What is a Friendly Lawsuit?
A friendly lawsuit is a lawsuit filed between two or more parties in order to ask the Court to appoint a guardian ad litem for purposes of approving a personal injury claim settlement for a minor. It involves a minor plaintiff and their next of friend, a defendant and a guardian ad litem.
Does a Minor Have Legal Capacity to Sue Someone?
Under United States law, a person under the age of 18 does not have the legal capacity to act on their own behalf in legal matters. They cannot file a lawsuit on their own behalf nor can they enter into a contract such as a settlement agreement. Thus, in order to settle a minor’s case, a legal guardian (most often a parent or relative) must act on their behalf. This person is what is known as the “next of friend.” The lawsuit is filed in their name as next of friend” of the minor.
The Guardian ad Litem and Court Approval
When a minor’s personal injury claim is settled, the minor has no way to prevent a parent or lawyer from taking away the money and spending it on something other than compensating the minor. Furthermore, because the statute of limitations on a minor’s personal injury claim typically does not even begin to run until they turn 18, the insurance company or person settling the claim has virtually no protection from the minor coming back and suing them if the settlement money is absconded with before the child turns 18.
In order to prevent this, a procedure was developed whereby a “friendly lawsuit” may be filed. Usually, the service of process requirement is waived and the parties take a non-adversarial posture before the Court. The lawsuit is filed simply so that the Court can appoint an independent guardian ad item, whose job is to review the settlement, advise the court as to whether it is in the minor’s best interests, and make sure that certain safeguards are put into place to ensure the minor’s share of the funds will still be available when the minor turns 18. These safeguards typically take one of the following two forms:
- The money is placed into the Court Registry (a Court controlled bank account) and held there until the minor becomes an adult.
- The money is invested in a special annuity offered to personal injury claimants and set up to make one or more payments directly to the injury victim at some future date one or after the party turns 18.
Both of the above options earn interest, however, annuities often offer the advantages of a better interest rate and a structured settlement payout that can be set to pay out in conjunction with events such as college tuition due dates.
The Minor Settlement Hearing
Once the guardian ad litem and the next of friend decide upon an option they can both agree is in the minor’s best interests, a minor settlement hearing is set with the court. The purpose of this hearing is to:
- create a record that the parent understands the settlement and approves, and;
- demonstrate to the Court that the settlement is in the minor’s best interests.
Assuming the Court agrees, the Court then approves of the settlement. If the Court does not agree, it may order the case to go to trial or may order a reconsideration of the structure of the settlement.