The Law of Unintended Consequences, or "What do you mean you can't tell me what the credits from prior settlements will be?" (Part 2)

            As the prior post indicated, Proposition 51 (California Civil Code Section 1431.2) attempted to reduce lawsuits against defendant that represented “deep pockets” by making liability for non-economic damages several, instead of joint, as had previously been the case.  As a result, defendants found liable at trial could no longer receive credits for the full amount of relevant settlements made by other defendants.  Instead, Appellate Court decisions held that the only sum that could be received as a credit was that portion of the settlements made by other defendants that was reflective of the jury’s award of non-economic damages. This post is going to explain just how final judgments are derived.

 

            The starting place is the verdict form.  The jury will have been asked to determine the share of fault of each defendant at trial for having caused the plaintiff’s injuries.  There may also be a line for the share of the plaintiff’s own comparative fault.  There will also, at a minimum, be a line for the fault of “all others.”  The “all others” can include entities that can’t actually be sued, including employers, according to the California Supreme Court, or the Navy, as was recently held in Collins v. Plant Insulation.  The jury will probably have also found non-economic damages.  The defendant’s  percentage of fault is multiplied by the non-economic damages (pain and suffering, mental distress) and that is the judgment against that defendant for non-economic damages.

 

            Then the Judge takes the ratio of the economic damages to the total verdict,  multiplies that percentage by the amount of settlement monies that are attributable to the causes of action at trial (except for loss of consortium – more on that later) and the sum thus derived is deducted from  the economic damages, to result in the portion of the judgment that is the economic damages (and recoverable against any remaining defendant.)

 

            For example, assume that there is a single defendant at trial, and a single plaintiff.  Further assume that the verdict is the verdict is for $1 million in non-economic damages, $500,000 in economic damages, and the defendant is found to have been 10% at fault.  First of all, the judgment will be $100,000 for  the non-economic damages.  Even if the plaintiff had $2 million from prior settlements, the plaintiff will be receiving $100,000 more.

 

            But let’s assume that there was $1 million in settlements, and the plaintiff says that 60% of that was for personal injury, and 40% for the potential future wrongful death claim that was released when the other defendants settled.  The Judge would take the $500,000 of economic damages and multiply that by the $1,500,000 that represents the whole verdict, and come up with 33 1/3 percent.  The $600,000 in available settlements money is multiplied by 33 1/3 percent,  and there is $200,000 of a credit to subtract from the economic damages.  Total verdict? $100,000 for non-economic damages and $200,000 for economic damages, and there’s $300,000 as a total judgment (plus costs, of course.)

 

            What happens if there are two or more defendants remaining at verdict?

 

            The non-economic damages are, of course, calculated  the same as when there is one defendant, and the credits from prior settlements are also calculated the same way.  As for the Judgment, each defendant will have its own portion of non-economic damages assessed, and then the economic damages will be assessed jointly against both defendants, as the plaintiff has the option of recovering those damages, in whole, from either defendant.  If the Plaintiff does recover the whole of economic damages from less than all of the defendants found to be “at fault” at trial, principles of equitable indemnity permit that defendant to recover the amount that it over-paid  from the other defendants. In other words, if one defendant is found 25% at fault, and another defendant is found to be 50% at fault, ultimately the first defendant is liable for 1/3 of the economic damages (after credits) and the other is liable for 2/3 of the economic damages.

 

            Plaintiffs themselves can have a percentage of fault attributed to them on verdict forms.  When that happens, their share of fault is deducted from the economic damages, although the ratio of economic to non-economic damages for purposes of establishing the credit from prior settlements is calculated on the total verdict.

 

            In the next post, I’ll describe some ways that defense counsel can improve the odds of a better post-verdict settlement credit.

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