Provides, in tort cases where one defendant has settled, that remaining defendants must elect prior to trial as to reduction in liability; repealer

Summary of provisions

Section 1:Amends Section 15-108 of the General Obligations Law (GOL) to provide that in tort cases when a settlement is reached with one of two or more persons who are liable in tort for the same injury or wrongful death it does not discharge any other tortfeasor from liability unless its terms expressly provide. However, each of the remaining tortfeasors may choose to reduce his or her liability to the plaintiff by the stated settlement amount, the consideration actually paid or the settling tortfeasor's equitable share of the damages under Article 14 of the Civil Practice Law and Rules (CPLR). This choice must be made in open court or in writing prior to the first opening statement of the trial, unless the party making the election only later becomes aware of the settlement.

Section 2:Effective date.

Justification

Section 15-108 of the GOL sets forth what happens when a personal injury or wrongful death plaintiff releases from liability one or more, but fewer than all, of the alleged tortfeasors. Although the statute was enacted to encourage settlements, most commentators have concluded that it generally rewards non-settlors at the expense of settlors and that, by doing so, it actually discourages settlement.

The key feature of the statute, and the feature most criticized by the statute's detractors, is that it rewards defendants who do not settle and can penalize plaintiffs and defendants who do. It does this by allowing the non-settlor to reduce its liability to the plaintiff by the greatest of: (1) the amount that plaintiff received in settlement, (2) the amount that plaintiff was stipulated to receive in settlement, and (3) the settling tort feasor's "equitable share" of the damages. The first two alternatives are almost always equivalent, usually leaving the non-settlor with the choice of an "amount paid" reduction or an "equitable share" reduction.

This benefits the non-settlor in two ways. First, in those instances in which the settling tortfeasor's payment turns out to exceed what the trier of fact later determines to be the settlor's equitable share of the damages, the non-settlor benefits by the difference between those two sums. The second benefit accorded to the non-settlor is that the risk of settlor's solvency, formerly borne by the non-settlor, is now eliminated. The non-settlor is able to deduct settlor's equitable share whether or not settlor actually could have paid such sum. By

virtue of these features, the non-settlor often obtains windfall reductions of liability usually, albeit not always, at the plaintiffs expense.

In 1986, the Law Revision Commission proposed that the non-settling tortfeasor obtain a reduction of only the "amount" paid by a settling tortfeasor, unless the settlement was itself made in "bad faith." Such plan was modeled upon section 4 of the 1955 Uniform Contribution Amongst Tortfeasors Act. This proposal goes too far in the other direction and treats non-settlors unfairly. The non-settlor's liability would be effectively increased by virtue of a settlement to which the non-settlor did not accede and which the non-settlor was powerless to prevent More-over, this proposal would inevitably spawn litigation over whether particular settlements were made in good faith.

This bill would allow the non-settlor the same alternatives as currently exist, but require that the choice be made before, rather than after, trial. The non-settlor still would get to choose whether it will reduce its liability to plaintiff by the amount of the settlor's payment to plaintiff or by the amount of the settlor's equitable share of the damages. The difference is that because the non-settlor would have to make the choice before the verdict was rendered, there would be an added incentive to a defendant to settle, rather than to sit back and choose the "best of both worlds."

So as to avoid disputes, selection would be effective only if made in writing or on the record in open court. If the non-settlor failed timely to make an election and thus "defaulted", he or she thereby would be presumed to have elected an "equitable share" credit.

The statute is vague as to which agreements will trigger its operation. Currently, it requires a formal release to be exchanged. The courts, however, have ignored this requirement. Under this proposal, the statute would be triggered by the occurrence of a "settlement", thus codifying the case law.

The current statute also is ambiguous as to the manner in which the non-settlors' liability is calculated in those instances in which the plaintiff reaches settlement with more than one tortfeasor. This proposal, consistent with recent Court of Appeals decisions, adopts the "aggregate," rather than "pick and choose," method of calculation.

Neither GOL § 15-108 nor CPLR Article 16 (the "limited liability" law, which partially abrogates the general rule of joint and several liability) specifies the interrelationship between those provisions. There are a number of logically tenable methods in which the statute could be applied to a given fact pattern; selection of one such method rather than another could conceivably make hundreds of thousands of dollars' difference to the parties. The instant measure precisely delineates the manner in which the two statutes would operate, essentially codifying the approach adopted in (IN RE BROOKLYN NAVY YARD ASBESTOS), 971 F.2d 831 (2nd Cir. 1992).

The statute has been construed by the courts to render the settling defendant immune from contribution claims but not from indemnity claims. Because, as a practical matter, it often is difficult to

distinguish a contribution claim from a claim for common law indemnity, it is not uncommon for a defendant who thinks that he or she has "bought peace" to be rudely surprised with a successful indemnity claim. This serves as yet another disincentive to settle. This bill would apply the statute to common law indemnification, but not to contractual indemnification. Public employees could, however, seek common law indemnification: But, while rendering the settlor immune from common law indemnity claims, this measure would not otherwise displace the rule set forth in (RIVIELLO V. WALDRON), 47 N.Y.2d 297 (1979).

(RIVIELLO) held that a non-settlor who stands vicariously liable for a settling defendant's wrong is entitled to an "amount paid" credit, but cannot claim an "equitable share" credit. An "equitable share" apportionment in such a case would result in a total elimination of the non-settlor's liability, thereby defeating the purpose of vicarious liability.

This bill would allow a tortfeasor, upon settlement with the plaintiff, also to "buy" the plaintiffs claims against one or more other tortfeasors. There are many cases in which this option would streamline the litigation and induce quicker settlements. The current statute is silent as to the manner in which a structured settlement should be valued for its purposes. This measure would require structured settlements to be valued in terms of their cost.

Finally, we note that the instant measure has been modified slightly from past versions. A new provision has been added (see: proposed 15-1 08(a)(4)), which would precisely specify the manner in which a settlement would be credited towards and reduce a non-settlor's liability in actions governed by Article 50-A or 50-B of the CPLR in which the future damages are paid periodically. This is a matter not currently addressed by any statute, and it has caused confusion, To resolve that confusion, this measure would require the settlement credit to be apportioned pro rata between past and future damages.

Legislative history

S. 887 of 2013: Died in Senate Judiciary, Died on Assembly Floor Calendar S.3766 of 2012: Died in Senate Judiciary, Died in Assembly Judiciary S.3766 of 2011: Died on Senate Floor Calendar, Died on Assembly Floor Calendar S.2390 of 2010: Died in Senate Judiciary S.2390 of 2009: Died in Senate Judiciary S.7482 of 2008: Died on Senate Floor Calendar, Died on Assembly Floor Calendar

Fiscal implications

None.

Local fiscal implications

None.

Effective date

This act shall take effect on January 31st next succeeding the date on which it shall have become a law and shall be applicable to any action commenced on or after such effective date.