Opinion ID: 853614
Heading Depth: 2
Heading Rank: 4

Heading: What is the Best Policy?

Text: In the absence of a statutory directive or controlling case law, our decision rests heavily on the sort of policy considerations that have always been a part of the development of common law. Both sides urge differing public policy concerns in our determination of whether credits survive the Comparative Fault Act. [8] The basis of Skinner and Broadbent's policy argument is the one satisfaction principle. Skinner argues, if non-settling defendants do not receive credits, plaintiffs will be unjustly enriched where a defendant is responsible for an entire verdict although plaintiffs have already received partial or full recovery from settling co-defendants. (Appellee's Br. at 3, 10.) This is the principle our Court of Appeals articulated in its disposition of this case. See Mendenhall, 693 N.E.2d at 612 (purpose of credit is to prevent double recovery for the same injury) (citing Riehle v. Moore, 601 N.E.2d 365, 371 (Ind.Ct.App. 1992)). Partly in response, the Mendenhalls assert that we should consider the risks that a plaintiff incurs when settling. Depending on the accuracy of a plaintiff's predictions about the amount of damages a jury may find, or the percentage of fault that the jury will assign to the settling defendant, a plaintiff may suffer a penalty or gain a windfall. Leonard E. Eilbacher, Comparative Fault and the Nonparty Tortfeasor, 17 Ind. L.Rev. 903, 910-11 (1984). Under our comparative fault system, double recovery may occur where the plaintiff settles, then receives more than the amount of damages calculated at trial. [9] The ability of the court to adjust for such overcompensation is straightforward when the settling defendant is added as a nonparty. With the addition of the nonparty, the jury necessarily provides the court with a visible allocation of fault among the plaintiff, the defendant, and the nonparty. It is then possible to ascertain whether the plaintiff was overcompensated by the settling defendant. When the nonparty is not added by the defendant, the jury cannot provide an allocation of fault to that party and any effort by the court to calculate a credit is more speculative. What the jury has provided in this instance, after all, is an indication of such damages as it thinks have been proximately caused by the litigating defendant, and presumably no more. We think the ability of courts to implement the common law policy of credit during an age of litigation under the Comparative Fault Act is best served by a rule that obliges defendants to name the settling nonparty if they are to seek credit for the settlement. We reach this conclusion for reasons that follow here. The nonparty defense is a potent tool for defendants. A defendant likely approaches the question of whether to add a settling nonparty from at least two possible starting points: cases where the defendant believes the settling nonparty likely had some liability and those where they think the settling nonparty did not. In the first of these two situations, the nonsettling defendant can be expected to make a calculated economic decision based on an assessment of how much the settlement was and an estimate of the liability a jury might find against the settlor. This is not unlike the economic decision the plaintiff makes in deciding whether to settle with one or more defendants. There are also cases in which the remaining defendant concludes that the settlor had no liability. This is the position Skinner says it occupies. Skinner argues that requiring it to plead a nonparty defense to obtain credit is inappropriate because Skinner did not have reason to believe that Stewart Tire was in any way liable for Mendenhall's injuries. Indeed, Skinner maintains that it would have been unethical to add Stewart Tire as a nonparty where there was no evidence tending to establish Stewart Tire's liability in this matter. Skinner is right to be concerned about the ethics of such a decision, and surely there will be pressure to identify legitimate grounds for claiming the nonparty defense. Still, if there is no evidence of Stewart's liability, then the fact that Stewart Tire was not added as a nonparty leads to a just result. If Stewart Tire was not culpable, but settled merely to avoid the cost of litigation or for some other reason, Skinner loses nothing to which it is rightfully entitled. It either prevails at trial and suffers no judgment, or it loses at trial and incurs liability for the value of that injury shown by the evidence to be its sole responsibility. [10] Finally, we consider the possible effect of today's ruling on settlement decisions. The policy of the law generally is to discourage litigation and encourage negotiation and settlement of disputes. Lafayette Tennis Club, Inc. v. C.W. Ellison Builders, Inc., 406 N.E.2d 1211 (Ind.Ct. App.1980). We surmise that this decision will not discourage a defendant from settling. Under our comparative fault system, the jury is asked to determine the fault of each of the parties and nonparties without giving consideration to settlement. Therefore, for the purposes of fault allocation, it does not matter to the litigating defendant whether a settlement occurred or for what amountthe defendant will still actively seek to shift a percentage of fault to the settling tortfeasor and the plaintiff. See Eilbacher, supra, at 909. Likewise, defendants considering settlement are not discouraged from settling because, even if they are named as nonparties, they are no longer financially at risk. The benefits of the finality they seek to achieve through settlement seem unaffected. Further, this resolution does not discourage plaintiffs from settling. Plaintiffs still assume the same risks in making the decision to settle and must still consider whether settlement is beneficial in light of their estimations of liability and anticipated savings in litigation costs. Thus, this rule neither discourages settlement nor penalizes any party, plaintiff or defendant, from having his day in court. Finally, while the rule we announce today does not discourage settlement, we believe that, at least in a case such as this one, the one satisfaction rule does discourage settlement. Under the one satisfaction rule, the economic effect on the parties in this case is as follows: the Mendenhalls receive $40,000; Stewart pays $20,000; and Skinner pays $20,000. Under the rule we adopt today, the economic effect on the parties is as follows: the Mendenhalls receive $55,000; Stewart pays $20,000; Skinner pays $35,000. Assuming perfect information, the Mendenhalls are less likely to settle under the one satisfaction rule (they receive $15,000 under it), while Skinner is also less likely to settle under the one satisfaction rule (it pays $15,000 less under it). At least on the facts of today's case, we believe that our holding makes settlement more likely than it is under the one satisfaction rule plaintiffs do not risk losing the value of a portion of their settlement and defendants are not encouraged to go to trial in an attempt to reduce their liability by the amount of another's settlement. We conclude that the one satisfaction rule and the benefits of settlement are best advanced to affording litigating defendants a credit where a thorough allocation of damages by the jury provides the court with a respectable basis upon which to adjust a judgment to avoid a double credit. Thus, to request a credit, the litigating defendant must add the settling defendant as a nonparty under the Comparative Fault Act. Under the facts presented here, therefore, Skinner should not be entitled to receive a credit for the amount of the Mendenhall's settlement.