Settlements & Multi-Party

What relationship does Pro Tanto apply to?

Between non settling Defendants and Plaintiffs. Asks “how much do the non-settling defendants owe P?”

P gets into a car crash with D1 and D2. D2 finalizes a settlement with P, leaving only D1 left in the litigation. Result?

Once D2 finalizes a settlement with P, D2 steps out of the litigation entirely and “buys peace.”

D1 CANNOT sue D2 for indemnification.

Pro Tanto: J&S Liability Jurisdictions

1. How Does it Work?

2. Who Bears Bad Settlement Risk?

3. P suffers $1M damages. D1 liable for 60% and settles with P for $200K. D2 liable for 40%. P and D2 go to trial. How much is D2 liable for?

1. D2 gets dollar-for-dollar credit for what D1 paid. P WILL be made whole.

2. D2. Because if D1 gets a good deal, D2 is on the hook.

3. $800K ($1M - $200K)

Pro Tanto: Several Liability Jurisdictions

1. How Does it Work?

2. Who Bears Bad Settlement Risk?

3. P suffers $1M damages. D1 liable for 60% and settles with P for $200K. D2 liable for 40%. P and D2 go to trial. How much is D2 liable for?

1. D is strictly liable for his own actions and nothing more.

2. Plaintiff

3. D2 pays $400K (strictly their 40%). P eats the $400K loss.

Percentage Share

1. How Does it Work?

2. Who Bears Bad Settlement Risk?

3. P suffers $1M damages. D1 liable for 60% and settles with P for $200K. D2 liable for 40%. P and D2 go to trial. How much is D2 liable for?

1. Subtract settling D’s percentage of liability from P’s damages.

2. Plaintiff, but D2 if D1 is insolvent

3. D2 pays $400K ($1M - 60%)

What is a Mary Carter Agreement? Provide an example.

D1 promises P will get a particular settlement amount.

If D1 overpromises: he’s on the hook for the excess to honor his promise and meet his number.

If D1 underpromises, D2 covers everything. D1 is pointing fingers at D2 to avoid paying.

Example: D1 promises P $1M. P is awarded $1.5M in court. D2 is 40% liable ($600K). D1 must pay $400K to honor his promise.

What is a High-Low Agreement? Provide an example?

Defendant guarantees P a minimum and a maximum.

Example: D guarantees minimum of $50K, maximum of $100K. If verdict is $1M, P gets $100K. If verdict, is $10K, P gets $50K.

1. What is Contribution?

2. What word indicates it?

3. Which jurisdictions is it only available in?

4. What are the main limits?

1. A negligent D overpays P for damages and seeks to recover the excess amount from other liable Ds.

2. ACTIVE.

3. Only in J&S Liability jurisdictions.
   

4. Intentional Tortfeasor: An intentional tortfeasor cannot sue for contribution against the negligent tortfeasor.

5. Immunity: D1 can’t seek from D2 if protected by immunity (e.g. spouse or employer) (Yellow Cab case).

6. Good Faith Settlement: Can’t seek contribution from party who made good-faith settlement with Plaintiff (release).

What is Indemnification? What term indicates it?

Passive. Non-negligent party forced to pay 100% of damages (e.g. insurance, employer pays under respondeat superior and sues employee)

P and D settle for a super low amount. Is this bad faith? If not, what is?

Not bad faith unless collusion/secrecy, fraud, dishonesty, or wrongful conduct

Plaintiff suffers $200,000 in financial damages during the acquisition of a small business due to fraudulent misrepresentations. The jury determines that Plaintiff was 20% at fault for failing to conduct proper due diligence. Seller (D1) is found 50% at fault. Broker (D2) is found 30% at fault. Prior to trial, D2 settles with Plaintiff for $10,000. In a jurisdiction that has jettisoned joint and several liability in favor of several liability only, and applies a "pro tanto" reduction, how much is D1 required to pay Plaintiff?

(A) $100,000.

(B) $90,000.

(C) $150,000.

(D) $160,000.

Explain your reasoning and the rule.

A.

No windfalls are allowed, so P shouldn’t get more than $200K - 20% = $160K. D1 is 50% liable. 50% of $200K damages = $100K. D2 already paid $10K. $100K + 10K = $110K—less than what P’s entitled to. And in a several liability jurisdiction, each D is only liable for their own portion.

Plaintiff is remodeling a luxury home and suffers $100,000 in property damage from a severe water leak. The jury finds Plaintiff 10% at fault. Plumber (D1) is found 40% at fault. General Contractor (D2) is found 50% at fault. Before trial, D2 settles with Plaintiff for $60,000. In a jurisdiction with several liability only and a "pro tanto" reduction rule, what is Plaintiff entitled to collect from D1?

(A) $40,000.

(B) $30,000.

(C) $90,000.

(D) $100,000.

Explain your reasoning and the rule.

B.

D1 liable for 40%. 40% of $100K = $40K. If D1 pays $40K, P will walk away with a windfall because he was 10% liable himself. Windfall exception.

Plaintiff purchases a commercial warehouse that collapses shortly after closing, causing $500,000 in damages. The jury assigns 0% fault to Plaintiff. Inspector (D1) is found 70% at fault. Appraiser (D2) is found 30% at fault. D2 enters a good faith settlement with Plaintiff for $100,000 before the verdict. In a jurisdiction that retains traditional joint and several liability and applies a "pro tanto" reduction, how much can Plaintiff collect from D1?

(A) $350,000.

(B) $400,000.

(C) $500,000.

(D) $250,000.

B.

No windfalls allowed for P. P already got $100K. Under J&S, P can recover damages from whomever they want. The only remaining amount is $400K.

Plaintiff is injured in an accident and sustains $300,000 in damages. The jury determines Plaintiff is 10% at fault. D1 is 60% at fault. D2 is 30% at fault. D2 settles before trial for $50,000. In a jurisdiction that applies joint and several liability but uses the "percentage share" approach for settlements, how much is D1 liable to pay?

(A) $180,000.

(B) $220,000.

(C) $270,000.

(D) $130,000.

A.

Under Percentage Share Approach, D only pays their fault. D1 is 60% liable. 60% of $300K = $180K.

Now check if there’s a windfall: P is entitled to $270K. Already got paid $50K = $220K. $180K doesn’t exceed $220K.

Plaintiff slips and falls at a local deli, suffering indivisible injuries. Defendant 1 and Defendant 2 are both found negligent. Defendant 2 finalizes a good faith settlement with Plaintiff for $25,000 and steps out of the litigation. Defendant 1 goes to trial, loses, and ends up paying significantly more than their equitable share of the damages. Defendant 1 files a claim against Defendant 2 to recover the excess amount. What is the most likely result?

(A) Defendant 1 will succeed if they can prove Defendant 2 was the primary active tortfeasor.

(B) Defendant 1 will succeed under the doctrine of contribution.

(C) Defendant 1 will fail since a valid good faith settlement protects the settling party from contribution claims by other negligent defendants.

(D) Defendant 1 will fail unless they specifically requested indemnification instead of contribution.

C.

D2 made a good faith settlement and is forever released.

What framework should you use when analyzing a muddled Pro Tanto/Percentage Share/J&S/Several question?

1. Are we in a J&S (P can collect from anyone) or Several jurisdiction (D is only liable for their portion of fault)?

2. What is P’s ceiling? (Subtract their portion of fault from their damages)

3. If there’s a good faith settling fellow D, Pro Tanto or Percentage Share?

Plaintiff is injured by a defective medical device and suffers $200,000 in damages. The jury finds Plaintiff 0% at fault. The device Manufacturer is 50% at fault. The Surgeon is 30% at fault. The Hospital is 20% at fault. Prior to trial, the Manufacturer settles with Plaintiff for $80,000. The jurisdiction applies traditional Joint and Several Liability and uses the 'percentage share' reduction approach. How much can Plaintiff collect from the Surgeon?

A. $200K

B. $60K

C. $120K

D. $100K

D.

Step 1: We are in J&S Liability. P can recover from whomever they please.

Step 2: P has no fault.

Step 3: Good faith settling D - percentage share approach: $200K - 50% =$100K

Plaintiff suffers severe injuries in a multi-car collision and sustains $500,000 in damages. The jury finds Plaintiff 20% at fault. Driver A is 60% at fault. Driver B is 20% at fault. Before the verdict, Driver A settles with Plaintiff for $350,000. The jurisdiction applies Several Liability only and uses a 'pro tanto' reduction. How much is Driver B required to pay Plaintiff?

A. $150K

B. $50K

C. $100K

D. $0