher, if it could have been used in other litigation. He suggested that it might lend guidance to some 540 other clergy abuse cases pending in Los Angeles County. G. Andrew Lundberg Jr., an attorney for the diocese, also notes that the court declined to reach the insurance companies’ arguments that Lichtman’s order could never be used. “I think [the ruling] does leave the door open for arguments about whether or not [the order] might be used for some purpose” down the line, said Lundberg, who chairs the Los Angeles litigation department of Latham & Watkins. The court vacated the order and directed that it remain sealed, but did not expunge it as the insurance companies had requested. The case is Travelers Casualty and Surety v. Superior Court of Los Angeles, 05 C.D.O.S. 1368.

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