View more from News & Articles or Primerus Weekly

Written By: Tonya D. Hubinger, Esq.

Buchman Provine Brothers Smith LLP

Walnut Creek, California

In August 2012, the California Supreme Court unanimously abrogated the common law release rule, which provided that a plaintiff's settlement with, and release from liability of, one joint tortfeasor also releases all other joint tortfeasors. The basis for the rule was that there could be only one compensation for a single injury and, because each joint tortfeasor is liable for all economic damages, any joint tortfeasor's payment in any amount satisfied the plaintiff's entire claim. (Leung v. Verdugo Hills Hospital, Case no. S192768; 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts §70, pp. 142-143.)

Writing for the unanimous court, Justice Joyce L. Kennard explained that the rule in such cases hereafter is that "when a settlement with a tortfeasor has judicially been determined not to have been made in good faith…nonsettling joint tortfeasors remain jointly and severally liable, the amount paid in settlement is credited against any damages awarded against the nonsettling tortfeasors, and the nonsettling tortfeasors are entitled to contribution from the settling tortfeasor for amounts paid in excess of their equitable shares of liability."

In Leung v. Verdugo Hills Hospital, the plaintiff sustained irreversible brain damage six (6) days after his birth and sued his pediatrician and the hospital in which he was born. Before trial, plaintiff settled with defendant pediatrician for $1 million, the pediatrician agreed to participate as a defendant at trial, and plaintiff agreed to release him from all claims in excess of the $1 million settlement contribution payment. However, the trial court denied the pediatrician's petition for a determination that the written settlement agreement was made in "good faith." (Code of Civil Procedure §877.)

At trial, the jury calculated plaintiff's total economic damages at approximately $15 million, and found the pediatrician and the hospital to be jointly and severally liable for ninety-five percent (95%) of all economic damages. It apportioned fifty-five (55%) of the liability to the pediatrician, forty percent (40%) to the hospital and five percent (5%) to plaintiff's parents.

The Court of Appeal applied the common law release rule, and held that the release of liability claims against the pediatrician also released the nonsettling defendant hospital from liability for plaintiff's economic damages.

The Supreme Court accepted the trial court's determination that the pediatrician's settlement was not made in good faith, and pointed out that, if the common law release rule were applied, plaintiff would be compensated for only a small fraction of his total economic damages. The court declared that such a result would be harsh, unjust and inequitable, and accordingly held "that the rule is no longer to be followed in California."

In overturning the release rule, the Court adopted the so-called "setoff-with-contribution approach," as the most equitable alternative to adopt under the facts before it. Under that approach, the plaintiff would receive the full amount of his economic damages, less the proportionate share attributable to the plaintiff's own negligence. The settling defendant would contribute the amount of the agreed settlement and the non-settling defendants would be jointly and severally liable for the remaining amount of damages with a right of contribution against the settling defendant for amounts in excess of their equitable share of total liability.

Although this was a medical malpractice case, the decision has application to all multi-defendant tort litigation in California. Consequently, all ramifications of a proposed settlement must be carefully weighted and considered before the settlement is finalized. The failure to take into consideration all potential eventualities could have dire consequences.

For more information about Buchman Provine Brothers Smith, please visit www.bpbsllp.com or the International Society of Primerus Law Firms.