Opinion ID: 1240913
Heading Depth: 1
Heading Rank: 2

Heading: To Which Amount Does the Setoff Apply?

Text: The district court found that the plaintiff in this case had sustained at least $271,304 in proven damages. Applying Illinois contribution law, it then reduced that amount by $108,500, the amount that Sompo had received from Pace and Yusen in settlements. The court therefore concluded that Sompo was entitled to $162,804 in damages. As the Warsaw Convention capped NCA's liability at $74,450.84, however, the district court awarded Sompo only $74,450.84. On appeal, NCA contests the district court's method of calculation. It submits that Sompo's $108,500 settlement with Pace and Yusen instead should have been applied against the $74,450.84 limited liability figure, effectively reducing NCA's liability to $0. Sompo, on the other hand, contends that the settlement amount correctly was deducted from its total amount of proven damages, or $271,304, leaving NCA responsible for the full amount permissible under the Warsaw Convention. We review de novo the district court's decision to apply the setoff to the total damage amount rather than to the reduced liability amount. See Johnson v. West, 218 F.3d 725, 729 (7th Cir.2000). The JTCA provides that a plaintiff's settlement with a joint tortfeasor reduces the recovery on any claim against a non-settling defendant. 740 Ill. Comp. Stat. 100/2(c). In NCA's view, the term recovery means the amount finally collected by a plaintiff. Black's Law Dictionary 1276 (6th ed.1990). Without citing legal authority, NCA contends that the plain meaning of this statute therefore requires the court to apply the setoff against the amount finally collectable by the plaintiff here, the $74,450.84 ultimately recoverable under the Warsaw Convention. In practice, however, NCA's so-called plain meaning reading of the statute makes little sense. As the district court aptly noted, [i]f the setoff were to be deducted from the `amount finally collected' by a plaintiff, . . . the latter would no longer be the amount `finally collected.' Applying the `plain meaning' leads to an absurd result. Sompo Japan Ins., Inc. v. Nippon Cargo Airlines Co., No. 02 C 9311, 2004 WL 2931282, at  (N.D.Ill.Dec.15, 2004). [15] Contrary to NCA's defendant-centered approach, an Illinois court has said that the JTCA requires a setoff so that a payment by one tortfeasor diminishes a plaintiff's claim against all other tortfeasors responsible for the same harm. Hentze, 178 Ill.Dec. 280, 604 N.E.2d at 541. The court focused on the plaintiff's proven damages, not the defendant's ultimate liability: The underlying current. . . is that a plaintiff's claimed damages are to be reduced by any payments he has received in compensation for the same harm or injury. Id. The purpose underlying the JTCA is the long-recognized principle in Illinois that a plaintiff shall have only one satisfaction for an injury. Pasquale, 211 Ill.Dec. 314, 654 N.E.2d at 1381. The setoff right is plaintiff-centered, rather than focused on the unique characteristics of the defendant. See Maher v. Chicago Park Dist., 269 Ill.App.3d 136, 206 Ill.Dec. 290, 645 N.E.2d 295, 298 (Ill.App.Ct.1994) (noting that a defendant may receive a setoff in order to prevent a plaintiff from receiving double recovery for the same injury, irrespective of the defendant's actions). Therefore, applying the setoff to the plaintiff's total damages, rather than the defendant's total liability, comports with the intent of the statute. Such a result, as NCA suggests, conceivably could be perceived as allowing double recovery for Sompo, for although only NCA was held responsible for the accident, Sompo recovered from multiple parties. Indeed, Sompo recovered more in its settlement with Pace than it probably would have been awarded had all the parties gone to trial. This is not, however, the double recovery about which the JTCA is concerned. Presumably, the settlement amount recovered from Pace and Yusen was discounted by those parties to reflect their estimation of the probability that they would be found responsible for the accident. Although, in hindsight, it appears that the settling defendants paid far more than their legal liability, avoiding the risk and the cost of litigation apparently was worth the price of settlement for Pace and Yusen. Courts do not second-guess such decisions absent evidence of bad faith. Cleveringa v. J.J. Case Co., 192 Ill.App.3d 1081, 140 Ill.Dec. 226, 549 N.E.2d 877, 880 (Ill.App.Ct.1990). The purpose of the setoff statute is defeated by a recovery from this type of settlement only if the plaintiff's aggregate recovery is greater than his actual proven damages. Here, Sompo receives no unfair windfall by recovering from both Pace and NCA. Even with recovery from both, Sompo is still substantially under-compensated. The district court found that Sompo's total damages were at least $271,304. The Pace/Yusen settlement of $108,500 left Sompo with $162,804 in unpaid damages. Given that NCA's liability is limited to $74,450.84, the district court noted, Sompo will not recover even one full compensation for its injuries, much less `double recovery.'  Sompo, 2004 WL 2931282, at . On the other hand, NCA would receive a hefty windfall were we to accept its interpretation of the JTCA. NCA asks that we apply the amount of Pace's and Yusen's settlements to its already-capped liability amount, reducing the judgment against it to zero and leaving Sompo with $162,804 in uncompensated damages. Under NCA's interpretation, despite the fact that NCA was found by the district court to have been the sole party responsible for the loss, it would be free from paying any damages. The entire burden would fall upon Pace, Yusen and the plaintiffall innocent parties. Surely this is not the result required by the JTCA, an act intended to properly distribute losses among culpable parties. See Doyle, 77 Ill.Dec. 759, 461 N.E.2d at 386, 388 (stating that the JTCA was designed to reach anyone who is culpable regardless of whether they have been immunized from a direct tort action by some special defense or privilege, and to enforce an equitable duty to share liability for the wrong done); see also Jansen v. Aaron Process Equip. Co., 149 F.3d 603, 609 (7th Cir.1998) (noting that the culpable tortfeasor rather than the injured victim will bear the financial responsibility when faced with an inequitable distribution of loss). Such a result does not contradict the purposes of the Warsaw Convention. Certainly, one of the leading purposes of the original Warsaw Convention was to limit the potential liability of air carriers. However, beginning with the Montreal Agreement and MP4, and culminating in the most recent Montreal Convention, [16] the modern Warsaw regime has been driven by an attempt to better balance the interests of air carriers and potential plaintiffs. This goal is achieved by limiting air carriers' potential liability to predictable, non-catastrophic damages and also by preserving a plaintiff's right to recover its losses up to a certain amount. Applying the setoff to the total amount of damages in this case results in a greater amount of liability for the airline than if the statute had directed us to take the reduction from the capped amount. Even when applying the setoff to the total damages amount, however, the airline retains the protection of the Warsaw Convention's liability cap and therefore is assured that its liability is predictable and limited. Our interpretation of the setoff rule in no way increases the air carriers' risk of being subjected to unpredictable or catastrophic damages. Accordingly, we conclude that the judgment of the district court was correct. NCA is entitled to a setoff of the settlement amounts, but the amount must be subtracted from Sompo's total proven damages rather than from NCA's limited liability under the Warsaw Convention. Because Sompo's post-settlement uncompensated damages far exceeded Sompo's liability under the Warsaw Convention, the award of $74,450.84 was correct.