Citation. McDermott, Inc. v. Amclyde, 511 U.S. 202, 114 S. Ct. 1461, 128 L. Ed. 2d 148, 62 U.S.L.W. 4241, 94 Cal. Daily Op. Service 2727, 94 Daily Journal DAR 5248, 1994 AMC 1521, CCH Prod. Liab. Rep. P13,826, 8 Fla. L. Weekly Fed. S 50 (U.S. Apr. 20, 1994).
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Brief Fact Summary.
Plaintiff was injured in a construction accident. Some of the defendants settled, but two did not. The jury assessed Plaintiff’s loss at $2,100,000, and the court decided how to divide an appropriate damage award against the two non-settling Defendants.
Synopsis of Rule of Law.
The liability of non-settling defendants is calculated by the jury’s determination of proportionate responsibility, not by giving the non-settling defendants a credit for the amount of the settlement.
Facts.
Plaintiff was injured in a construction accident. Plaintiff settled with three of the Defendants for $1,000,000. AmClyde and River Don Castings, Ltd. (Defendants) did not settle. A jury assessed Plaintiff’s loss at $2,100,000 and allocated 32% of the damages to Defendant AmClyde and 38% to Defendant River Don Castings, Ltd.
Issue.
Is the liability of the non-settling defendants calculated with reference to the jury’s allocation of proportionate responsibility?
Held.
Yes. Reversed and remanded for further proceedings.
* Damages are to be assessed on the basis of proportionate fault when such an allocation can be made.
* When Plaintiff settles with one of several joint tortfeasors, the non-settling defendants are entitled to a credit for that settlement. There is a divergence among respected scholars and judges about how the credit should be determined. There are three principal alternatives: (1) a “pro tanto” credit with a right of contribution against a settling defendant; (2) a “pro tanto” credit without a right of contribution against a settling defendant; and (3) a credit for the settling defendants’ proportionate share of responsibility for the total obligation.
* The proportionate share approach (alternative three) would make Defendant River Don responsible for $798,000.00 (38% of $2,100,000) in damages, precisely its share. The “pro tanto” approach (alternative one and two) would make Defendant River Don responsible for $1,100,000.00 ($2,100,000.00 minus $1,000,000.00) in damages.
* Under the pro tanto approach, a defendant’s liability will frequently differ from its equitable share, because a settlement with one defendant for less than its equitable share requires the non-settling defendant to pay more than its share. This would seldom reflect an entirely accurate prediction of the outcome of a trial. It also provides Plaintiff with a “war chest” with which to finance the litigation against the remaining defendants.
* To battle this potential for unfairness, “good-faith hearings” have been used. In a “good-faith hearing,” the settling defendant is protected against contribution actions only if it shows that the settlement is a fair forecast of its equitable share of the judgment.
* The pro tanto rule has no clear advantage over the proportionate rule in promoting settlements.
* The proportionate share approach is superior.
Discussion.
In this case, Plaintiff is going to recover more that what the jury assessed to be Plaintiff’s damage. Because the proportionate share approach does not deduct money previously received, Plaintiff is basically permitted a double recovery.
